By Gene Meyer
Kansas Reporter
TOPEKA — A surge in state sales tax receipts in August sent Kansas tax revenue nearly $17 million higher than projected for the month, but no one is cheering.
State officials and outside observers say a combination of one-time purchases, including storm and flood damage repairs and seasonal back-to-school buying, may have boosted the totals temporarily.
However, the Kansas Business Conditions Index, which measures what business supply managers expect of the state’s economy in the next three to six months, plunged to 43.6 in August from 54.7 in July, according to a monthly Midwestern survey released Thursday by Creighton University economists.
That, on the index’s 100-point scale, changes Kansas’ outlook to a shrinking economy instead of a slowly growing one, said Ernie Goss, the Creighton economist who compiled the report.
“You can’t read too much into just one month, because the dominance of aircraft manufacturing always makes Kansas’ index a volatile one,” Goss said. “But overall, the survey points to slowing growth in the next three to six months.”
However, collections of Kansas sales and use taxes that buyers pay on items they purchase from websites or through catalogs both increased in August, which Kansas Revenue Secretary Nick Jordan said signaled increased confidence among consumers and business owners despite the economy still being fragile.
Preliminary tax revenue figures for August show that Kansas collected $436.4 million, which is 4 percent, or $16.8 million, more than state revenue forecasters estimated for the month, and up 5.4 percent, or $22.4 million, from the same month last year.
Retail sales tax collections, which are one of 15 categories of taxes listed, totaled $177.2 million, and topped state estimates by $7.2 million to become the largest contributor to the total increased collections. Individual income tax payments totaling $198.4 million, or $3.4 million more than expected, were the second biggest contributor.
“We’ve got some real questions about those sales tax numbers,” state Budget Director Steve Anderson said Wednesday.
Kansas sales tax receipts have grown minimally or not at all for many of the past 12 months since the state raised its basic sales tax rate to 6.3 percent in July 2010, according to revenue department records. That increase works out to about $160 a year for many Kansas households, according to a Wichita State University study.
The August bump in tax revenue, to 5 percent higher than a year earlier, is the first notable change.
“We don’t know how much of the August increase is pent up demand from consumers who weren’t buying before or whether it will be longer lasting,” Anderson said Wednesday. “We’ll probably need another couple months to tell.”
National trends, which Kansas generally follows, may provide a clue, said Jeremy Hill, director of the Center for Economic Development and Business Research at Wichita State University.
“Consumer spending rose 0.8 percent in July, its strongest increase since February,” Hill said.
“Personal incomes were up 0.3 percent and personal savings rates dropped to 5 percent from 5.5 percent. But consumer confidence, which had been slowly rising, is again as low as it was a year ago.”
Cutting through that cluster of numbers suggests that some consumers, especially in upper middle-income brackets, may have felt secure enough in their jobs and about the economy, at least briefly, to buy new cars and other big ticket items, he said.
July sales in Kansas would show up in August sales revenue because many merchants collect taxes all month long as sales are rung up, but actually pay those collected taxes once, after the month ends.
Kansas City Federal Reserve economists in their most recent analysis of the region’s economy in an eight-times a year report known as the Beige Book, reported six weeks ago that some retail sales in Kansas and surrounding states were being boosted by consumers repairing homes and businesses damaged by floods, tornadoes and other weather calamities this year.
The next Beige Book, formally known as a Commentary on Current Economic Conditions, is scheduled to be issued Sept. 8.