Division of the Budget
Landon State Office Building Phone: (785) 296-2436
900 SW Jackson Street, Room 504 adam.c.proffitt@ks.gov
Topeka, KS 66612 Division of the Budget http://budget.kansas.gov
Adam C. Proffitt, Director Laura Kelly, Governor


February 14, 2024


The Honorable Adam Smith, Chairperson
House Committee on Taxation
300 SW 10th Avenue, Room 346-S
Topeka, Kansas 66612
Dear Representative Smith:
SUBJECT: Fiscal Note for HB 2546 by House Committee on Taxation
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2546 is
respectfully submitted to your committee.
HB 2546 would reduce the state retail sales tax and compensating use tax rate for food and
food ingredients to 0.0 percent and would change the distribution of overall state sales and
compensating use tax revenue to 82.0 percent to the State General Fund and 18.0 percent to the
State Highway Fund on April 1, 2024. The bill would take effect upon publication in the Kansas
Register. Under current law, the state retail sales tax rates specifically on food and food ingredients
and the distribution of overall state sales and compensating use tax revenue are set to be adjusted
as follows:
Date of Percent to Percent to
Rate Change Tax Rate State General Fund State Highway Fund
Current law 2.0 83.0 17.0
January 1, 2025 0.0 82.0 18.0
Estimated State Fiscal Effect
FY 2024 FY 2025 FY 2026
Expenditures
State General Fund $2,550 -- --
Fee Fund(s) -- -- --
Federal Fund -- -- --
Total Expenditures $2,550 -- --
Revenues
State General Fund ($20,800,000) ($72,600,000) --
State Highway Fund (4,200,000) (15,000,000) --
School District Finance -- -- --
Total Revenues ($25,000,000) ($87,600,000) --
FTE Positions -- -- --
The Honorable Adam Smith, Chairperson
Page 2—HB 2546

The Department of Revenue estimates that HB 2546 would decrease state revenues by
$25.0 million in FY 2024 and by $87.6 million in FY 2025. Of those totals, the State General
Fund is estimated to decrease by $20.8 million in FY 2024 and by $72.6 million in FY 2025, while
the State Highway Fund is estimated to decrease by $4.2 million in FY 2024 and by $15.0 million
in FY 2025. The bill would have no fiscal effect on local sales tax revenues.
To formulate the estimates of the sales tax exemption for food and food ingredients, the
Department assumes that expenditures on food and food ingredients will be comparable to
expenditures observed during calendar year 2023, the first year of the rate reduction. The fiscal
note considers the three-year phase-out of state retail sales tax and compensating use tax rate for
food and food ingredients that was enacted in 2022 HB 2106. According to the Department of
Revenue, reissuing sales tax publications and revising forms would cost $2,550 from the State
General Fund in FY 2024.
The Kansas Department of Transportation (KDOT) indicates that the bill would reduce
state revenues to the State Highway Fund as noted above. KDOT indicates that when the state
receives lower State Highway Fund dollars it may be required to make corresponding reductions
to planned expenditures for projects funded under the comprehensive transportation plan.
This bill has the potential to reduce revenues that are pledged to repay STAR bond projects;
however, it is unknown what impact the bill would have on the viability of those projects. The
fiscal effect associated with HB 2546 is reflected in The FY 2025 Governor’s Budget Report.

Sincerely,

Adam C. Proffitt
Director of the Budget


cc: Lynn Robinson, Department of Revenue
Brendan Yorkey, Department of Transportation


Statutes affected:
As introduced: 79-3603, 79-3603d, 79-3620, 79-3703, 79-3710