In this issue …
- House Budget passed
- “Nuclear option” tax bill now costs $2 billion by 2018
House Budget passed
The Kansas House passed a $14 billion-plus budget Tuesday after several hours of debate. The bill is Substitute for House Bill 2768. It passed 77 to 44.
Successful amendments included:
- Adding $50 million to K-12 education. The money is taken from the Kansas Department of Transportation. Half of it goes into the base budget per pupil. The other half goes to equalizing differences between rich and poor districts.
- Requiring state agencies to use the federal E-Verify program to check the status of newly hired employees. The requirement also applies to businesses with state contracts over $50,000.
- $5.8 million was committed to reduce waiting lists for services for the disabled and seniors. That will bring in an estimated $6.5 million in federal matching money. The U.S. Department of Justice is looking at Kansas’ waiting lists.
After Tuesday’s long day, the House faces the prospect Wednesday of redistricting debate.
“Nuclear option” tax bill now costs $2 billion by 2017
The original Senate version of income tax cut legislation has a new price tag that could prevent the House of Representatives from taking the so-called “nuclear option.”
The bill would cost the state an estimated $2.084 billion, or over 31% of the state general fund budget in fiscal year 2017.
As the Kansas Senate prepares to debate the House-Senate conference committee version of income tax cuts Wednesday, there has been public discussion by House Speaker Mike O’Neal (R-Hutchinson) and Governor Sam Brownback about passing the original Senate bill if the Senate rejects the negotiated version.
According to a May 6 story in the Lawrence Journal-World:
Speaking to reporters last week, House Speaker O’Neal said he wasn’t making a threat but mentioned that scenario was a possibility.
“The administration tells us that they can make it work. It’s a lot of tax relief in a hurry, so you’d expect a quicker stimulus from that,” O’Neal said. He said he would prefer that not happen, but added, “It happens. Last week in the session, if that’s the only option left when you want to move forward, the option is used. And this wouldn’t be the first time.”
Because the Senate passed their original version of an income tax cut, the rules state that the House just needs to approve that version for it to pass the legislature.
However, that was before the new price tag (fiscal note) on the original Senate bill was prepared by the Legislative Research Department. The original price tag was $911 million in Fiscal Year 2017. The new analysis corrects a mistake in calculating the impact of the reduction of the state sales tax by 0.6% in 2013. It is dated May 2.
Senator Tom Holland (D-Baldwin City) requested it when talk started turning to the so-called “nuclear option.” The conference committee version had been corrected due to the error, but Holland, a member of the tax conference committee, asked for the original Senate version to be corrected as well.
The fiscal note includes projected human services caseload adjustments and uses a revenue growth projection of 4%, which many legislators feel is very optimistic.
Here are the estimated state ending balances from the document:
- In FY 2013, the ending balance is $507.8 million (8%)
- In FY 2014, the ending balance is -$270.3 million (-4.4%)
- In FY 2015, the ending balance is -$969.9 million (-15.4%)
- In FY 2016, the ending balance is -$1,585.0 billion (-24.6%)
- In FY 2017, the ending balance is -$2,084.8 billion (-31.7%)
To give you an idea of how big a problem that would be for the state, according to the December 2011 edition of Kansas Tax Facts the entire 2011 income and privilege tax collected by the State of Kansas was $2.952 billion.
The practical upshot of the new fiscal note is that the House no longer appears to have the leverage of the “nuclear option,” which could cause tremendous turmoil never before seen in the history of the state.
The Senate should be able to concentrate on the conference committee bill with less worry about what the House will do.