KEPC WEEKLY NEWS: Block grant, transpo day, farm tax, tax bill opposed, tax hearings, Medicaid expansion, KanCare, STAR bonds

In this issue …

  • Block grant plan…finally
  • Transportation Day is Thursday
  • More heat on farmland property tax
  • Governor’s tax bill opposed by Kansas Chamber
  • Senate committee will hold tax increase hearings
  • Brownback says he could sign Medicaid expansion
  • KanCare expansion hearing scheduled
  • STAR bond changes could be coming


Block grant plan…finally

Thursday was seven weeks to the day after Governor Sam Brownback said he wanted the legislature to work on replacing the school finance formula over the next two years and put a “block grant” system to schools in place in the interim. Instead of giving the legislature details of such a block grant system, he tossed them the task of coming up with a bill.

The bill was finally introduced in the House (HB 2403) and Senate (SB 273) on Thursday. The title of the bill: classroom learning assuring student success act.

Get it? The CLASS act.

Education groups are still trying to understand what it does, but we know some of it from a crowded news conference held by the major authors: Appropriations Chairman Ron Ryckman, Jr. (R-Olathe) and Ways and Means Chairman Ty Masterson (R-Andover).

Here are the highlights as we understand them at this point:

  • The program is still in process
  • Funding is increased by $300 million over the next two years. However, Legislative Research says two-thirds comes from KPERS spending increases
  • The bill is said to eliminate almost all restrictions on how the block grant money will be spent. Exceptions would be bond and interest; special education; and some administrative retirement funds.
  • The block grants make no provisions for growing or falling enrollment.
  • School districts could apply for money from an “extraordinary need fund” for unanticipated costs. They would have to take their case to the State Finance Council.

As of this writing, education groups were waiting for the important school finance runs that show what each district would receive under the plan. Once we have access to them, we will attempt to e-mail the information to you. We are hearing they will be available sometime Friday.

Hearings were scheduled for the plans even before the bill or the school finance runs were available.

Senator Masterson said the Senate Ways and Means Committee will tentatively hold hearings Tuesday from 9 to 12 in the morning. The House Appropriations Committee will start hearings Monday morning at 9 and may continue later in the day.


Transportation Day is Thursday

Economic Lifelines and the Kansas Contractors Association are partnering to host a Transportation Day at the Capitol next Thursday, March 12. The event is to show legislators there’s strong support for transportation and opposition to continued raids on transportation revenues designated for the T-WORKS program.

Organizations and individuals interested in participating are welcome.

The event begins at 10 a.m. at the Kansas Contractors Association Offices at 800 SW Jackson in Topeka on the first floor. That’s the corner of 8th and Jackson, just Northeast of the Statehouse. A free lunch will be provided at the Capitol, along with orange shirts!

If you or your group want to participate, you can contact either the Kansas Contractors Association at 785-266-4152, or Economic Lifelines at 785-233-1903.

Since FY 2011, here’s what’s been taken from the transportation program:

  • 2011: $257 million
  • 2012: $307 million
  • 2013: $110 million
  • 2014: $264 million
  • 2015: $421 million
  • 2016: $376 million (proposed)
  • 2017: $378 million (proposed)

Although the Administration has said previously that low bids and other efficiencies have allowed the transfers without an effect on the program, KDOT Secretary Mike King now admits there will be an impact.

Secretary King says there will be delays in 2015 and 2016 projects, but they will be completed. Some preservation work is to be put off to out years, but the amount and where is unknown and unclear.

There’s some discussion of removing the 18% cap on bonding allowed by K-DOT and raising it to 25%. This amounts to borrowing more to pay for the program, making it more expensive in the long term.

In House Appropriations discussions on the KDOT budget, it was revealed that only $150 million in sales tax would be left each year in the highway fund after the recommended transfers take place. Many legislators want to divert the entire 4/10 cent sales tax to the state general fund permanently, then decide what to appropriate to the highway fund in each budget.


More heat on farmland property tax

We are told the controversial bill that changes use value appraisal of agricultural property in a way that increases taxes on farmers will have a hearing Tuesday in the Senate Assessment and Taxation Committee. Senate Bill 178 is getting intense opposition from farm groups.

We noticed lobbyists from agricultural organizations doing research in the State Library this week pouring over old newspaper stories about agricultural land valuations.

Meanwhile, an informational hearing was held on the issue in the House Agriculture and Natural Resources Committee. Staff from the Kansas Revenue Department’s Division of Property Valuation appeared to brief the committee.

They went through calculations on how agricultural land values are determined, including values for different kinds of Ag land: cultivated crop land (dry and irrigated) and grasslands (native and tame).

Other fun facts:

  • In 2014, agricultural land produced $229 million in property taxes in Kansas
  • Agricultural land represents only 5.3% of the total property tax base in Kansas
  • 49 million acres are on the tax rolls
  • The average tax per acre is $4.67
  • The average appraised value per acre is $117
  • In 2014, agricultural land produced $34 million in property taxes for K-12 schools
  • Senate Bill 178 would result in an additional $160.8 million in property taxes for K-12 schools
  • 44 other states use a valuation system similar to Kansas


Governor’s tax bill opposed by Kansas Chamber

In an ironic twist of fate, income tax changes proposed by Governor Sam Brownback were supported by the Kansas Association of School Boards, but opposed by traditional Brownback allies: the Kansas Chamber of Commerce and Americans For Prosperity.

The testimony came during a hearing in the House Taxation Committee on House Bill 2307. That’s the Governor’s tax proposals without his tobacco and alcohol tax increases, which are in a separate bill.

The bill provides a tax amnesty, creates a budget stabilization fund, changes how future income tax cuts are implemented, and speeds up the reduction of certain itemized deductions. The bill would result in revenue increases (or tax increases if you prefer) of $103.2 million in FY 2016 and $108.5 million in FY 2017.

Mark Tallman of the Kansas Association of School Boards testified that KASB supports state tax policies that provide increasing education funding necessary for increasing education outcomes. Tallman made the case that educational outcomes are as vital to economic growth as tax policy, if not more. He was grilled pretty intensely by conservative Republicans on the Tax Committee.

Former Speaker of the House Mike O’Neal, now President of the Kansas Chamber of Commerce, testified against the Governor’s bill. O’Neal said for lower taxes to be fully effective in growing and stimulating the economy, they must be accompanied by reductions in government spending. He said the Kansas Chamber opposes any attempt to roll back the 2012 and 2013 tax cut legislation.

A representative of Americans For Prosperity also opposed the legislation.

Tax Committee Chairman Marvin Kleeb (R-Overland Park) said the committee would not take up any other revenue enhancement legislation until May. He said any decisions about tax reform will have to wait until the April consensus revenue updates.

But then, there is this: House Bill 2392, which modifies passive income, has a hearing in House Taxation next Thursday. It’s twin to Senate Bill 260 (see next story).


Senate committee will hold tax increase hearings

Meanwhile, on the other side of the Statehouse rotunda, the Senate Assessment and Taxation Committee will be holding some hearings on revenue enhancing (tax increase) bills next week.

Senate Bill 258 is a property tax increase on homeowners and other residential property owners. Current law exempts the first $20,000 of appraised valuation on residential property from the statewide school levy. The bill removes that exemption.

Senate Bill 260 reverses some of the income tax cuts for business by taxing certain income from rental activity or business activities in which the owner does not materially participate. That could include property income or rent income.


Brownback says he could sign Medicaid expansion

You may have heard about Governor Sam Brownback’s trip to Missouri, where he addressed Missouri legislators and conservative groups, touting his Kansas income tax cuts. Brownback was the guest of conservative Missouri billionaire Rex Sinquefield’s think tank. Sinquefield has been trying unsuccessfully to eliminate Missouri income taxes.

Little noticed was a statement Brownback made on Medicaid expansion (called KanCare in Kansas). Medicaid expansion is part of the Affordable Care Act (Obamacare) that has been rejected so far in Kansas.

According to a story in the Missouri Times, a Poplar Bluff weekly newspaper:

“Brownback said he was neither for nor against expansion, but that his main concern was improving the system if more citizens would be added to the rolls.”

“But he did clarify that if he was presented with a legislative proposal to expand Medicaid that met his own personal financial concerns, he would likely sign the bill into law.”


KanCare expansion hearing scheduled

Meanwhile, back in Kansas, it appears a hearing on Medicaid expansion will be held on House Bill 2319 in the House Health and Human Services Committee. The bill is the Kansas Hospital Association’s proposal for KanCare expansion.

It was given a boost after Representative Jim Ward (D-Wichita) offered a KanCare expansion amendment on a bill being debated in the Kansas House. Ward agreed to withdraw his amendment when Speaker of the House Ray Merrick (R-Stilwell) promised to allow a hearing on the issue.

We are told the hearings will be held on March 18 for proponents and March 19 for opponents and neutrals. The KHA is coordinating the proponent testimony but is asking supporters to attend the hearing to show their support.


STAR bond changes could be coming

A bill that makes changes to the STAR Bonds program (HB 2402) has been introduced but does not appear to be assigned to a committee at this writing.

STAR Bonds provide Kansas municipalities the opportunity to issue bonds to finance the development of major commercial, entertainment and tourism areas and use the sales tax revenue generated by the development to pay off the bonds.

The bill says metro areas which are defined as “blighted areas” by statute have to qualify for STAR bonds with a minimum $25 million capital investment and $25 million in project gross annual sales.

Another new section says 0.05% of the revenues collected are to be sent to a Department of Revenue “STAR Bond administration fund.”