KEPC WEEKLY UPDATE: Adjourned, budget waits for revenue, gloomy fiscal update, unemployment insurance, tax bill rundown

In this issue …

  • Legislature adjourned until April 29 veto session
  • Budget agreement waits for revenue picture
  • Lawmakers hear gloomy fiscal update
  • Unemployment Insurance bill moves forward
  • More tax bills introduced


Legislature adjourned until April 29 veto session

The Kansas Legislature held its first adjournment Thursday evening and will return April 29 for what’s expected to be a lengthy veto session.

This newsletter contains just a few of the highlights from this week. A more detailed summary will be available in the next week or so, once we figure out where all the pieces of the puzzle.


Budget agreement waits for revenue picture

House and Senate negotiators have reached an agreement on a budget for the next two fiscal years, but will wait to vote until the veto session. Complicating the picture is that the Kansas House of Representatives has never debated the budget. A spending plan was passed out of the Appropriations Committee but never brought up for consideration. That’s because it was not expected to pass.

Instead, the Senate used a parliamentary procedure which means that House members will only have the opportunity to have an up or down vote on the budget. They will not be able to offer amendments.

Both the House Appropriations version of the budget and the budget that passed the Senate will require additional revenue. Both are underfunded.

The delay until the end of the month gives lawmakers a chance to get better information on how much they will need to raise revenue, cut spending, or a combination of the two.

April is a big month because it’s when the majority of state income tax is collected. .

Lawmakers will also be waiting for information April 20 from the consensus revenue estimating group, the official soothsayers whose educated guess on future revenues must be used as a basis for the budget.


Lawmakers hear gloomy fiscal update

If the discussion in the House Taxation Committee this week is any indication, the outlook for a recovering economy and more revenue collections is not good. Many who attended the session described the mood as gloomy and depressing.

Chris Courtwright, Principal Economist in the Legislative Research Department, noted that March revenues were $11 million short of estimates. He also noted:

  • The corporate income taxes showed signs of weakness in December and have not bounced back much. They are down $17 million. Officials are unsure of why corporate collections are sliding. They are now $26 million below the total estimate.
  • Sales taxes are down about $13 million for January/February. They slid another $6 million in March and are currently $19 million down from the estimate that was made in November. If income taxes are eliminated, the state will have a strong dependence on sales taxes, so this news is not encouraging.
  • The severance tax is down $2.1 million through January for a total of over $9 million down from the November estimate. The slide is expected to continue because the price per barrel of oil has plummeted. The estimate was based on $80 per barrel oil. It’s currently $40 per barrel.
  • The individual income tax is up $7 million for March, but only $12.7 million up from the November estimate of the fiscal year to date. Courtwright said that could indicate good news, or not.

J.G. Scott, Chief Fiscal Analyst for Legislative Research, also presented information to the Tax Committee:

  • The current fiscal year (ending June 30) budget shortfall is $48.3 million. That will change again when the consensus revenue estimating group meets.
  • That number does not include all of the revenue enhancements proposed by Governor Brownback (income, liquor, tobacco taxes, or amnesty proposal)
  • It does include the proposed KPERS agreement for $1 billion in bonding, the surtax on KanCare managed care organizations, and the savings from the school block grant legislation.
  • For the FY 2016 budget, lawmakers need $400 million in reductions or enhancements to have a cushion in the bank. For the FY 2017 budget, the will need $250 million for a zero ending balance with no cushion.
  • With the taking of money originally earmarked for transportation, $290 million in preservation projects for 2015 are being moved to future years.


Unemployment Insurance bill moves forward

Despite a possible conflict with the federal government, the Unemployment Insurance Bill (SB 154) is close to passing the legislature. On Thursday, the House gave approval to a conference committee report by a vote of 85 to 36. The Senate will take the bill up when it returns for the veto session.

SB 154 would revise provisions of the Employment Security Law, commonly referred to as Unemployment Insurance (UI), pertaining to the calculation of maximum weekly benefits, the assessment of employer contributions, and the administration of the UI System.

A letter from the administrator of the federal Office of Unemployment Insurance said part of the bill would jeopardize the state’s access to federal grants used to run the unemployment system as well as some unemployment offices. Kansas Department of Labor officials disagree.

Senate Bill 154 eliminates a requirement that hiring of unemployment staff in the Labor Department be based on a competitive exam. The federal official says that’s the part of the bill in question.


More tax bills introduced

As legislators contemplate the possibility of raising taxes to fill the budget hole, new tax proposals were introduced this week, adding to the large buffet of choices that will be available for consideration during the veto session.

Here’s a sampling:

  • HB 2419 – Taxing moneys, notes and other evidence of indebtedness.
  • HB 2420 – Property exempted from taxation after July 1, 2015 will not be exempt from school property tax.
  • HB 2423 – The statewide mill levy for schools is increased from 20 to 30 mills for the next two school years.
  • HB 2424 – Providing for a state-wide school mill levy of 5 mills on exempt property.
  • HB 2425 – This bill lowers some income taxes and raises other.   Beginning in tax year 2015 and thereafter, the lower rate is decreased from 2.7% to 2.5% (those earning under $30,000). The top bracket (over $30,000) increases from the current 4.6% to 4.8%. That’s very likely a revenue increase for the state.

Also introduced but apparently not drafted yet is legislation that eliminates some economic development incentives and uses the savings to buy down the corporate income tax.


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