KEPC UPDATE: School finance, income tax, transportation, Medicaid expansion, property tax, TABOR, eco devo programs

In this issue …

  • Slow week as lawmakers consider school finance decision
  • Senate Tax will look at income tax bill next week
  • Bills would find funds for transportation
  • Senate Medicaid expansion hearing March 21
  • Hearing was delayed on property tax lid bill
  • Senate will hold hearing on TABOR constitutional amendment
  • Economic development programs under the magnifying glass
  • BILL TRACKING

 

Slow week as lawmakers consider school finance decision

Kansas lawmakers spent the week pondering the meaning of the Kansas Supreme Court’s decision last week on school finance, trying to figure out how much it will cost the state and how to find the money.

The Court ruled unanimously that Kansas’ block grant system is unconstitutional and it retained jurisdiction of the case, giving lawmakers until June 30 to pass something constitutional.  The court gave lawmakers clues about what it would take.  For example, they pointed out that testing indicates about a fourth of public school students are not getting an adequate education.  That’s telling legislators where to concentrate some attention.

One big concern is the court did not name a dollar amount.  However, the decision did make note of a lower court ruling last year that a constitutional formula might cost over $500 million next year while saying, “Total spending is not dispositive of adequacy.”

That’s got everybody scratching their collective legislative heads.

Now, the committees go to work on the problem.

In the senate, President Susan Wagle (R-Wichita) appointed a Senate Select Committee on Education Finance.  The chair is Majority Leader Jim Denning (R-Overland Park) and the Vice Chair is Ways and Means Chair Carolyn McGinn (R-Sedgwick).

Other members

  • Senator Anthony Hensley (D-Topeka) will be the ranking minority
  • Senator Molly Baumgardner (R-Louisburg), the Senate Education Chair
  • Senator Barbara Bollier (R-Mission Hills)
  • Senator Bud Estes (R-Dodge City)
  • Senator Dan Goddard (R-Goddard)
  • Senator Dan Kerschen (R-Garden Plain)
  • Senator Pat Petty (D-Kansas City)

Work has been underway in the house where the K-12 Education Budget Committee will continue meeting, likely using a proposal by Representative Melissa Rooker (R-Fairway) as a base, although many are concerned about its cost right now.

 

Senate Tax will look at income tax bill next week

Having successfully passed an income tax increase and overturned a veto by Governor Sam Brownback, the Kansas House of Representatives will wait to see what the senate comes up with.  The senate also passed the bill, but fell three votes short of overriding the Brownback veto.

It seems very clear from discussions with senators that changing the effective date from January 1, 2017 to January 1, 2018 would cause three no votes to shift to the yes column.  However, that leaves a bigger hole in the budget until the income tax increases starting flowing to the state treasury.

There’s also that pesky school finance decision and balancing the need for unknown funding against the ability to get enough votes.

The Senate Assessment and Taxation Committee will hold a hearing Tuesday on Senate Bill 192.

This bill is a little different from the one vetoed by the Governor.

It keeps the two current income tax brackets at the same rates, but adds a third bracket for single people making $35,000 a year and over; and married people filing jointly who make more than $70,000 a year jointly.  That rate would be 6.1 percent.

The bill also eliminates the “March to Zero” trigger mechanism that automatically lowers rates in the future and it allows a 100 percent itemized deduction for medical expenses.

The bill would raise an estimated $578.5 million for FY18.

This bill, like the one vetoed by Brownback, is retroactive to January 1, 2017.

 

Bills would find funds for transportation

Things are starting to move on the transportation front as lawmakers try to salvage the 2010 T-WORKS program that has been decimated over the past six years by raids to fund other parts of the budget.

Here’s the shorthand:

  • Senate Bill 224 was introduced Tuesday and sent to the Senate Assessment and Taxation Committee. It raises gas taxes five cents a gallon.  Senate Vice President Jeff Longbine (R-Emporia) asked for the bill, which would raise an estimated $100 million.
  • House Bill 2382, which contains an eleven cent a gallon gas tax increase, was introduced Wednesday and sent to the House Taxation Committee. That raises in excess of $200 million.
  • After a spirited debate Thursday, the House Appropriations Committee approved the use of $400 million in additional bonding authority for KDOT. It is seen as a temporary “bridge” for work in FY18 and FY19.  The subcommittee had considered a gas tax increase but could not agree.
  • The legislature would have to remove the 18 percent bonding cap in current law. KDOT is at $1.1 billion in bonding.  The original T-WORKS bill was built on $1.7 billion in bonds.  An attempt to eliminate the bonding authority failed on a vote of the full Appropriations Committee, so it’s still in the budget.

 

Senate Medicaid expansion hearing March 21

Our sources in the medical community tell us hearings will be held on Medicaid expansion in the Senate Public Health and Welfare Committee on March 21.  The Kansas House already passed the bill a few weeks ago by a vote of 81 to 44.

Supporters believe the vote will be closer in the Senate.  They estimate they have between 22 and 24 votes right now.  A majority needed for passage is 21 votes.

 

Hearing was delayed on property tax lid bill

A hearing was delayed this week on a bill to change the local property tax lid from requiring an election to exceed the lid.  House Bill 2376 is now scheduled for a hearing Thursday in the House Taxation Committee.

It changes the current law to say an election will not be held unless a ten percent protest petition is turned in within 21 days of a local government publishing a notice they intend to exceed the lid.

Meanwhile, the Senate Assessment and Taxation Committee will hold a hearing on the same day on Senate Bill 167, which totally repeals the property tax lid.  Local government lobbyists say they will support the bill, but don’t think it has a realistic chance of passage right now.

 

Senate will hold hearing on TABOR constitutional amendment

A constitutional amendment to enact a TABOR spending and revenue limitation in Kansas will have a hearing Wednesday in the Senate Assessment and Taxation Committee.  The measure is SCR 1602.

TABOR stands for Taxpayer Bill of Rights.  Colorado enacted TABOR in 1992, but voters approved suspending many of its requirements in 2005 due to problems it caused.

The latest problem in Colorado is a conflict with the state’s legalized marijuana legislation.  The money raised for government by marijuana is supposed to go to schools, police, and drug education.  However, the TABOR constitutional amendment is in conflict with that intent and the pot money is prevented from being used for those purposes.

Meanwhile, a long-standing lawsuit challenging TABOR continues in a federal appeals court.  Those bringing the lawsuit include current and former legislators, educators, and parents of school children.  In 2011 they filed suit, claiming TABOR stripped them of legislative powers regarding taxation, which violates the guarantee clause of the U.S. Constitution.

Colorado’s TABOR is also in conflict with another portion of that state’s constitution, which requires a certain level of spending on public education.

Meanwhile, local Colorado chambers of commerce and economic development organizations are telling lawmakers there’s a $9 billion gap in funding roads that needs to be addressed.  That gap is hindered by Colorado’s TABOR.

Here’s what’s in the Kansas TABOR constitutional amendment.

  • State tax increases or extensions would require a 2/3 supermajority of the house and senate
  • State spending and revenue limits would be imposed
  • The legislature could only exceed the spending limit if approved by a vote of the people at a general election
  • Excess state revenues would be reserved for economic downturns and reducing state debt (or to be refunded to taxpayers)
  • State borrowing would be limited

A constitutional amendment takes a 2/3rds vote of the Kansas House of Representatives and Kansas Senate before it is put to Kansas voters in an election.

 

Economic development programs under the magnifying glass

For the past few weeks, the Senate Commerce Committee has been holding hearings on STAR Bonds (Sales Tax Revenue Bonds) and the projects they fund.  STAR Bond legislation will expire without the legislature voting to continue the program, which has been used for projects like the Kansas City NASCAR Track and Village West.

The Senate Assessment and Taxation Committee held a long hearing Thursday on the PEAK Program.  PEAK stands for Providing Employment Across Kansas.

Enacted in 2009, PEAK provides benefits to companies to relocate or expand operations and jobs in Kansas.

Approved companies can receive up to 95 percent of the Kansas withholding of PEAK eligible employees that are paid at or above the county median wage.  The incentive can be approved by the Kansas Secretary of Commerce for up to ten years.

Hearings were held on two bills. Senate Bill 222 would impose a one year moratorium on PEAK.  Senate Bill 223 puts limitations on how PEAK can be used.  Most notably, it could not be used to attract a business from less than 250 miles away!

Supporters of the bills were the Kansas Policy Institute and Americans For Prosperity.  The Kansas Chamber of Commerce, often aligned with those groups on tax issues, was on the other side this time, opposing the bills.

Local chamber of commerce and economic development officials also appeared in support of PEAK.

Tom Robinette of the Overland Park Chamber of Commerce said, “…it makes little sense to tie the hands of those professionals (economic developers) for an entire year, taking away what has been demonstrated to be a very successful and effective economic development tool.”

Robinette also produced a statement from 21 local chambers of commerce calling for the preservation of economic development programs, including PEAK, which are “critical tools used to retain and attract businesses and create jobs throughout Kansas.”

Blake Schreck of the Lenexa Chamber said, “an aggressive incentive package is expected” when competing with other states for jobs, adding, “A new job to the state is new revenue to the state.

The Topeka Chamber’s Matt Pivarnik said, “A number of Topeka’s fastest-growing employers have taken advantage of these incentives.  In most cases, these were companies which could have chosen to locate elsewhere.  They chose to relocate to Topeka, or to stay here, for a number of reasons.  Having spoken directly with officials at these companies, we know their ability to utilize PEAK tax credits was an important part of their decision-logic.”

The committee took no action on the bills.

 

Bill tracking

Here’s our latest bill tracking on measures we think are of interest to our readers.

You should be able to click on the bill number and be taken to the Kansas Legislature’s web site page for that particular bill.  You will be able to see all actions taken, read the bill, and read any supplemental notes (layman’s descriptions) and fiscal notes (how much does the bill cost the state) that have been prepared.