KEPC UPDATE: Working on the weekend, income tax, school finance, property tax abatements, STAR Bonds

In this issue …

  • Is the Kansas Legislature working this weekend?
  • Income tax: talk but no action yet    
  • School finance still in process
  • 20 mills renewed with change to property tax abatements
  • STAR Bonds action
  • Bill tracking

 

Is the Kansas Legislature working this weekend?

As the first week of the 2017 legislative veto session moves forward, there’s still a question of whether lawmakers will be working over the weekend, especially if there’s nothing for them to do.

This is the time of the year when only the major items and some few leftover bills are around.  The bulk of legislators find themselves with a lot of time on their hands, waiting for leadership and key committee leaders to reach agreement.

In particular, Senate Majority Leader Jim Denning (R-Overland Park) has been insisting that the Senate will work this weekend.  We shall see.

The area around the Statehouse will be largely blocked off for what’s termed a Christian rap concert as well as a car show.  We are told that on-street parking around much of the building will be unavailable.  Getting to the Statehouse parking garage will be difficult due to heavy construction activity on Topeka Boulevard and the fact that Van Buren Street to the North will be closed.

Also complicating the picture is talk that many key lawmakers have tickets for the Garth Brooks concerts this weekend at the Sprint Center in Kansas City.

 

Income tax: talk but no action yet

This has been a week of delay on legislation to raise income taxes.  First the Senate scheduled a debate on a conference committee agreement, and then backed off as Democrats and some Republicans indicated they couldn’t vote for it.

Then it was the House turn and the same thing happened.  Debate was postponed, especially when needed Democrat votes indicated they wanted K-12 education to be handled first, so they know how much money is needed to fund the budget and school finance.

As of this writing, the Senate Assessment and Taxation Committee is trying to put together a new plan.

They are using House Bill 2228 as a vehicle.

What they have put in the bill so far:

  • Repeal of the pass-through business exemption
  • Two income tax brackets: income under $12,600 would pay zero percent and over $12,600 would pay 4.4 percent. This is essentially a flat tax
  • The standard deductions would be the same as federal
  • There is no retroactivity. Everything (including business pass through repeal) begins in 2018
  • State Board of Regents retirees would have pensions taxed beginning in 2018
  • The food sales tax is reduced from 6.5% to 5.5% in 2018
  • The annual business filing fee is increased from $40 to $75 beginning in 2018
  • The income tax deduction for property taxes paid is fully restored in 2018
  • The mortgage interest deduction jumps from 50% to 75% in 2020 and a full 100% in2021

Final action on the bill is being held until sometime Friday.  The committee wants to see fiscal runs and language.

Earlier, Senate Majority Leader Jim Denning proposed a $3 charge on utility bills, which would raise substantial revenue but is opposed by many as unfair.  It was not included.

Meanwhile the House Taxation Committee is looking at possible revenue sources including internet and remote sales; a motor fuels tax increase; increasing the cigarette tax; and maybe some sales tax on services.  Those are still in the early stages.

Members of the committee are mainly doing some informal polling of their colleagues to determine if there is support for any of those sources.

 

School finance still in process

The Kansas House K-12 Budget Committee has a school finance bill (HB 2410) that has been written but is still being tweaked.

Thursday, the Committee heard a presentation from former Kansas Senator Jeff King, the attorney hired by the Legislature to advise on school finance matters.

Some of his analysis included the following:

  • The more money you put into K-12, the more likely the bill is to be accepted by the court.
  • You have to provide the funding and have a funding stream. The legislature needs to provide “real dollars with revenues behind them.”
  • Whatever lawmakers do will become the “constitutional standards” that legislatures will be held to in the future.
  • The Kansas Supreme Court put an emphasis on providing funds to underperforming students. King said he believes the amended bill was less targeting of at-risk students than the original bill, and that will raise red flags with the Court.
  • Asked by Representative Brenda Landwehr (R-Wichita) if the state has to fund the constitutional promise of a suitable education regardless of economic conditions or the impact on other budget areas, King said, “Yes!”

The committee adjourned without taking action on the bill.  Chairman Larry Campbell (R-Olathe) did not set a time for a meeting Friday but said the committee was on call.  He had originally hoped to begin working the bill further and passing it out of committee on Friday.

 

20 mills renewed with change to property tax abatements

The Kansas Senate has renewed the statewide 20 mill property tax for K-12 education by a vote of 39 to one.  The renewal is good for two years.  The first $20,000 of assessed valuation of residential properties would continue to be exempt from the property tax levy.

In FY 2018, the 20 mill levy is estimated to raise about $630 million.

Local governments and economic developers might have a problem with a provision that was added to the bill that concerns property tax abatements.

Beginning in school year 2017-2018, any new property tax exemptions granted by the State Board of Tax Appeals for property financed by industrial revenue bonds or for economic development purposes (pursuant to the Kansas Constitution) for which the public hearing was not held prior to May 1, 2017, would no longer apply to the statewide 20 mill school finance levy.  Previously exempted property would continue to be eligible for exemption from the levy.

There is no estimate yet available for how much the property tax abatement change would be expected to

Bring to the state.

The bill (Senate Bill 146) now resides in the House Taxation Committee.

 

STAR Bonds Action

The economic development tool known as STAR Bonds (Sales Tax Revenue Bonds) will go away this summer without legislative action to renew its use.

The House took action this week, passing HB 2184 by a vote of 112 to 11.

There are some changes:

  • The bill allows STAR bond project costs to include expenses for the renovation and expansion of an historic theater.
  • The bill would eliminate language that allows a county commission or school board to object to a proposed STAR bond district, if it is determined the STAR bond district would have an adverse effect on property tax revenues.
  • The Secretary of Commerce would no longer be required to approve a city or county option to use all or a portion of transient guest tax revenues to be pledged for principal and interest payments on the STAR bonds.
  • The bill would eliminate outdated language for a STAR bond project that involves auto racetrack facilities.
  • The bill extends the sunset date for the STAR Bond Financing Act from July 1, 2017 to July 1, 2022.

The bill was assigned to the Senate Commerce Committee after passing the House, where Chair Julie Lynn (R-Olathe) has expressed concern and a desire to make changes.  Her Commerce Committee has had hearings on STAR Bonds as well as the state’s other economic development tools.

 

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.