KEPC UPDATE: School finance, debate held until staff can write agreement, house adjourned until 8a Monday

In this issue…
  • House and Senate negotiators have reached agreement on a school finance bill that is linked to a revenue-raising income tax/sales tax on services bill.
  • House leadership had hoped to debate the measure Sunday night, but legislative staff needed time to put the agreement into writing.  
  • The House of Representatives has adjourned until 8 a.m. Monday morning.
Here’s what’s in the tax portion as I understand it:
  • The tax plan is basically the conference committee report on HB 2067, which failed in the Kansas Senate on May 11 by a vote of 18 to 22.
  • There would be three-tiers of individual income tax rates: Under $30,000 (3%); $30,000 to $100,000 (5.6%); and over $100,000 (5.6%).
  • Sales tax would be added to certain services. These would include towing, detective, cleaning, pet care, and mini storage/self storage.
  • The bill would designate income tax to be transferred from the state general fund to school funding.
  • All tax revenue from the sales tax on the newly taxed services would go to school funding.
  • KPERS employer contributions would not come from the state general fund but from a special revenue fund.
  • A  tax “trailer bill” would be required to be passed, with both bills linked.  If one bill does not pass, the other does not go into effect.
  • The bill raises an estimated $514 million in FY 18; $548 million in FY 19; $554.2 million in FY 20; $559.8 million in FY21; and$564.4 million in FY 22.
  • The business pass through exemption is eliminated in tax year 2017 and beyond.
  • The “glide path to zero,” the trigger mechanism that reduces future income taxes, is eliminated.
After the House adjourned Sunday evening, the tax conference committee of negotiators met to discuss the tax trailer bill for the agreement.  The Senate asked for more time to study the House proposal, so the committee will meet again tomorrow.
Here’s the House offer that was discussed Sunday night on the tax trailer bill:
  • Itemized deductions would be phased back in beginning in tax year 2018 for medical expenses, mortgage interest paid, and state/local property taxes paid.  The phase in would be 50%, 75%, and 100%.
  • Dependent child care tax credit would be restored to pre-2012 levels over a three year period, beginning in tax year 2018.
  • STAR Bonds would get a three year extension with a one-year moratorium beginning July 1, 2017.
  • The Ad Astra Jobs Act (which has already passed) tax credit would begin in 2020.
  • An Aviation Tax Credit would be enacted.
The big question now is: are there enough votes?  Many Democrats have expressed disappointment with the agreement. 
In fact, Democrats on the education conference committee refused to sign the agreement, but it is going forward anyway.