KEPC UPDATE: Budget profile, job cuts, school finance, assessment & taxation

In this issue …

  • Legislators review the latest state budget profile
  • State agency job cuts are examined
  • Special School Finance Committee to meet December 4
  • Assessment and Taxation meeting scheduled

 

Legislators review the latest state budget profile

Along with a review of the new consensus revenue estimates, Chris Courtwright of the Kansas Legislative Research Department recently gave a group of legislators an overview of the state budget profile.

At the November 8th meeting of the Legislative Budget Committee, Courtwright said the estimate included

  • An increase in corporate income taxes (an increase of $25.7 million for FY 18)
  • An increase of 1.9% in sales taxes in FY 2018, even though growth has been about 4% since this Spring. The estimators do not believe 4% is sustainable
  • Estimates show the expected general fund balance for FY 18 will be 4.2% (about $279.7 million)
  • Estimates indicate a general fund balance for FY 19 of 5.3% (about $354.9 million)
  • These include income tax increases expected due to the tax legislation passed in 2017.

Courtwright said the so-called “long form” explanation of what the estimators think will happen with the economy will be coming out soon.  Some of the highlights:

  • There’s ongoing uncertainty of the timing of receipts from the new income tax law
  • Estimated growth in several areas has been reduced from the previous estimate in April. Personal income growth was reduced from 4% to 1.5% and Real Gross State Product was reduced from 1.8% to 0.2%
  • Crop production will likely be at its lowest level since 2009
  • Oil and natural gas prices have lowered, as well as production, which impacts severance tax receipts
  • Employment seems to be stagnant
  • There is ongoing uncertainty about U.S. foreign trade policy, health care policy, and tax policy.

 

State agency job cuts are examined

One of the major arguments in favor of passing the 2017 income legislation was that the 2012 income tax cuts have hurt the ability of the state to deliver services.

House Majority Leader Don Hineman (R-Dighton) has now proved that in his latest newsletter to constituents by researching employee head counts and budgets from 2011 to 2016, especially in departments that can have something to do with economic development.

For example, we knew there had been significant cuts in the Kansas Department of Commerce.  Hineman says from 2011 to 2016, the employee headcount at Commerce has been reduced by 21.6% and the department’s budget was slashed by 33.5%.  Look for the 2018 Kansas Legislature to take a close look at Commerce operations, especially after the Kansas City Star broke the news that former Commerce Secretary Antonio Suave had used Commerce money for contracts with friends and business associates.

Everyone wants to know why Kansas can’t attract more business when the state’s lead agency for doing that has had a third of its budget slashed.

Hineman notes that Commerce is not the only state agency which businesses interact with on a regular basis.  Many of those have been downsized from 2011 to 2016.

He provided these examples:

  • Kansas Corporation Commission employment reduced 14.7%
  • Revenue Department employment reduced 8.0%
  • Board of Tax Appeals employment reduced 25.1%
  • Kansas Real Estate Commission employment reduced 17.0%
  • Kansas Department of Labor employment reduced 32.6%
  • Secretary of State employment reduced 22.6%
  • Insurance Department employment reduced 14.9%
  • Kansas Water Office employment reduced 11%
  • Department of Transportation employment reduced 18.0%

Representative Hineman’s comment on all of this:

“No doubt there are instances where efficiencies have been found and unneeded employees have not been replaced and that is a very good thing.  But the consistent trend of fewer employees across most all state departments and agencies raises the possibility that for many businesses and individuals, interacting with state government is now more burdensome, time-consuming and costly.  Messages I receive from constituents seem to confirm that this is true.”

 

Special School Finance Committee to meet December 4

The newly formed, eleven member Special Committee on a Comprehensive Response to the School Finance Decision meets December 4th at the Kansas Statehouse.  The Legislative Coordinating Council has approved a total of three days of meetings for the committee.

House Speaker Ron Ryckman (R-Olathe) was able to put comprehensive response in the committee title, saying he wants to “reduce or eliminate the perpetual cycle of conflict over school finance and end the perennial recurrent threat of school closures.”

The committee is supposed to identify legislative responses to the Kansas Supreme Court decision and the consequence for each.

Some legislators and onlookers read that as code for “let’s change the constitution so we are constitutional.”

At this time, that seems highly unlikely, given the number of lawmakers elected in 2016 who ran strong campaigns promising support for education, and the lack of support for such a constitutional amendment in recent years.

 

Assessment and Taxation meeting scheduled

Meanwhile, there’s more activity on the money front as the Special Committee on Assessment and Taxation holds meetings in Topeka on December 7th and 8th.

The first day will be spent reviewing the consensus revenue estimates, the state general fund profile, the implementation of the new income tax law, and what’s going on with the local property tax lid.  The committee will also hear presentations on school district property taxes, a history of the sales tax, and sales tax exemptions.

Here’s a link to the agenda for both days.