Tax Study Released Today

A new study on the ramifications of lowering the state income tax was released today at a statehouse news conference. Bernie Koch, executive director of KEPC, and study author Dr. John Wong presented findings at the statehouse today. The study finds that, for every 1 job created, 1.63 are lost due to study released today finds that a lowering of the income tax would result in a loss of 1.63 jobs due to a reduction in overall state spending. The study was commissioned by the Kansas Economic Progress Council.

The press release is available here, and the ful text of the study is available here.

Dr. Wong’s slide deck is available here.

KEPC NEWS: Budget fix, education plan, KDOT, Unemployment, Next Week

In this issue …

  • Legislators trying to understand budget fix
  • Education plan is unclear
  • KDOT slows contracts; warns about taking sales tax money
  • Changes to Unemployment Insurance will be proposed
  • Next week


Legislators trying to understand budget fix

Kansas lawmakers spent much of this short work week trying to understand Governor Brownback’s budget proposals to fix a Fiscal Year 2016 revenue shortfall of about $700 million.

The budget was not released until last Friday morning and lawmakers did not convene this week until Tuesday because of the Martin Luther King, Jr. Holiday on Monday. Add to that President Obama’s visit to Kansas this week and that’s not much time for a thorough analysis.

Conventional wisdom in the Statehouse hallways is that there is not enough support to increase cigarette and liquor taxes, which total $107 million.

The Governor’s education proposals are not understood and there are concerns about the cost of KPERS changes and the impact of transportation funding shifts on projects scheduled for 2015 and 2016.


Education plan is unclear

The Governor wants to “suspend” the current school finance formula and rewrite it. In the meantime, he proposes “block grants” to school districts for the next few years.

The dollars he wants to spend are clear, but the impact on local school spending and how the money will be distributed is unclear and confusing. Education groups and legislators are waiting for detail from the administration.

Information from the Kansas State Department of Education indicates the proposal would result in $127 million less being spent on K-12 education between FY 2015 and FY 2016. That’s the amount actually spent in schools. When KPERS and other increases are added in, the total is a $22 million less from this year to the next.

If the formula is suspended, educators want to know what happens to the Local Option Budget. Are there limits on what districts can levy in property taxes? What are they?

Education lobbyists who met this week on the proposal believe some structure has to be in place for a black grant system to work, but no one knows yet what that is.

Meanwhile, some legislators are quietly asking if such a block grant system violates the Kansas Constitution.

In a memo by the Kansas Office of Reviser of Statutes (part of the staff of the legislature) on the recent court decision on school finance, the staff notes: “Local option budget funding cannot be used in any measure of adequacy of the school finance formula because it is solely discretionary at the local level.”

That means Kansas cannot use local property taxes levied through the LOB to say they are providing a suitable education.

The memo goes on to say the Legislature’s compliance with the obligations of the Kansas Constitution “cannot be delegated to other entities.” Question: are block grants really the state delegating their duty to provide for a suitable education to local school districts. If so, the Governor’s proposal would violate the Kansas Constitution.


KDOT slows contracts; warns about taking sales tax money

The Governor’s budget would divert some funding for the Kansas Department of Transportation over the next few years. Kansas Secretary of Transportation Mike King told lawmakers this week the result will be a delay in some 2015 and 2016 projects. He said there would be no impact on 2017 projects.

The projects affected were not discussed.

On Tuesday, Secretary King warned the House Appropriations Committee not to take the four-tenths of a cent sales tax that goes directly to the highway fund.

According to a Topeka Capital-Journal story, King told the committee Tuesday, “You take that four-tenths away from us, you take our borrowing ability away from us, and we would cut projects. We would cut projects in this calendar year.”

King was reacting to statements by some Republican lawmakers who have been discussing diverting the four-tenths from the highway fund to the state general fund. They would then determine how much to return to the highway fund with each appropriation, likely keeping a large amount to fund the rest of the budget.

Some of these lawmakers are using carefully crafted language to indicate this is a revenue stream that should be going to the state general fund now. However, the original purpose was to provide a direct funding source for the 10-year T-WORKS program.

If King’s warning is not taken seriously, that sets up a possible confrontation between the Governor and members of his own party on highways.


Changes to Unemployment Insurance will be proposed

A working group of business and business organizations is close to proposing changes to Kansas unemployment insurance system, moving from an “arrayed” method to a “fixed” method.

The House Commerce, Labor, and Economic Development Committee held an informational meeting on how the system works this week.


Next week

Here are some of the activities of interest going on next week as the legislature starts its third week of the session.

The Senate Ways & Means Committee holds hearings Wednesday and Thursday on Senate Bill 35, which appears to be the rescission bill dealing with changes to the Fiscal Year 2015 budget and beyond.

The House Pensions and Benefits Committee will hold briefings on bonding. Of particular interest will be the presentation by Alan Conroy, Executive Director of KPERS, who will likely be asked about the cost of Governor Brownback’s proposed changes to KPERS.

The House Commerce, Labor and Economic Development Committee will hear presentations Monday on workforce and labor. On Wednesday, the committee will review a Legislative Post Audit on Economic Development.

On Monday the House Education Committee holds hearings on House Bill 2035, which changes the tax credit for the low income student scholarship program. That’s the controversial program inserted into the school finance bill last year that creates a tax credit for certain businesses that contribute to a program to pay for some tuition at private schools for low income students.

On Monday, the House Committee begins a week of looking at Kansas taxes. It begins with an overview of income, privilege, cigarette and tobacco, liquor and severance taxes.

February 2, a week from Monday, is the last day for members to request bills be drafted by legislative staff.

KEPC UPDATE: State of the State, Next Week

In this issue … State of the State: more questions than answers Next week’s schedule   State of the State: more questions than answers Governor Sam Brownback delivered his State of the State address Thursday night. There was no detail about his budget proposal and no discussion about how he plans to deal with the […]

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KEPC UPDATE: Gov’s budget, severance tax, rules change, Goossen joins KCEC

In this issue … Waiting for the Governor’s budget Severance Tax Down Rules change? What’s up with that? Goossen joins Kansas Center for Economic Growth  JOIN KEPC TODAY FOR THE LATEST INFORMATION ON THE 2015 LEGISLATIVE SESSION!   Waiting for the Governor’s budget Governor Brownback will deliver his State of the State speech on Thursday […]

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KEPC 2015 Legislative Positions

Following are the policy positions of the Kansas Economic Progress Council as we enter the 2015 legislative session: The Budget Stability in revenue and services is a strong foundation of business growth. It is evident that the 2012 and 2013 Kansas income tax changes went too far and resulted in severe cuts that impact the ability […]

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KEPC UPDATE: Legislature begins; What will the Gov do to fill the hole; rating agencies skeptical

In this issue … Legislature begins; budget dominates Will the Governor propose revenue increases and/or education cuts? Credit rating agencies are skeptical   Legislature begins; budget dominates The 2015 Kansas Legislature begins today about three hours after Governor Sam Brownback is sworn in for his second term as the state’s chief executive.  But amid all […]

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KEPC PRESS RELEASE: Kansas must revisit income tax cuts

Unprecedented budget crisis endangers education at all levels and all basic government functions Topeka, Kan. – Kansas Economic Progress Council (KEPC) Executive Director Bernie Koch called on the legislature and governor to revisit the 2012 and 2013 Kansas income tax cuts as they wrestle with the state’s growing budget crisis. Building a working budget will […]

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KEPC UPDATE: KS Economy will continue to lag

Consensus revenue group:  Kansas economy will continue to lag Personal income in Kansas and the state’s economy will continue to lag behind the national average, according to the more detailed memo on revenue estimates released last week by the consensus revenue estimating group. On November 10, the committee came up with numbers that must be […]

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KEPC UPDATES: Ranking Drops; Allotments = Cuts; County Profiles Updated

In this issue … Forbes: Kansas ranking drops from 13th to 25th in two years How allotments (cuts by the Governor) would work Kansas County profiles updated   Forbes:  Kansas ranking drops from 13th to 25th in two years Forbes magazine now ranks Kansas 25th in the nation in its annual “Best States for Business” […]

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KEPC UPDATE: Revenue estimating group meets Monday

Revenue estimating group meets Monday Just when you thought the election campaign debate over fiscal policy was over, it will likely surface again this week as the Kansas consensus revenue estimating committee meets to predict state revenues. The committee is sure to lower last April’s estimates, starting the process that could trigger reductions to the […]

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KEPC UPDATE: Kansas Speaks, lagging employment growth, legislature supports transpo

Docking Institute releases 2014 Kansas Speaks Survey Kansas still lags region in employment growth Survey shows legislative support for transportation   Docking Institute releases 2014 Kansas Speaks Survey What is probably the most comprehensive survey of what Kansans are thinking came out over the weekend. The sixth annual Kansas Speaks Survey was prepared by the […]

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