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 UPDATE: Flat tax crushed, FY17 budget, school finance, Medicaid

In this issue …

  • Senate crushes the flat tax
  • Legislature moves toward first adjournment with FY 17 budget
  • House committee has a school finance bill
  • What about Medicaid expansion?
  • Bill Tracking

 

Senate crushes the flat tax

By a vote of 3 to 37, the Kansas Senate flattened a proposal for a 4.6 percent “flat” income tax in debate Thursday afternoon.  The vote sends a strong message to Governor Sam Brownback, who had expressed support publicly for the bill, saying he would sign it or something like it.

The old saying that “politics makes strange bedfellows” was confirmed as Democrats, moderate Republicans, and very conservative Republicans all joined to squash Senate Bill 214, although for different reasons. It appears that conservatives did not support the income tax increase, while moderates and Democrats objected to the bill’s impact on lower income Kansans. They prefer a bill with three or more brackets, similar to the bill that passed the legislature and was vetoed by Governor Brownback.

The three yes votes were Senate President Susan Wagle (R-Wichita); Majority Leader Jim Denning (R-Overland Park); and Senator Gene Suellentrop (R-Wichita).  All other senators voted against the bill on final action.

Wagle and Denning were among those who had met with Governor Brownback about the bill.

The bill had many things that many legislators support:

  • Removing the pass through exemption for business entities
  • Ending the “March to Zero” trigger mechanism that lowered income tax rates in the future
  • Itemized deduction of medical expenses
  • Increases in the standard deduction on state income taxes
  • A reduction in the food sales tax

However, many believe it did not raise the revenue necessary to fix the state’s budget problems.  They also object to its impact on low income taxpayers.

What happens now?

Following the Senate vote, some in House leadership are saying the Legislature will return to consideration of an income tax bill with brackets that raises the revenue needed.  They believe it will pass quickly when lawmakers return to the Statehouse for the veto session, beginning May 1.

 

Legislature moves toward first adjournment with FY 17 budget

The Kansas Legislature is scheduled to hold its first adjournment sometime today (Friday).

The senate returns Friday morning at 10 a.m.  The House comes back at 11 a.m.

On Thursday night, lawmakers passed a rescission bill that deals with the current year’s fiscal imbalance, a deficit of about $290 million.  That sets up adjournment.

Revenues for the current fiscal year (which ends June 30) will not be enough to fund the budget for the remaining three months, so the budget had to change to fit the revenues (or the revenues have to change to fit the budget).

House and senate negotiators had reached an agreement, but the Kansas House of Representatives rejected the agreement, sending the bill back to the negotiating table on Wednesday.  The house objected to using money that was to go to KPERS to balance the budget.

Senators agreed to remove that provision and the budget was passed by the house Thursday evening, 108 to 15.

The bill does not cut K-12 education or higher education.

 

House committee has a school finance bill

Work on a new school finance formula in the house K-12 Education Budget Committee appears to be complete.  However, the bill still resides in the committee.  We expect it will be voted out for debate in the full House of Representatives during the veto session.

The bill is HB 2410.

It’s expected to increase funding for school district general state aid and special education by about $150 million next year; then add $150 million more each of the next four years.

That totals a $750 million increase.

Here’s what we understand is in the bill, in detail, as described by the Kansas State Department of Education.  It is very similar in structure to the last school finance formula.

  • Base aid for student excellence (BASE) will increase to $4,006 in 2017-18, $4,206 in 2018-19, $4,406 in 2019-20, $4,606 in 2020-21, and $4,806, in 2021-22. It will increase based on the midwest consumer price index beginning with the 2022-23 school year.
  • Special mill levies now in place will continue, except declining enrollment will be reduced 50 percent in the 2017-18 school year, and eliminated the next school year.
  • Enrollment will be based upon prior year or second preceding year, whichever is higher. All weighted enrollment will be based upon the prior school year enrollment.
  • At-risk funding will be based upon free lunch count and funded the same as law prior to the 2014-15 school year.
  • High-density at-risk will be funded the same as law prior to 2014-15 school year.
  • Provides a floor of ten percent for computing free lunch for any school district offering K-12.
  • All-day kindergarten will be funded and counted in the enrollment.
  • Career & Technical Education (vocational education) funding will be based upon .5 weighting (same as old law). The State Department of Education will study CTE cost by program and report to the Legislature by January 1, 2018.
  • Virtual students will be funded as in current law.
  • Non-resident virtual students will be excluded in the computation of assessed valuation per pupil for capital outlay and bond and interest state aid.
  • Special education funding remains the same as current law.
  • Transportation is amended slightly and on a statewide basis there will be a small increase in the state appropriation. No school district will receive less transportation state aid than received in 2016-17.
  • New facilities will be funded for all elections held prior to July 1, 2015 with a .25 weighting.
  • Bilingual education is computed using the higher of .361 of the contact hours or .185 of the bilingual headcount enrollment for students who qualify for bilingual services. The weighting under current law is .395 based on contact hours.
  • 20-mill levy will remain the same as current law.
  • Low and high enrollment will be reinstated as in law prior to 2014-15.
  • Expands early childhood funding by increasing state aid for four-year-old at-risk programs, $2,000,000 each year in 2017-18 through 2021-22.
  • The local option budget will be renamed the local foundation budget (LFB).
  • School districts may adopt up to 30 percent of their local foundation budget on board action. If a district chooses to increase the LFB up to 33 percent, this would require board action and right of protest petition.  Those school districts that are already at 33 percent will retain that authority.
  • Partially funds the mentoring program and professional development as provided by law
  • Adds utilities as an option for capital outlay fund if the school district republishes their capital outlay resolution.
  • Students from schools in the bottom 25 percent of student achievement and direct certified are eligible for tax credit for low income student scholarships effective July 1, 2017.

If you really want to get into the weeds and see what your school district gets, here’s a link to the Kansas State Department of Education web page with the estimated runs

The information is in the five links found here under House Bill 2410.

 

What about Medicaid expansion?

Governor Brownback’s veto of Medicaid expansion will stand.  On Monday, the Kansas House of Representatives could not muster the 84 votes necessary for an override.  The vote was 81 to 44 to sustain the veto.

Here’s how the House voted:  http://www.kslegislature.org/li/b2017_18/measures/vote_view/je_20170403115129_310009/

What happens now?  Although prospects for resurrection seem unlikely, Medicaid expansion supporters still harbor some optimism and will look for opportunities to bring the issue up during the May veto session.

As former Kansas Senator Phil Martin (D-Pittsburg) is reported to have said many years ago, “When I die, I hope I’m in the statehouse. Things have a way of coming back to life in this building.”

 

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.

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