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: THE SCHOOL FINANCE DECISION

Takeaways from the school finance decision

By now, you’ve heard about the 87 page ruling on Kansas school finance by a three-judge panel on Friday.  The court ordered the state to pay about $50 million to local school districts by July 1.

Many are still scratching their heads over what this means, particularly considering the short amount of time the state has to comply with a court order concerning the decision.

The decision has already been appealed to the Kansas Supreme Court by Attorney-General Derek Schmidt.

Questions:

  • Does the court order to pay the money continue, or does it wait on the Supreme Court appeal?
  • If the state must comply with the order immediately, can it do so with existing funds and without a special legislative session?

The ruling is lengthy and can be difficult for a non-attorney to navigate, but here’s my attempt.

The court spent considerable effort discussing and dissecting the actions of the 2015 Kansas Legislature and the block grant bill, Senate Bill 7.

The court said the bill violates “the Kansas Constitution, both in regard to its adequacy of funding and in its change of, and in its embedding of, inequities in the provision of capital outlay state aid and supplemental general state aid.”  Supplemental general state aid is Local Option Budget equalization provided by the state to local school districts.

The order applies to capital outlay and supplemental aid, but not the adequacy question.  The court said the adequacy of public education funding in Kansas is unconstitutionally low, but the court did not issue an order on that.  It’s awaiting an automatic appeal to the Kansas Supreme Court.

The adequacy question probably has a $500 million price tag attached to it.

Here are some of the highlights of the ruling as I understand them.

 

On block grants

Block grants “exacerbate” an already unconstitutional funding of K-12 education, according to the court.  The legislature scrapped the 23-year-old school finance formula and substituted block grants to districts.

“In addition, we have noted the abject failure of the block grant funding procedure to accommodate ordinary increases in the K-12 student population or changes in that student population’s demographics and the consequent total disregard of the opinion of experts and educators that opined the increased cost associated therewith and the reasons therefore.”

“This particular aspect of the block grant—flat funding-mechanism for the distribution of school funding resources is so pernicious and its negative effects so immediate that we believe a temporary restraining order should be issued pending resolution of the appeal of our decisions that would at least mitigate these effects and somewhat maintain the status quo…”

 

On flexibility and use of reserve funds, an argument made by supporters of block grants

Although not mentioned specifically in the ruling, Lawmakers have been robustly encouraged by conservative groups like the Kansas Policy Institute to force school districts to use reserve funds.  Here are excerpts on that issue:

“The State consistently points to USDs contingency reserve funds as widely available.  However, as we have pointed out in previous Opinions, the source of these contingency reserve funds comes principally out of operational funds, which have been, and are, inadequate to the task overall.”

“To assert that local school boards should abandon their constitutional duties to K-12 students by failing to hedge the risks inherent in inadequate funding through maintaining reserve funds so as to continue their constitutional duties as long as possible in the face of the failure of others to fulfill theirs is a grossly misplaced proposition.  If funding is inadequate to begin with, fund flexibility is merely a question of which funds should be used first, not which funds can be used better.”

 

On capital outlay

“If the history of the enforcement of Brown v. Board of Education has taught us anything, it is that a judgment fundamentally grounded on principles of equality of opportunity cannot be satisfied by merely a proffer of a lesser degree of the same inequality.”

 

On supplemental general state aid (LOB equalization)

The court said that because the base state aid per pupil is inadequate, Local Option Budgets are being used by school districts in an attempt to fund an adequate education.  The court called this use of LOB resources “backdoor funding.”

 

On KPERS funding

The court responded to the Governor and Legislature’s argument that KPERS funding increases are part of K-12 and are an increase in education spending by Kansas.

“As we have always believed to be the case, KPERS contributions are not able to be used for general school district operations and pass straight through USDs to KPERS or are otherwise placed only temporarily in a school district’s special retirement fund.”

“It represents only a new façade for a continuing lack of adequate funding.”

 

On emergency funds for schools being approved by the State Finance Council

“We find this school need evaluation, being entrusted to the State Finance Council, to be oddly placed.  As placed, it appears to be more a state budget control device rather than a true needs assessing failsafe for a USD that finds itself with deficient revenues to obtain its educational objectives.  The Kansas State Board of Education, at least in the first instance, has the constitutional duty of the oversight of USDs.  The needs evaluation procedure adopted includes no part for that Board.

For those so inclined, here’s a direct link to the decision.

KEPC UPDATE: Property tax problem, Kansas economy shaky

In this issue… Lawmakers face property tax problem at Friday session Kansas economy still shaky   Lawmakers face property tax problem at Friday session The tax package of two bills designed to balance the budget (including the sales tax increase) has an error that could have a significant impact on cities and counties and their […]

[Continue reading…]

KEPC UPDATE: Senate passes tax increase bill & budget, House returns on Monday

In this issue… Senate passes tax increase bill Senate passes a budget House returns Monday afternoon   Senate passes tax increase bill The Kansas Senate met Sunday afternoon and passed a sales tax increase and several other revenue enhancements that fill the hole in the state’s budget, at least for the time being. The bill […]

[Continue reading…]

KEPC UPDATE: House rejects tax bill, emergency budget, furloughs

In this issue… House overwhelmingly rejects tax bill Emergency budget waits in the Senate wings State prepares for weekend furloughs of state workers   House overwhelmingly rejects tax bill A compromise tax increase bill was overwhelmingly defeated in the Kansas House of Representatives Thursday by a vote of three to 108. A meeting of negotiators […]

[Continue reading…]

KEPC UPDATE: Legislature works through wknd, tax overview, tax debate Friday, running out of time, labor report, ed clean-up

In this issue… Legislature plans to work through the weekend The tax overview House tax debate scheduled for Friday Is the legislature running out of time? Monthly Kansas Labor Report indicates continued lackluster economy Education clean-up sent to the Governor   Legislature plans to work through the weekend After a week filled with stumbled starts, […]

[Continue reading…]

KEPC UPDATE: Tax debate Wednesday, tax overview, budget agreement, bioscience hearing

In this issue… Senate Cancels tax bill debate until Wednesday The tax overview Budget agreement tentatively reached Senate holds Bioscience Authority hearing   Senate cancels tax bill debate until Wednesday The Kansas Legislature went home Thursday and will return to Topeka Tuesday after a four-day Memorial Day weekend. The Kansas Senate had been scheduled to […]

[Continue reading…]

KEPC UPDATE: Biz tax cuts not working, cmte struggles with tax increas, block grant arguments & appeals, renewable energy, outlook

In this issue … Business tax cuts not working says Rep. Hutton Senate Committee struggles with tax increase Judges hear block grant arguments Block grant appeals Renewable energy compromise passes House The outlook for next week   Business tax cuts not working says Rep. Hutton In what many deemed an extraordinary hearing on HB 2430, […]

[Continue reading…]

KEPC NEWS RELEASE: Kansas’ own benchmarks lag the region

Indicators_Feb2015_nonfarm

Wichita, Kan. – Standards established by the State of Kansas and Governor Sam Brownback three years ago to measure the success of the Administration’s economic policies show the state’s economy trailing the rest of the region. The Kansas Economic Progress Council (KEPC) obtained a copy of the February 2015 report from the Governor’s Council of […]

[Continue reading…]

KEPC UPDATE: Tax cmte, 14 chambers send letter, Medicaid expansion favored by public and Catholic bishops, unemployment insurance

In this issue … Tax committees meet as lawmakers return 14 local chambers sign letter on budget/taxes Medicaid expansion favored by public and Catholic bishops Unemployment insurance bill passes Legislature   Tax committees meet as lawmakers return It was a short week as legislators returned to the Statehouse for the veto session, which is expected […]

[Continue reading…]

KEPC UPDATE: Revenue updates released, KSU/WSU criticize tuition freeze, tax talk, labor report, report: how gov’t can promote entrepreneurship

In this issue … Revenue estimates released KSU and WSU criticize budget’s tuition freeze More tax talk by key legislators Kansas labor report disappointing Kauffman Foundation: How government can promote entrepreneurship   Revenue estimates released: $400 million in “adjustments” needed The long-awaited consensus revenue estimates for Kansas were released this afternoon and, as expected, the news […]

[Continue reading…]