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: school finance, house budget, efficiencies, tax lid, deadlines

In this issue …

  • Court to Legislature: Fix school finance or schools will close
  • House passes budget
  • Efficiency proposals take the spotlight
  • Mayors oppose tax lid
  • Busy week for bill introductions as deadlines loom


Court to Legislature: Fix school finance or schools will close

The Kansas Supreme Court has ruled last year’s block grant funding for K-12 schools in Kansas unconstitutional.

The decision, released Thursday morning, says the Kansas Legislature has until June 30 to fix the problem or Kansas public schools will be unable to operate after that date.

The court says the block grant legislation violates Article 6 of the Kansas Constitution and that it violates the equity provisions concerning state money for capital outlay and local option budgets.

No dollar amount is suggested.  Rather, it’s about fairness in funding.

The Justices left the decision on how to make the distribution of funds to lawmakers.  They could do that by returning to portions of the old school finance formula, changing the block grant law, or writing a new formula that is constitutional.  Each of those options will likely cost more money.

Four school districts challenged the block grant bill: Wichita, Hutchinson, Kansas City, and Dodge City.

Here are some direct quotes from the decision:

“The evidence supports the Plaintiffs’ position. It shows the amended formula when fully funded provides less capital outlay state aid than the previous one would have provided had it been fully funded—i.e., that the amended formula is structurally less equitable. As a result of the amended formula, every district entitled to capital outlay state aid suffered a loss when the legislature reversed its plan to fully fund the previous formula—and 28 districts lost their entire entitlement. In contrast, the wealthier districts that did not qualify for the aid obviously lost nothing.”

“We also stay the issuance of today’s mandate to give the legislature a second, and substantial, opportunity to craft a constitutionally suitable solution and minimize the threat of disruptions in funding for education. This stay is consistent with much of the history of school finance litigation in this state.”

“With this backdrop established, we repeat that during this additional time accorded the 2016 legislature, constitutional infirmities ‘can be cured in a variety of ways—at the choice of the legislature.’”

“In short, if by the close of fiscal year 2016, ending June 30, the State is unable to satisfactorily demonstrate to this court that the legislature has complied with the will of the people as expressed in Article 6 of their constitution through additional remedial legislation or otherwise, then a lifting of the stay of today’s mandate will mean no constitutionally valid school finance system exists through which funds for fiscal year 2017 can lawfully be raised, distributed, or spent.”

“Without a constitutionally equitable school finance system, the schools in Kansas will be unable to operate beyond June 30. And because an unconstitutional system is invalid, efforts to implement it can be enjoined.”

“Accordingly, the legislature’s chosen path during the 2016 session will ultimately determine whether Kansas students will be treated fairly and the schoolhouse doors will be open to them in August for the beginning of the 2016-2017 school year. The legislature’s choices will also dictate whether we may proceed to the final stage of this litigation, i.e., the sooner the legislature establishes a constitutional funding system, the sooner this case can be dismissed.”

The opinion also included several passages that seemed designed to defend the Supreme Court against the inevitable attacks by Governor Brownback and others that this is an “activist court.”

The court discussed some of the writings of founding father Alexander Hamilton about the separation of powers.  Here’s a sampling of comments in the opinion after that discussion:

“So the judiciary clearly has the power to review a law and potentially declare it unconstitutional. But this power is not limited solely to review. It also includes the inherent power to enforce our holdings.”

“Our order should not be misinterpreted as expressing a desire by this court to become a regular supervisor of Kansas’ school funding system.”

“But our order is a manifestation of Hamilton’s conclusion that ‘the courts were designed to be an intermediate body between the people and the legislature.’  Federalist Paper No. 78.  Consequently, while we do not desire to become a supervisor of the school finance system, neither do we abandon our duty to the people of Kansas under their constitution to review the legislature’s enactments and to ensure its compliance with its own duty under Article 6.”

Here is a link to the 80 page opinion.

This is just one part of the school finance question before the Kansas Supreme Court, the equity (or fairness) portion.

The court is also considering the question of whether funding is enough.  Those arguments are scheduled for a hearing before the court in March.

One reaction came swiftly.  The House Judiciary Committee has scheduled a hearing Tuesday on a constitutional amendment to change the membership of the Supreme Court Nominating Commission.  The change gives the Governor and legislative leadership control over the appointment of a majority of members of the commission.

The measure is HCR 5013.


House passes budget

The Supreme Court decision came in the middle of legislative deliberations about the budgets for this year and next, which are becoming a yearly difficult balancing act.  The bill passed 68 to 56.

It is SB 161.

The House of Representatives budget leaves only about $6 million in the state’s checking account at the end of the current budget year (Fiscal Year 2016).  The court decision will certainly eat that up and more, making the job of lawmakers more difficult.

The bill eliminates a deficit brought on by lower than expected tax revenues.

One of the provisions is strongly opposed by teacher and education groups.

As explained in a Wichita Eagle story:

“The House bill would enable the governor to delay a payment to the Kansas Public Employees Retirement System at the end of the 2016 fiscal year in June as a way to cushion the ending balance and prevent cuts to state agencies.

“That could add up to $100 million to the state’s 2016 ending balance, depending on whether the governor decides to delay the entire June payment to KPERS.”

Governor Brownback could delay the payment, but would have to repay the money by September 30, plus 8% interest.

Some of the other items in the House budget:

  • Takes $27 million from KDOT for Fiscal Years 2016 and 2017
  • Reduces state contributions to the Children’s Health Insurance Program in 2017 by $25.5 million (offset by increased federal funding)
  • Cuts funding for the Bioscience Authority over two years, saving $12 million
  • Increases funding for Osawatomie and Larned State Hospitals by $3 million
  • Increases pay for correctional officers with $2.4 million
  • Suspends KPERS death and disability payments for the first three quarters of 2017. That saves $37.5 million
  • The budget calls for selling the Kansas Bioscience Authority’s assets, which would raise an estimated $25 million. Additional legislation would be needed
  • “Step therapy” would be enacted for Medicaid patients, saving an estimated $10.6 million. This requires doctors to first prescribe generic, or the cheapest drugs for treatment.  More legislation would be needed for this
  • A provision allows the Kansas Bureau of Investigation to use existing funds for a salary increase

As of this writing (Thursday evening), the Kansas Senate continued to debate its version of the budget.


Efficiency proposals take the spotlight

Before the Supreme Court decision came out on school finance, House Speaker Ray Merrick (R-Stillwell) was talking about spending the rest of the session coming up with money saved through the legislature’s big efficiency study from the firm of Alvarez and Marsal.

The company claims the suggestions could save the state $2 billion over five years.  Several committees have scheduled detailed presentations by the firm for next week as lawmakers attempt to closely review the proposals.

However, the Senate Commerce Committee meeting on the subject was abruptly halted Thursday when a woman from the firm fainted after her presentation during Q and A by the committee.

The state paid $2.6 million for the report.


Mayors oppose tax lid

An unusual open letter to citizens by the mayors of Johnson and Wyandotte Counties criticizes the Kansas Legislature for its unbalanced budget and the tax lid passed last year.  The letter was signed by Merriam Mayor Ken Sissom, chairman of the Council of Mayors, a group made up of mayors from the two counties.

Here’s a portion of the letter:

“Despite continually complaining about Washington trying to tell Kansas what to do, the Legislature seems determined to tell local governments what to do, how to do it, how to raise revenues and how to spend those revenues.

“The first leap down the road of eliminating local voters, and local government control over our cities and county was a last-minute, no-hearings-held “tax lid” passed at the end of the historically lengthy 2015 legislative session.  By passing the “tax lid,” the Legislature (including many of your local senators and representatives) said very clearly that Topeka knows more about your community than you do, or the mayor, city council or county commission you elected.

“The tax lid discourages local growth and investment.  If a community successfully invests and grows value in the community, Topeka’s artificial cap on taxes may eliminate a city’s ability to support growth with basic services like public safety.  And what does a city do as personnel costs for insurance and pensions continue to exceed inflation?  Cut government services you want from your city or county because Topeka says you aren’t allowed to afford them?”

The letter concludes:

“It’s time for the Legislature to address the State’s fiscal problems without imposing the same unproven, unpredictable and potentially unproductive experiments on your city, schools and county.

“And it’s time for Kansas to return to its true conservative roots as a state relying on fair taxes, local control, and a balanced budget.”

Cities and counties statewide say last year’s legislation requiring an election is unworkable.  They would prefer the legislation be repealed.  Although it doesn’t take effect until 2018, the Kansas Association of Realtors and some other groups are pushing to move up the effective date and remove some exemptions.

It’s believed the Senate Assessment and Taxation Committee will hold hearings on the issue the first or second week in March.


Busy week for bill introductions as deadline looms

There were a lot of bills introduced in the House and Senate this week because of two major deadlines.  Wednesday was the deadline for individual legislators to introduce bills.  Friday (today) is the deadline for most committees to introduce bills.

There are “exempt” committees that can introduce legislation at any time, but the avalanche of legislation being introduced will slow after this week.

Two weeks from today, February 26, is the scheduled “turnaround,” marking the halfway point of the legislative session.  However, legislative leadership has been hoping to move that deadline up sooner in an effort to reduce the number of days the legislature is in session.  No word yet on whether that will occur.


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