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.

KEPC UPDATE: Federal tax reform could mean a “windfall” for Kansas

Kansas could get an unexpected boost in state revenues if federal tax reform is enacted. Few in state government understand or are discussing the possibility.

If federal tax reform passes, Kansans could be paying less federal income tax, resulting in more income in their pockets.  However, that additional income would be subject to state income tax, meaning more revenue for the state.

It would be an unlegislated state income tax increase and it has happened before.

The phenomenon occurred in Kansas and other states after Congress passed the Tax Reform Act of 1986, a bill introduced by Democrats and supported by President Ronald Reagan.

Federal income tax cuts for individuals were about $60 billion.  They were offset by eliminating tax loopholes and shifting the burden from individuals to corporations.

Because Kansans were paying less federal income tax, their income subject to state income tax was larger, resulting in an unlegislated state income tax increase.  The 1988 “windfall” to state government was estimated at over $150 million.  That roughly translates to about 7.5% of the budget at the time.

There was also an unexpected windfall in Kansas corporate income taxes due to the federal changes.  Corporate revenues were over $70 million above the estimates.

Because the federal changes were phased in, the legislature had to deal with the issue over multiple years and through two administrations (Governors Mike Hayden and Bill Graves).

I was a reporter in 1987 and did a story on the possibility of a “windfall” to state government with the sole state legislator who had the issue on his radar.  No one else was discussing it.

That lawmaker was State Representative Henry Helgerson (D-Wichita), who returned to the Kansas House in 2015 after an absence of several years.

These days, there is one organization that does have its focus on this issue: the National Council of State Legislatures (NCSL), which put out some information on the possibility in January.

A few of their comments:

“What will the states do with potential revenue windfalls – Based on current state conformity with the IRC (Internal Revenue Code), there is likely to be a revenue windfall for the states if the Blueprint passes. – Will states reduce rates or otherwise attempt to make the overall impact revenue neutral?

“States are likely to receive significant revenue increases from conformity with other Blueprint provisions: – Border adjustability; disallowance of interest deductions; elimination of many corporate and personal income tax deductions.”

Of course, we don’t know if federal tax reform will pass or what form it will take.  That would affect the impact on Kansas.  However, the Washington discussion seems to include a consensus that federal tax reform has a better chance than previous attempts at major legislation since the Trump Administration began.

If there is a windfall, it could be a big piece in solving the puzzle of how to fix damage to state services brought on by the 2012 income tax cuts.

KEPC UPDATE: Troubled economy, incentives, DegreeStats, tuition increases…and everything you wanted to know about Kansas.

 

In this issue… 

  • Kansas’ economy is still troubling
  • Survey says incentives growing in importance
  • New DegreeStats available
  • Tuition increases for public higher education
  • Everything you wanted to know about Kansas

 

Kansas economy is still troubling

The downward slope of the Kansas economy over the past several years continues to be disturbing.  As the 2018 Legislature approaches, many lawmakers are trying to decide what they can do to reverse the trend.  The many candidates for governor are also expressing concern.

There are two major indicators we look at: employment growth and GDP growth (gross domestic product), which is also essentially economic growth.

The latest employment growth figures for Kansas continue to be bleak.  The latest Kansas Labor Department Report, which looks at employment from August, 2016 to August, 2017, shows an overall decline.  Total non-farm employment is down (-0.6%) over the period.  That’s about a 9,000 job decline.

If you just look at private sector jobs, the decline is -0.5%.

Back in the first quarter of 2012, Kansas job growth was over 1.5%.  The charts have zigged and zagged but the trend has been declining growth.

Kansas economic growth (GDP) has been showing a similar trend.  In the fourth quarter of 2016, Kansas tied with Mississippi for the lowest economic growth among the states at 0.1%.

What can government do to grow the economy?

I try to start every presentation and testimony with a list of five things that mainstream economists have concluded government can do.  Not on this list is currency and interest rate manipulation because we can’t do that at the state and local level.

  1. The investment rate in plant and equipment, including efficient physical infrastructure, has a strong positive impact on growth. Studies show the higher an economy’s capital intensity, the more prosperous the economy. This means government infrastructure like highways, bridges, water and sewer systems, as well as encouraging businesses to invest in machinery and equipment that makes them more productive.

Kansas has hurt infrastructure investment over the past several years through transportation cuts.  The latest state budget borrows $200 million to be used for essentially basic maintenance over the next two years.

  1. Human capital and the efficiency of labor have also been shown to be significant to growth. Measures of human capital include the literacy rate, school enrollment ratios, and labor demographics.  Higher education levels contribute to higher wages and higher productivity.  Higher productivity increases GDP, the major economic measure of wealth.

Kansas has hurt this area by not keeping up with K-12 education spending and reduced spending over the years on higher education.   That’s resulted in higher tuition costs, making it more difficult for students to obtain an education.

  1. Linked to investment and human capital, there is substantial support for the contribution of continuing technological innovation and improvement in sustaining economic growth. This suggests that support for research and development and education is important. We do this through the research conducted by our universities that help agriculture, aviation, and other areas of the economy become more productive.

Kansas has pretty much eliminated the Bioscience Authority, a public-private agency that’s been given tremendous credit for attracting the $1.25 billion National Bio and Agri-Defense Facility (NBAF) at Kansas State University.  About 1,500 construction jobs are being created and 350 permanent jobs.

  1. Public policy which supports economic freedom through open economies supports higher growth rates. We would include tax structure and business regulation in this category.

Okay, Kansas went overboard on this with the 2012 income tax cuts, which resulted in problems for the other areas we are talking about here.  However, this is still important.  We need to continue to look at tax structure on some businesses that weren’t necessarily helped by the income tax cuts, but were damaged by the sales tax increases passed to pay for the cuts.

  1. Reliable legal systems are a significant basis for economic growth. These systems provide dependable enforcement of private contracts, protection of private property rights, effective law enforcement, and an absence of corruption. The budget cuts over the years are having an impact on this area that we’ve been reading about often in the news:  problems at our prisons.  Also, the Kansas Highway Patrol doesn’t have enough troopers to cover all of our counties.

Obviously, it will take many years to correct the problems caused by the income tax cuts that then resulted in damaging budget cuts.  Perhaps our economy is declining because we’ve cut in so many areas (like those above) that are important to economic growth.

 

Survey says incentives growing in importance

The annual survey of corporate decision-makers by Area Development Magazine shows a big jump in the importance of state and local incentives to the location of new and/or expanding businesses.

Area Development Magazine is considered the primary publication for businesses that are expanding, local and state economic development officials, and professional site consultants.

The 31st annual survey, released earlier this year, indicated incentives have become more important.  According to the narrative of the survey, “The lack of available buildings in certain markets, as well as rising rental and labor costs, has made expansions more expensive than ever and heightened the need for economic incentives in order to make projects a reality.”

State and local incentives moved up from number nine on the list to the number 5 ranking factor over the past year.  The survey narrative says, “In fact, 74 percent of the respondents separately note that incentives are very or somewhat important to a project moving forward in a particular location. More than 70 percent consider tax incentives the most important type, and 39 percent cite the importance of worker training incentives.”

Here’s the list.  The percentage on the right represents respondents who answered the factor was “very important” or “important.

  1. Highway accessibility (94.4%)
  2. Availability of skilled labor (89.8%)
  3. Labor costs (89.6%)
  4. Occupancy and construction costs (86%)
  5. State and local incentives (84%)
  6. Corporate tax rate (82.3%)
  7. Tax exemptions (79.7%)
  8. Energy availability and costs (78.5%)
  9. Proximity to major markets (78.1%)
  10. Quality of life (76.4%)

Local economic development professionals I’ve talked with agree.  Here’s what they usually say:

“A business that’s expanding normally has two or three locations in mind.  They need highway accessibility, an educated labor pool, and taxes that aren’t high.  Taxes don’t have to be low, but they can’t be too high.  If everything else works, they ask about what else is available.

“Some states like Arkansas have a big ‘closing fund’ that can be tapped.  Oklahoma offers free workforce training.  Some individual communities in Kansas have set aside dedicated funds for economic development incentives.  Most would depend on the state for help.”

Most of the local economic developers I know say the State of Kansas doesn’t offer enough.

Note that number 10 on the list is quality of life.  Here’s what the survey narrative says about it:

“Despite the fact that quality of life is not the primary consideration when a company is choosing a location, experts say it cannot be overlooked.  It’s not only important to attracting young, tech-savvy workers but also mature workers who require good schools for their children and access to quality healthcare, as well as cultural and recreational amenities.”

 

New DegreeStats now available

How much does it cost to get a degree in a specific area?  How much can I expect to earn if I get the degree?

The answers to these and other questions are available online through a service offered by the Kansas Board of Regents.  The latest updates are available here.

The service is the result of 2016 legislation that requires the information be collected and presented online.  It’s an interactive online tool that reviews cost and earnings data from real graduates for each undergraduate degree program offered at a public university or college in Kansas.

It’s now been updated and expanded.

The Kansas Board of Regents says no other state provides data on the actual costs experienced by graduates, and no other resource is available which combines detailed degree-level cost and earnings data in one place.  You can even compare the same degree and different institutions.

 

Tuition increase for public higher education

The Kansas Board of Regents announced in June their approval of new tuition rates for each of the six state universities for the new academic year.  The majority range from 2.5% to 2.9% for undergraduate resident and non-resident students.  An exception is the University of Kansas Compact Rate (5.5%) and students attending the KU Medical Center (5.0%).

Here’s a link to the news release from the Regents.

 

Everything you wanted to know about Kansas

What do you want to know about Kansas?  There are sixteen categories of information available in the 51st Edition of the Kansas Statistical Abstract, collected through August of 2017.

They are Agriculture; Banking and finance; Business, Industry, and Exports; Climate; Communications and Information; Courts, Crime, and Public Safety; Education; Employment and Earnings; Energy and Natural Resources; Government: Housing and Construction; Income; Parks and Recreation; Population; Transportation; and Vital Statistics and Health.

Here’s a link to the information, which was put together by the University of Kansas Institute for Policy and Social Research.

KEPC UPDATE: Prison system, shrinking economy, disappointing labor report

In this issue …

  • Lawmakers will look at prison system budget after disturbances
  • Kansas economy shrank 1st quarter
  • A disappointing June labor report

 

Lawmakers will look at prison system budget after disturbances

Several years of state budget cuts are having their consequences on state prisons, where recent disturbances are putting a spotlight on serious safety problems.

Low pay for employees, unfilled positions, and difficulty recruiting employees may be contributing to recent disturbances at both the El Dorado and Lansing correctional facilities.

The agenda for Thursday’s Legislative Budget Committee meeting in Topeka includes an update on corrections by Kansas Secretary of Corrections Joe Norwood.

Committee Chair Senator Carolyn McGinn (R-Sedgwick) told the Kansas City Star she’s concerned about double-bunking of inmates, long hours for guards, and lockdown problems.

“I’ve never seen anything like this,” McGinn told the Star.

Some of the reported problems:

  • Union representatives say some employees are required to work 16-hour shifts
  • On June 29 at El Dorado, some prisoners refused to return to their cell block. Visitation was cancelled for two cell houses
  • Union reps also report receiving information about disturbances up to two months prior to the June 29th incident
  • There have been reports of inmate stabbings. On July 28th at El Dorado, two prisoners were taken for medical treatment after squabbles with other inmates.  Reports quote Corrections Department spokesman Todd Fertig saying one inmate suffered several puncture wounds.
  • As of Monday, July 24, Lansing had 116 staff vacancies out of about 682 workers
  • Staff positions at El Dorado are believed to be about 20 percent vacant

Here’s a link to a Kansas City Star story on the problems.

 

Kansas economy shrank 1st quarter

A report by the U.S. Bureau of Economic Analysis says the Kansas economy shrank -0.7 percent during the first quarter of 2017.  This was at the same time the national economy was growing at a rate of 1.2 percent.

As has been the pattern since the 2012 Kansas income tax cuts (which were supposed to grow the economy) all of our surrounding states did better with the exception of Nebraska, where the economy shrank -4.0 percent.

  • Missouri grew 0.9 percent.
  • Colorado grew 0.4 percent.
  • Oklahoma grew 1.9 percent

Kansas was only one of seven states where Gross Domestic Product shrank from the previous quarter.

The Bureau says the worst decline was in agriculture.  Retail, utilities, finance and insurance, information services, professional services, business management, educational services, and arts and entertainment all shrank.

Oil and gas production, manufacturing, construction, wholesale trade, transportation and warehousing, real estate, administrative services, health care, accommodation and food services, and government services all grew.

Here’s a link to the BEA news release.

 

A disappointing June labor report

The Kansas Labor Department’s June labor market report contains more bad news.

Since June of 2016, the Kansas economy lost 4,000 seasonally adjusted total nonfarm jobs and 4,000 private sector jobs.

Here’s a link to the report, which contains detailed employment growth information by industry.

The July Labor Report will come out on August 18.

###

KEPC UPDATE: Cut spending? Prison problems? June revenue, T-WORKS, school finance, college costs and benefits

In this issue …

  • Cut spending? What about prison problems?
  • June revenue growth came largely from corporate taxes
  • T-WORKS Progress
  • Preparing for school finance arguments
  • What a degree costs and can get you

 

Cut spending?  What about prison problems?

The media spin from the Brownback Administration about the income tax bill has been to criticize the legislation and the veto override and to talk in general terms about the need for spending cuts.

In an op-ed in the Wichita Eagle July 2, Revenue Secretary Sam Williams talked about the need for “cuts and efficiencies.”

In the same editorial section, Americans For Prosperity’s Kansas State Director Jeff Glendenning criticized the tax increases and condemned “soaring government spending.”

There was something else both of these op-ed pieces had in common.  Neither mentioned specific suggestions for what to cut.  That seems to be a common theme among those who criticize the legislation: don’t be specific; be general.

There’s no mention of the state budget cuts that have already occurred over the past decade or their impact.

No mention that the T-WORKS transportation program has been reduced to basic preservation after billions in transfers.  This year’s budget authorizes $400 million in bonding over the next two years specifically to be used for preservation work on the state’s roads.  We’ve been reduced to borrowing just to fill the potholes.

No mention of the state employees who have gone without a raise for nearly a decade because of the cuts that have already taken place, but are finally getting an increase this year.

No mention of the years of tuition hikes for post-secondary education as state aid to Regents Institutions has decreased in real dollars, making it harder for young people and their families to afford a higher education.

No mention of the shortage of highway patrol officers in over 30 counties, resulting in many counties without coverage.

No mention of the systemic problems in our state mental hospitals, and that inadequate spending on security has resulting in federal Medicare funds being halted to Osawatomie State Hospital after the investigation into a 2015 sexual assault.  The cost to the state is a million dollars a month.

I found it particularly ironic that the two op-eds with their anti-spending rhetoric occurred in a week where the long period of state budget stagnation likely resulted in the disturbances at the El Dorado Correctional Facility that began June 29.  The situation was resolved later that day.

Reports indicate that some prisoners refused to return to their cells and reportedly took over sections of the prison.

According to the Associated Press: “The union has said for weeks that the prison is understaffed and its inmate population has increased by about 200 inmates over the past three months, to about 1,900.  The state has boosted its capacity by double-bunking some cells as it transferred inmates in, including from other prisons.

‘The pressure of having fewer staff, more inmates and double-bunking was a recipe for some type of occurrence like this,’ said state Rep. J.R. Claeys, the Republican chairman of a budget subcommittee on public safety.”

It had been announced earlier in the week that employees at the El Dorado facility would start working 12-hour shifts to cope with the staffing shortage.  That was to begin July 1.

So, where is the state supposed to cut and become more efficient and what’s your solution for our roads, our higher education, our state hospitals, our law enforcement, and our prisons?

Please be specific.

 

June revenue growth came largely from corporate taxes

June revenues for the state of Kansas came in $72 million over the estimates, according to the Kansas Department of Revenue.

The biggest increase came from corporate income taxes, which are notoriously hard to estimate.  It’s important to note that the 2012 Kansas income tax cuts did not impact corporate income taxes for business.  Those are paid by C corporations, as opposed to the 2012 tax break (repealed by the 2017 Legislature) for business pass-through entities.

Those C corporations made up the biggest piece of the increase, exceeding estimates by about $39 million.

Individual income tax collections (where business pass-through entities would be located) were up $22.8 million over estimates.  Sales tax receipts beat the estimates by $11.5 million for the month.

 

T-WORKS Progress

Where are we on transportation projects in Kansas after the 2017 legislative session?

Economic Lifelines, the statewide transportation coalition, put out a summary of what to expect.  Here’s our summary of what they said:

KDOT has begun the process of letting additional critical preservation projects based on the $400 million in additional bonding authority authorized by the 2017 Kansas Legislature (see the first story in this newsletter, above).

In January, KDOT planned to let only $43 million in preservation projects during FY 18, but will now spend about $320 million in both FY 18 and FY 19.

For FY 18, $115 million will be spent on “1R” projects.  Examples of these types of projects are overlays, seals, patching and surfacing work.  1R projects help to ensure the full useful life of roadways and protect the investments already made to the system.

$143 million will be spent on heavy preservation projects.  Examples of these projects are bridge replacements or sections where full reconstruction may be necessary.  Two of the main projects that will be programmed during FY 18 are:

  • I-70 in Wyandotte County at the Lewis & Clark Viaduct over the Kansas River in Kansas City Kansas
  • I-70 in Gove County from one miles west of K-23 to 4 miles east of K-211, which will be let in April of 2018. Other heavy preservation projects can be expected in Edwards, Allen, Sheridan, Hamilton, and Butler Counties during Fiscal Year 2018.

The rest of the funds will be programmed to yet-to-be determined 1R projects.

Because these projects are based on borrowing, the funds cannot be swept in to the state general fund by future legislatures.

 

Preparing for school finance arguments

Now that the Kansas Legislature has passed school finance legislation that replaces the block grants of the past two years, the Kansas Supreme Court has scheduled oral arguments in the school finance lawsuit for July 18.

There seems to be a consensus among legislators (including pro-education lawmakers who don’t think the state did enough) that the Court decision, whatever it is, will NOT require a special legislative session this summer or fall.  Instead, any changes would be allowed to take place by the 2018 Legislature.

In Court briefs filed on the lawsuit recently, the districts suing the state say what the legislature approved is about $1.5 billion short of what’s needed.  Their attorneys are asking the Court to order more money be provided by September 1.

Attorney General Derek Schmidt, representing the state, says the increase is sufficient under the state constitution to pay for a suitable education for every child.

 

What a degree costs and can get you

What does a higher education degree from a Kansas public institution cost?  How much can you expect to earn if you get one of these degrees?

The Kansas Board of Regents has updated that information here.

A 2016 Kansas law requires the Regents to make the information available as an online tool.  It reviews cost and earnings data from real graduates for each undergraduate degree program offered at a public university or college in Kansas.

Known as Kansas DegreeStats, the newly updated information has been expanded to include each degree offered at 26 public colleges in Kansas, along with employment data for graduates who work in both Kansas and Missouri.  That’s information on more than 1,100 undergraduate degrees.

Information includes reports on typical resident tuition, fees, room and board, and books and supplies.  There’s information on the typical length of time it takes students to complete each degree program, along with scholarships, grants, loans, etc.

The site allows side-by-side comparison of up to three degrees.

KEPC UPDATE: Supreme court hearing, tuition increases, lottery, budget, Osawatomie, nothing on property tax lid

In this issue …

  • Kansas Supreme Court to set school finance hearing schedule
  • Board of Regents approves tuition rate increases
  • Governor vetoes Lottery extension/vending machines
  • How the budget turned out
  • Feds don’t certify Osawatomie State Hospital
  • No action on property tax lid
  • Bill Tracking

 

Kansas Supreme Court to set school finance hearing schedule

Now that Governor Sam Brownback has signed SB 19, the new school finance formula bill, the Kansas Supreme Court has begun the process of reviewing the bill relative to its constitutionality.

A scheduling conference call will take place at 8:30 Monday morning to discuss deadlines and identify at least the major issues arising out of the signing of the bill.  Afterward Monday, the Court says it will issue a scheduling order.  It’s expected the Supreme Court will schedule a hearing on the constitutionality of the bill very quickly.

Kansas lawmakers will return June 26 for the formal Sine Die session when the books are officially closed on the session.  If Governor Brownback vetoes any bills, Sine Die will be the time when veto override votes take place.

A possible return could occur before then if the Kansas Supreme Court rules that the school finance actions taken by lawmakers are unconstitutional.  That could mean returning to session before the end of June to figure out how to make school funding constitutional and allow revenue to move to local school districts.

 

Board of Regents approves tuition rate increases

Once again, the Kansas Board of Regents has approved tuition increases for the six state universities for another academic year.  The majority of the increases range from 1.5% to 1.9% for undergraduate resident and non-resident students.

The exceptions are the University of Kansas Compact Rate (5.5% increase) and students attending the University of Kansas Medical Center (5.0%).  Students attending the Kansas State University College of Veterinary Medicine will have no rate increase.

Here’s a link to the 102-page Kansas Board of Regents document that provides detailed information on tuition at all of the state’s Regents Institutions.

Also, the Kansas News Service has put together an excellent report on the rising cost of higher education in Kansas that’s well worth reading to understand how dwindling state support over the years has resulted in higher tuitions.

Pay particular attention to the chart entitled, “The shifting cost of Kansas education.”  It really tells the story.

Here’s the link to the story.

 

Governor vetoes Lottery extension/vending machines

Governor Sam Brownback has vetoed a bill that extends the Kansas Lottery because it authorizes vending machine sales of Lottery products.

Brownback vetoed House Bill 2313, saying he objected to the measure because expansion of lottery ticket sales “will negatively impact our communities and our neighbors.  The Kansas Lottery has a disproportionately negative effect on low income Kansans.  Rather than investing limited resources in games of chance, our goal is to help low income Kansans find a path to self-reliance and independence through education, work, and savings.”

There appeared to be no advance warning that Brownback was going to veto the bill.

Kansas Lottery officials had lobbied legislators for many months to authorize vending machines.  They argued an additional $8 to $10 million in state revenue would be generated.  The bill dedicated that additional funding to community mental health services.

Current law sunsets the Kansas Lottery on July 1, 2022, so the Kansas Legislature has five years to renew it.  The Lottery provides funding for the Kansas Department of Commerce and most of the state’s economic development programs.

 

How the budget turned out

The two year budget passed by the legislature leaves the state with an estimated ending balance of $157 million (2.5%) in Fiscal Year 2018 and $209 million (3.3%) in Fiscal Year 2019.

Built into the budget is a pay raise for state employees after almost nine years of no raises for most.  Those with less than five years on the job will get a 2.5% raise, while those with over five years will receive a 5% increase.  There are some exceptions.  Statewide elected officials and legislators don’t get a raise.  In the courts, there’s 2.5% allowed for judges and non-judicial staff.

Also in the budget is a provision that allows the Kansas Department of Transportation to issue up to $400 million in bonds over the next two years.  The revenue raised must be used for road maintenance and repair.

The state water plan will receive $1.2 million after a long wait for additional funds.

 

Feds don’t recertify Osawatomie State Hospital

In a very disappointing decision for the Administration and many others, the Osawatomie State Hospital has not been recertified by the federal government.  That means it will continue to lose $1 million per month in federal funds.

The certification of the unit was revoked at the end of 2015 over safety issues, along with a lack of staff and problems having to do with patient care.  Many blamed state budget cuts.  The federal government said the facility was too unsafe to accept Medicare patients.

The latest inspection indicated there were improvements at the facility, but not enough for recertification.

Osawatomie State Hospital is a psychiatric hospital with 206 beds.  At one time, it was considered by many to be a strong leader in treatment of serious mental illnesses.  Federal officials started looking into safety at the hospital after a 2015 sexual assault.

 

No action on property tax lid

The legislature, caught up in the fervor of trying to pass an income tax override, school finance, and a budget, did not take action to loosen the local property tax lid.  The major hope was to exempt employee benefits from the lid.

Local government officials are now putting together their 2018 budgets.  Many are trying to figure out how to meet increased demand for public services under the tax lid’s restrictions.  Exceeding the lid is possible with an election, but most agree that the current law on how that would happen is unworkable.

 

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.

KEPC NEWS RELEASE: Income tax bill will ultimately be good for the economy

The Kansas Legislature’s veto override means spending can improve on government services that aid economic growth

The Kansas Economic Progress Council (KEPC) welcomes passage of Senate Bill 30 by the House and Senate veto override Tuesday night.  KEPC opposed the 2012 income tax cuts and has worked to reverse them for the past five years.

KEPC issued the following statement from Executive Director Bernie Koch:

“Low taxes can be an important element in attracting and growing some businesses.  However, serious economic studies indicate other factors to be as important, if not more important.  Those include government investment in infrastructure, education, reliable legal systems, and support for business innovation and improvement.  All of these economic ingredients have been damaged in our state by the 2012 Kansas income tax cuts.

“Even with passage of Senate Bill 30, it will take years of work to recover.  The transportation program, T-WORKS, has been reduced to basic preservation which many believe to be inadequate for simple maintenance of our roads and bridges.  Transportation access is a vital factor in business location. Billions in transfers from the highway fund need to be reversed and the fund shored up.

“School finance is still a work in progress as we await the court’s verdict on a new formula, but cuts to higher education are particularly troubling.  A high level of education has been shown to be the strongest predictor of economic growth, yet enrollment in Kansas public higher education institutions was one percent lower this school year as state funding was reduced and yearly tuition hikes increasingly put post-secondary education out of reach for many families.

“Funding cuts have impacted reliable legal systems.  Effective law enforcement has suffered.  There’s a shortage of highway patrol officers and tremendous turnover rates of uniformed correctional officers at our prisons.

“Senate Bill 30 is not a magic bullet that will turn things around immediately, and returning the state income tax to business pass-through entities will be painful for many, but it’s a very good beginning to reversing our direction, rebuilding our state’s finances, and providing the necessary government services which are an important basis for the economy to succeed.”

Click here for a printable version of the press release.

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For more information, contact:  Bernie Koch at 316.207.3380 or berniekoch@yahoo.com.

The Kansas Economic Progress Council is a statewide business organization whose members include businesses, local chambers of commerce, trade organizations, and individuals.  KEPC is a 501(c) (4) not-for-profit organization.  The purpose of KEPC is to provide information, research and education on statewide issues that affect the economy of the State of Kansas as well as the quality of life of its citizens.

Kansas Economic Progress Council
www.ksepc.org
212 SW 8th Avenue, Suite 200
Topeka KS  66612
Bernie Koch, Executive Director

KEPC UPDATE: School finance, debate held until staff can write agreement, house adjourned until 8a Monday

In this issue…
  • House and Senate negotiators have reached agreement on a school finance bill that is linked to a revenue-raising income tax/sales tax on services bill.
  • House leadership had hoped to debate the measure Sunday night, but legislative staff needed time to put the agreement into writing.  
  • The House of Representatives has adjourned until 8 a.m. Monday morning.
 
Here’s what’s in the tax portion as I understand it:
  • The tax plan is basically the conference committee report on HB 2067, which failed in the Kansas Senate on May 11 by a vote of 18 to 22.
  • There would be three-tiers of individual income tax rates: Under $30,000 (3%); $30,000 to $100,000 (5.6%); and over $100,000 (5.6%).
  • Sales tax would be added to certain services. These would include towing, detective, cleaning, pet care, and mini storage/self storage.
  • The bill would designate income tax to be transferred from the state general fund to school funding.
  • All tax revenue from the sales tax on the newly taxed services would go to school funding.
  • KPERS employer contributions would not come from the state general fund but from a special revenue fund.
  • A  tax “trailer bill” would be required to be passed, with both bills linked.  If one bill does not pass, the other does not go into effect.
  • The bill raises an estimated $514 million in FY 18; $548 million in FY 19; $554.2 million in FY 20; $559.8 million in FY21; and$564.4 million in FY 22.
  • The business pass through exemption is eliminated in tax year 2017 and beyond.
  • The “glide path to zero,” the trigger mechanism that reduces future income taxes, is eliminated.
After the House adjourned Sunday evening, the tax conference committee of negotiators met to discuss the tax trailer bill for the agreement.  The Senate asked for more time to study the House proposal, so the committee will meet again tomorrow.
 
Here’s the House offer that was discussed Sunday night on the tax trailer bill:
  • Itemized deductions would be phased back in beginning in tax year 2018 for medical expenses, mortgage interest paid, and state/local property taxes paid.  The phase in would be 50%, 75%, and 100%.
  • Dependent child care tax credit would be restored to pre-2012 levels over a three year period, beginning in tax year 2018.
  • STAR Bonds would get a three year extension with a one-year moratorium beginning July 1, 2017.
  • The Ad Astra Jobs Act (which has already passed) tax credit would begin in 2020.
  • An Aviation Tax Credit would be enacted.
The big question now is: are there enough votes?  Many Democrats have expressed disappointment with the agreement. 
 
In fact, Democrats on the education conference committee refused to sign the agreement, but it is going forward anyway.

KEPC UPDATE: Nothing new on income tax, school finance conference, gun bill to Gov

In this issue…
  • Nothing new on income tax
  • School finance goes to a conference committee
  • Gun bill sent to Governor
 
Here’s what’s going on at the veto session in Topeka as of Friday morning. The House and Senate are scheduled to go in at 10 a.m.
 
There is no debate scheduled in the House.  The Senate has two minor bills scheduled for debate on General Orders.
 
It’s possible lawmakers will be working this weekend, but nothing is certain yet.
 
Nothing new on income tax
 
There was no activity on income tax legislation Thursday, at least not in the open.
 
The conference committee of House and Senate negotiators met, but discussed other legislation, not the income tax issue.  They may be waiting to see what the legislature does with the school finance bill.
 
School finance goes to a conference committee
 
The Kansas Senate passed its version of school finance Wednesday by a vote of 23 to 16.  The bill went to the Kansas House of Representatives which asked for a conference committee to iron out differences between the House and Senate versions of the bill.
 
That conference committee met Thursday afternoon and plans to continue meeting today (Friday).
 
 
Gun bill sent to Governor
 
The major gun bill of the legislative session has passed and is headed to Governor Brownback’s desk.  It is uncertain whether he will sign the measure, House Bill 2278.
 
The bill would exempt certain institutions from a general requirement in current law that public buildings have adequate security measures in place before the concealed carry of handguns can be prohibited.
 
Those public buildings would be exempted:
  • State or municipal-owned medical care facilities and adult care homes
  • Community mental health centers
  • Indigent health care clinics
  • Any buildings located in the district associated with the KU Medical Center.
It passed the Senate 24 to 16 after a four hour debate.  The House agreed to the Senate version by a vote of 91 to 33. The bill was opposed by the Kansas State Rifle Association. 

KEPC UPDATE: Senate passes school finance, lottery compromise, gun debate, nothing new on tax bill

In this issue…
  • Senate passes school finance
  • Lottery compromise: extension for 15 years
  • Senate debates guns
  • Nothing new on tax bill
 
Senate passes school finance
 
The Kansas Senate passed its version of school finance Wednesday by a vote of 23 to 16.  The bill went to the Kansas House of Representatives which asked for a conference committee to iron out differences between the House and Senate versions of the bill.
 
 
The House has appointed its negotiators. The Senate negotiators have not been named as of this writing.
 
Lottery compromise: extension for 15 years
 
Without action by the Kansas Legislature, the Kansas Lottery’s legal authority to continue will lapse.  Legislation is in the works so that doesn’t happen.
 
A Federal and State Affairs conference committee has been working on the issue and has reached a compromise on differences between House and Senate Bills.  An earlier compromise was rejected by the House on Wednesday.
 
The new compromise is in House Bill 2313.  Here’s part of what’s in it:
  • The Lottery would not sunset again until the year 2037 (15 years from now)
  • The bill authorizes Lottery vending machines
  • Pull tab instant winner tickets could be dispensed in regular lottery dispensing machines
  • The Lottery will negotiate a shared fee to cover the cost of the machines with certain fraternal groups
  • The legislature’s staff is working with Lottery officials to draft the property language to make the compromise work
 
Senate debates guns
 
As of this writing, the Kansas Senate is debating House Bill 2278, which is the major gun bill of the session.
 
The bill would exempt certain institutions from a general requirement in current law that public buildings have adequate security measures in place before the concealed carry of handguns can be prohibited.
 
Those public buildings would be:
  • State or municipal-owned medical care facilities and adult care homes
  • Community mental health centers
  • Indigent health care clinics
  • Any buildings located in the district associated with the KU Medical Center.
Several amendments have been offered.
 
Nothing new on tax bill
 
As of this writing, we know nothing about what direction the House or Senate might be heading on raising revenue for the budget and school finance.  There’s not much new since earlier in the week when the House rejected a conference committee report that raised income taxes.  The Senate had passed the bill earlier.
 
A conference committee on taxes is scheduled to meet at 5 p.m., but may or may not talk about the income tax issue.
 
A hearing was held in the House Appropriations Committee on a plan (House Bill 2429) by a group of conservative legislators to balance the budget by changing the distribution of tax revenues from cigarette and tobacco products that would normally go to the Children’s Initiative Fund.
 
Bonds would be issued to fund the budget.  They would be paid off by diverting money from those tax revenues.
 
That’s seen as having very little chance of passage.