KEPC UPDATE: New Gov on Weds, transpo task force, broadband access, school finance, internet tax lawsuit

In this issue …

  • A new governor on Wednesday
  • Bill on transportation task force gets a hearing
  • Broadband access an emerging problem
  • The plan on school finance
  • Survey shows how districts would spend $600 million in new dollars
  • South Dakota AG to discuss internet sales tax lawsuit
  • KEPC BILL TRACKER

 

A new governor on Wednesday

Governor Sam Brownback has submitted his resignation as Governor of Kansas to the Secretary of State, effective at 3 p.m. on Wednesday of next week.  The U.S. Senate has confirmed him as ambassador-at-large for international religious freedom.

That means Lieutenant-Governor Jeff Colyer will become the Governor of Kansas.

On Wednesday, Colyer plans to attend Mass, tour a child mental health center, and have lunch in his hometown of Hays.  He will then return to Topeka for the swearing-in ceremony, which will be held in the Capitol rotunda.

Speculation is ongoing concerning how Colyer will compare to Brownback.  We are hearing he may be more open to Medicaid expansion.  Colyer’s ideas on how to satisfy the Kansas Supreme Court on K-12 education funding will also be of interest.

 

Bill on transportation task force gets a hearing

Senator Carolyn McGinn’s Senate Ways and Means Committee held hearings on Senate Bill 285.  Senate Bill 285 establishes a joint legislative transportation task force with members appointed from a variety of organizations.

Some of the testimony:

  • Bridgette Williams of the Heavy Constructors Association of Greater Kansas City discussed the $2.4 billion diverted from the 2010 transportation program to other purposes. “The diversion of transportation funds has delayed promised projects across the state and resulted in a decline in the level of annual maintenance of the existing system,” said Williams.  She added that SB 285 is the first step in a process that would bring back thousands of good-paying, skilled construction jobs back to Kansas, jobs that have gone to other states as funding for the current program has dropped.
  • Michael White of the Kansas Contractors Association asked the committee to consider how the Kansas transportation industry can grow the Kansas economy. “This may require hard conversations about State General Fund and State Highway Fund expenditures.”
  • Melissa Wangemann with the Kansas Association of Counties asked that public safety be considered by the task force. “There have been reports that traffic accident fatalities are increasing in Kansas.  At the local level, we see outdated roads, many of which do not have shoulders and other modern safety details.
  • Eric Smith with the League of Kansas Municipalities said, “Economic development opportunities for our member cities require a properly funded state transportation program.
  • Cathy Bennett with the Greater Kansas City Chamber of Commerce said, “transportation is one of the major drivers of the economy in the KC region and throughout the state.”
  • Tom Whitaker of the Kansas Motor Carriers Association (the trucking industry) noted that the task force appears too tilted towards those that would profit from the program. He used members be included from highway users organizations.

A second day of hearings was held on Thursday.  Chair Carolyn McGinn said the committee will attempt to work the legislation next week.

 

Broadband access an emerging problem

Many legislators agree with a statement made this week by Kansas Representative Annie Kuether (D-Topeka).  Kuether, who is the ranking minority on the House Energy, Utilities, and Telecommunications Committee, was reacting to a discussion on the need to expand broadband access in rural areas of Kansas.

“It’s all throughout the building,” said Kuether, referring to Statehouse discussion of the issue.

The House Energy, Utilities, and Telecommunications heard from a representative of the cable television industry who is proposing a state task force on how to expand high speed broadband internet access.

John Federico, President of the Kansas Cable Telecommunications Association said the federal government is putting a lot of money into broadband, but he’s not sure there’s really a coordinated statewide effort.

“Let’s focus on the underserved areas,” he said, adding that Kansas should not focus on one technology over another.  He also said the state should determine how to pay for expanded service and that Kansas should keep away from already served areas.  He suggested a task force be formed, similar to the transportation program.

Some legislators on the committee disagreed that already served areas don’t need help.

The committee plans to continue discussions next week.

 

The plan on school finance

This was another slow week for school finance.  Facing a Kansas Supreme Court finding that the current law is unconstitutional, lawmakers seem to be moving slowly, at least in public.  The best guess of many Statehouse observers is that legislators are waiting to see how much money they need spend.

That information will come from the hiring of Texas A and M professor Dr. Lori L Taylor, who is conducting a cost study.  That won’t be available until March 15.

 

Survey shows how districts would spend $600 million in new dollars

In his blog this week, Mark Tallman of the Kansas Association of School Boards has released the results of a survey of the state’s school districts which asks how they would spend additional funding.  They dollars would be $600 million statewide over a three year period.

$600 million is the number mentioned most often as what may be needed to satisfy the Kansas Supreme Court.  First on the list spending on at-risk students, second is class size, and third is for more school counselors and social workers.

Here’s a link to the survey results.

 

South Dakota AG to discuss internet sales tax lawsuit

The Attorney General of South Dakota will appear before a joint meeting of the House and Senate Tax Committees next week.  South Dakota and 34 other states are suing online retailers Wayfair, Overstock.com and Newegg Inc. in an attempt to be able to collect state and local sales tax for online sales.

The U.S. Supreme Court agreed to take up the case two weeks ago.

South Dakota AG Marty Jackley will speak, along with Kansas Attorney General Derek Schmidt and Marc Beshears of the Kansas Department of Revenue.  Kansas is one of the states that has joined the lawsuit.

Under current interpretations of the law, states may collect sales tax on interstate sales if the retailer has a physical presence in the state.  The lawsuit asks the U.S. Supreme Court to nullify the physical presence requirement.  At stake are millions of dollars that could be coming to state and local governments.

 

Bill tracking

Here’s our latest bill tracking on measures we think are of interest to our readers.  All of these bills are held over from 2017.  As new bills of interest are introduced, I will add them to the list.

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 UPDATE: Highway bill, no highway match in 2121, incentives audit, 18% budget cut for schools, constitution lawsuit, expensing

In this issue …

  • Prep for a new highway bill could be in the works
  • In the year 2121… no highway match
  • House Tax Committee looks at incentives audit
  • 18% budget cut needed to pay for school finance
  • Is another lawsuit possible on Article 7 of the Kansas Constitution?
  • State Chamber asks for “expensing” for small business
  • BILL TRACKING

 

Prep for a new highway bill could be in the works

There’s a hearing next Wednesday in the Senate Ways and Means Committee on a bill that could be a precursor to a new highway program.  It was introduced by Senator John Skubal (R-Overland Park).

Senate Bill 285 establishes a joint legislative transportation task force with members appointed from a variety of organizations including:

  • Members of the legislature
  • Two county commissioners appointed by the Kansas Association of Counties
  • Two city representatives appointed by the Kansas League of Municipalities
  • One member of Economic Lifelines
  • One member of the Kansas Contractors Association
  • One member from the Kansas City Heavy Constructors Association
  • One member from the Kansas Aggregate Producers Association/Kansas Ready Mix Association
  • One member from the Greater Kansas City Building and Construction Trades Council
  • One member appointed by the AFL-CIO
  • One member appointed by the American Council of Engineering Companies of Kansas
  • One member from the Kansas Public Transit Authority
  • One member from a class I railroad company (appointed by Economic Lifelines)
  • One member from a short line railroad company (appointed by Economic Lifelines)
  • Several other members from state government

The mission of the task force is to:

  • Evaluate the progress of the 2010 transportation program
  • Evaluate the current system condition of transportation
  • Evaluate current uses of the state highway fund dollars (including fund transfers for other purposes outside of infrastructure improvements)
  • Evaluate the sufficiency of funding to maintain the current and future transportation needs of the state
  • Make recommendations and reports to the Kansas Legislature on or before January 31, 2019

 

In the year 2121 … no highway match

KDOT Secretary Richard Carlson told the Senate Transportation Committee Thursday the department may not be able to match federal funds in four years.  

Carlson said with the recent history of $525 million in sales tax revenue being redirected to the state general fund, the annual cash flow to KDOT is just over $900 million.  In answer to a question from Senator John Skubal (R-Overland Park), Carlson said the Department may not be able to match federal funds in the year 2021.

Carlson also told the committee that highway fatalities in Kansas are up over the past two years.  The Secretary said 2016 fatalities increased 6.9% over 2015.  That’s about 459 deaths on Kansas roads.

 

House Tax Committee looks at incentives audit

The Kansas House Tax Committee, a major player in last year’s tax bill and school finance legislation, may be getting ready to play another big role in finding solutions this year.

On Wednesday, the committee spent time looking at an October Legislative Post Audit report that reviewed how other states inventory and evaluate tax credits and exemptions.  Kansas reportedly forgoes about $6 bill a year in tax credits and exemptions.

There was some direction provided by the Pew Charitable Trust, which was quoted in the LPA report:

  • Kansas trails other states in following best practices for evaluating tax incentives
  • The state does not have formal policies requiring regular, systematic evaluations of major tax incentives
  • Limited evaluations that are conducted do not necessarily address the cost or economic impact of tax incentives
  • Kansas does not live up to Pew best practices.  Many surrounding states do
  • Kansas does not have formal processes to ensure lawmakers consider the results of tax incentive evaluations
  • The conclusion: tax incentives can be an effective way to incentivize taxpayers to engage in behaviors which are beneficial to the state, but to merely reward behavior that might have occurred anyway, these credits can be costly and ineffective

Here’s a link to the complete Legislative Post Audit Report.

 

18% budget cut needed to pay for school finance

The House Appropriations Committee heard Wednesday that it would take an 18% across the board budget cut in the Kansas FY 2019 budget to come up with $600 million for school finance.  The Appropriations Committee was getting an overview of the work of the Special Committee on School Finance.

The committee heard the impact of that 18% across the board cut.  Chairman Troy Waymaster (R-Bunker Hill) said he thought the information on the Kansas Constitution, the 18% cut, and the possibility of a constitutional amendment were “insightful.”

Representative Clay Aurand (R-Belleville) who serves as the Chairman of the House Education Committee said he thought the most important action was the hiring of Texas A&M professor Dr. Lori L. Taylor was significant.  Taylor will conduct a new study of the cost of providing constitutionally adequate school funding in Kansas.  Legislative leaders also approved hiring Dr. Jesse Levin to “peer review” Taylor’s study and other studies conducted over the years on school finance in Kansas.

Lawmakers won’t get that study until March 15, which presents some timing problems.  The Kansas Supreme Court was the state’s brief by April 30th.  The Attorney General’s Office wants the legislature’s action by March 1 in order to brief the court.

 

Is another lawsuit possible on Article 7 of the Kansas Constitution?

The lawsuits challenging past and present school finance formulas have been based on Article 6 of the Kansas Constitution, which has to do with suitability. That says, in part: “The legislature shall make suitable provision for finance of the educational interests of the state.  The key words there are “shall” and “suitable.”

In the House Appropriations Committee Wednesday, Representative Brenda Landwehr (R-Wichita) brought up the possibility of a new lawsuit based on parts of Article 7.  Landwehr said there “has been discussion we may have another group of folks in the state who are saying Article 7 gives them a right to a certain amount of money, too.”

Chairman Waymaster said he had heard similar discussion.

Article 7 has to do with public institutions and welfare.  Two sections use the term “shall” when talking about the state’s obligation to finance something.

Here’s the language:

“Institutions for the benefit of mentally or physically incapacitated or handicapped persons, and such other benevolent institutions as the public good may require, shall be fostered and supported by the state, subject to such regulations as may be prescribed by law.”

The section on aged and inform persons uses both “shall” and may:

“The respective counties of the state shall provide, as may be prescribed by law, for those inhabitants who, by reason of age, infirmity or other misfortune, may have claims upon the aid of society.  The state may participate financially in such aid and supervise and control the administration thereof.

Sections on unemployment compensation; old-age benefits; taxation; and a tax levy for certain institutions use the term “may” instead of “shall.”

 

State Chamber asks for “expensing” for small business

The Senate Assessment and Taxation Committee was asked to introduce a bill Tuesday by Eric Stafford of the Kansas Chamber of Commerce.

The committee agreed to introduce a bill that restores the pre-2012 expensing of capital investments for small business entities that are not “C Corporations.”

In 2011 Governor Brownback proposed a new state income tax deduction known as “expensing” for qualified investments.  It basically allows businesses to deduct their full investment in equipment in one year instead of a prescribed schedule of smaller deductions over several years.  

The legislature passed Brownback’s proposal, only to take back a major part of it the next year (at Brownback’s request).

The big 2012 income tax cuts eliminated the ability of individuals to utilize the income tax deduction for expensing enacted in 2011.  That’s because Brownback’s tax legislation eliminated the state income tax on pass through income of businesses.  Because C Corporations did NOT get an income tax cut, they were allowed to continue to use the expensing deduction.

The 2011 legislation included big changes to several economic development programs designed to help pay for Brownback’s expensing and other programs.

One program eliminated that caught local economic developers by surprise was that income tax credits could no longer be earned pursuant to the Kansas Enterprise Zone Act and the Job Expansion and Investment Credit Act.

For several years, the Kansas Economic Development Alliance has asked that the program be reinstated.

KEPC UPDATE: Education fix runs dry in 2020, state and fed tax changes create uncertainty, property tax lid in House.

In this issue …

  • Brownback education fix runs out of money by 2020
  • State income tax increase and federal tax cuts combine to create uncertainty
  • Local property tax lid bill may be debated in House soon
     

Brownback education fix runs out of money by 2020

Governor Sam Brownback said in his State of the State Message to the 2018 Legislature Tuesday that he wants the Legislature to comply with the Kansas Supreme Court decision on education by adding $600 million to education over the next five years. That immediately brought strong criticism from Brownback’s own Republican leadership in the Legislature, who said five years was too long and would force a tax increase in future years.

Brownback’s goals for the State Board of Education were:

  • 95 percent graduation rate
  • 75 percent of students should be continuing education after graduation
  • Accelerate movement to Kansas Can school redesign

Brownback’s five strategic objectives for K-12:

  • Higher average teacher pay than any surrounding states
  • Increase the number of school counselors and psychologists by 150 positions each year for five years, making a total of 750 new positions
  • At least 50 schools participating in Kansas Can school redesign project
  • Every high school should offer at least 15 hours of dual credit at no cost
  • Every high school should offer, at no additional cost, the choice of taking the ACT or WorkKeys assessment

Brownback called for the Legislature to put a constitutional amendment on the ballot to “stop the never ending cycle of litigation.

During budget committee meetings on Wednesday, Budget Director Shawn Sullivan did not offer any way to pay for the new spending other than normal growth of the budget. Lawmakers say that means the state will be have no money by 2020 to pay for the increased education spending.

Here’s a link to Budget Director Shawn Sullivan’s PowerPoint presentation on the budget to legislative committees this week.

 

State income tax increase and federal tax cuts combine to create uncertainty

The House Appropriations Committee and the Senate Ways and Means Committee began the session this week with an overview of the current budget, expected revenues, and economic conditions that could have an impact on what’s available for the state to spend.

Those two committees are the budget-writing committees of the Kansas Legislature.

Here are some of the interesting discussions from those meetings.

  • There is strong uncertainty about the timing of the 2017 income tax increase.

    The new law (SB 30) is officially expected to collect an additional $591 million by the end of Fiscal Year 2018. Because of the timing of the new law, plus the impact of the new federal income tax cuts, we won’t know whether $591 million is correct, or even close. Chris Courtwright of the Kansas Legislative Research Department told the House Appropriations Committee the state was “fairly blind” on what the new tax bill will collect. Here’s why.

    Special language provides that taxpayers will not be assessed any penalties or interest relative to underpayments associated with the restoration of tax to non-wage business income. That’s because restoration of that income tax was retroactive to the beginning of 2017 and the law did not pass until June of 2017. Legislators didn’t think it was fair to assess penalties and interest the first year because of the mid-year change.

    It’s estimated that $270 million of the additional estimated $591 million will be from non-wage business income. That’s about 45 percent.

    Because there’s no penalty and interest, business owners had a choice. They could pay estimated tax to lower their eventual burden when income taxes are due in April of 2018, or they could just wait and pay the entire amount when it’s due.

    But then President Donald Trump and Congress stepped in and passed federal income tax cuts on December 22, 2017. It’s believed that had an effect on payment behavior. Some of the new federal law, such as elimination of deductions for state and local taxes paid, probably caused some businesses to make estimated payments in 2017 to take advantage of the federal deduction before it disappeared.

    The Kansas Department of Revenue and others in state government believe that $60 million in 2017 estimated payments may be attributable to the behavior caused by the new federal tax law.  In addition, fewer taxpayers will be able to itemize deductions under the new federal law.

    When will we know whether the estimates are high or low and how much money the state will take in from the 2017 Kansas income tax changes? Legislative staff says it will probably be June 30, 2018, the last day of the Kansas Fiscal Year.

    Coincidentally, that’s the deadline the Kansas Supreme Court has given the Legislature to bring the state into compliance on K-12 school spending.  The inability to know exactly how much the state income tax increase will bring in makes lawmakers’ work very difficult.

  • The Kansas economy is not growing as fast as the national economy and might actually be slowing.

    When it met in November, the state’s consensus revenue estimating group downgraded Kansas economic growth and personal income growth. That’s due largely to a perceived downturn in agriculture and oil and gas production and prices.

    Kansas Gross State Product (GSP) for 2017 was reduced from 1.8 to 0.2 percent. The state’s economy is now expected to grow 1.5 percent in 2018 (compared to 2.5 percent for the United States).

    Personal income growth was reduced from 4.0 to 1.5 percent for 2017 and from 4.1 percent to 3.1 percent for 2018.

    Here’s a link to the full “long-form” consensus revenue estimate document.

  • Despite all the negative news, sales tax receipts were unexpectedly up at the end of the year.

    Total state receipts were up about $83 million since the November estimates. In an era where local and state sales tax is being eroded by Internet sales, sales taxes made a surprising recovery.

    The reason is a mystery.

    One possible explanation is that with the stock market climbing to record levels and the national economy improving, consumers confidence (and thus sales) are up.

 

Local property tax lid bill may be debated in House soon

Kansas Speaker of the House Ron Ryckman (R-Olathe) met recently with local government groups about continuing problems with the local property tax lid law.

Ryckman has reportedly agreed to bring up House Bill 2424 for debate.  That bill passed out of committee last May 12 and sits on General Orders, the agenda for debate in the House.

The bill would add an exemption to the property tax lid for cities and counties.  That exemption would be costs associated with employer contributions for social security, workers compensation, unemployment insurance, health-care costs, employee benefit plans, and employee retirement and pension programs.  Increased property taxes associated with those benefits would be excluded from the calculation used to determine the tax lid.

The tax lid law has been seen as a hindrance to local economic development efforts and denies local elected officials the flexibility to use property taxes to continue services and add new ones that local communities need and want.  The law also lacks coordination with budget timelines.

 

Bill tracking

Here’s our latest bill tracking on measures we think are of interest to our readers. All of these bills are held over from 2017. As new bills of interest are introduced, I will add them to the list.

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 UPDATE: 2018 session begins with uncertanty; Kansans want Medicaid expansion

In this issue …

  • 2018 legislative session begins with uncertainty
  • Kansas Speaks Survey: Kansans want Medicaid Expansion

 

2018 legislative session begins with uncertainty

The 2018 Kansas Legislature began today (Monday), facing a Kansas Supreme Court decision that could mean up to an additional $600 million needs to be spent on K-12 education.

The Kansas Supreme Court said in October the Legislature’s 2017 school finance law is unconstitutional.  The Court gave lawmakers until June 30, 2018 to bring the funding into compliance.  Oral arguments on whatever the 2018 Legislature does are scheduled for May 22, 2018.

The opinion seems to indicate funding is about $74 per pupil short of constitutional.  The Court also struck down two other provisions:

  • Allowing districts to use capital outlay funds for utility and other expenses.
  • A provision that subjects some districts to a protest and election process to raise local option budget limits.

There are a variety of ideas out there on how to proceed:

  • Defy the court and/or change the constitution, which some more conservative legislators would like to do. However, as one lawyer in the legislature recently said, “The trial is over.  We are in the contempt phase.”  In other words, the Court will decide whether the Kansas Legislature is in contempt of court and take action.
  • Work on a phase-in of additional spending. This seems to be the most likely option.  Trying to find funding after the 2012 income tax cuts siphoned off significant funding that has resulted in noteworthy cuts to state services that need to be restored (prisons, child care, transportation, economic development, higher education) will be very difficult.  However, revenues have been coming in higher than estimated and the economy seems to be taking a turn for the better.  In the past, the Court has allowed a phase-in of additional education dollars.  Most likely, the Court would keep jurisdiction in the case to make sure the Legislature would keep its commitment.
  • Raise taxes on the wealthy. This is a recurring theme I’ve been hearing from some Democrats.  The argument goes like this:  Business and the wealthy just got a big tax break from the federal government.  They can afford to pay to the state more.  However, many Republicans say it’s unlikely the Legislature will raise taxes in an election year.

The House Taxation Committee met Monday where Committee Chairman Steve Johnson (R-Assaria) said the committee will spend the next several days going over the November consensus estimates.  Johnson said the committee may look at different taxes and increments.  He also indicated another major tax increase would not be easy and he’s not sure it would get the votes necessary to pass.

“We will have to take a cautionary position,” Johnson said, adding that lawmakers don’t want to go too far too fast “like we did in 2012,” the year of the income tax cuts.

Johnson said the committee will have to watch the new federal tax cuts and, “if you have a plan, now is the time to put it forward.  Let’s not wait until March.”

The committee will probably not meet again until next week.

Meanwhile, attention will turn to Governor Sam Brownback’s final State of the State Message Tuesday evening at 5 p.m., where lawmakers will be curious to know Brownback’s ideas for dealing with the education decision by the Kansas Supreme Court.

Many legislators fear Brownback will continue to say the state has a spending problem and will propose cuts, or more likely, delays in funding KPERS or other state obligations.

The Governor’s Budget Director, Shawn Sullivan, will brief the House Appropriations Committee and the Senate Ways and Means Committee on Wednesday morning on Brownback’s proposals.

Committees will also be spending the week looking at the education ruling by the Kansas Supreme Court and begin discussing at how to respond.

Here’s a calendar that looks at the schedule for the Kansas Legislature over the next several months.

 

Kansas Speaks Survey:  Kansans want Medicaid Expansion

The latest Kansas Speaks Survey done by the Docking Institute at Fort Hays State University contains a wealth of information on what Kansans think on a variety of issues.

One of the most surprising findings is that 69 percent of respondents strongly or somewhat supported expanding Medicaid under the Affordable Care Act.  For the past several years, many in the legislature have resisted expanding Medicaid and Governor Brownback has worked to block expansion.

In a related finding only 28 percent support repealing the Affordable Care Act (Obamacare), even if it is not replaced.  However, 36 percent support repeal only if replaced, while another 36 percent outright opposed repealing the Act.

Other items of interest in the survey:

  • What Kansans think about the quality of life in the state
  • What Kansans favor to balance the state budget (including tax increases)
  • How residents rate Donald Trump
  • What Kansans think of Governor Brownback and other politicians in the state, including a somewhat surprising ranking of candidates for Governor

You can read the entire survey here.

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.