KEPC UPDATE: School finance hearings, tax agreement delayed, new tax plan, not working for the weekend, budget crisis video

In this issue …
  • Senate school finance bill has hearings
  • Tax agreement delayed again
  • Is there another tax plan in the works?
  • Work the weekend?  Probably not.
  • The Kansas Budget Crisis explained in a video
 
Senate school finance bill has hearings
 
Hearings are continuing today (Friday) on the newly introduced Senate version of a school finance bill.
 
Senate Bill 251 had hearings Thursday.  It’s very similar to the House school finance bill that came out of committee but has not been debated yet.
 
The first year “base foundation aid” is the same as the House bill ($4,006), but a formula is applied to determine the second year base, which looks to be $4,080 per student.
 
The third year base comes from a proposed formula that uses a three year rolling average of a version of the consumer price index called the CPI-U.
 
The House version has a mandate for applied behavior analysis therapy for children with autism.  The Senate version does not.
 
The Senate version also does not include a local enhancement for schools with the least at-risk students.
 
Both House and Senate versions have all-day Kindergarten, mentor teacher program funding, and professional development funding.
 
A very controversial element of the Senate bill is a utility fee, designed to raise about $150 million to pay for increased education spending.  It would be a monthly “school fee” of $2.25 on residential utility bills and $10 on commercial users.  Utilities would send the money collected to the State Treasurer.
 
Irrigators who are water right owners would pay an annual $120 fee instead of a monthly payment.
 
Collection of these fees would begin September 1, 2017.
 
 
As I write this, the Friday hearings in the Senate Select Committee on Education Finance are continuing.  It is possible the bill could be worked in committee today.
 
Tax agreement delayed again
 
The conference committee of House and Senate negotiators on an income tax bill met again Thursday but broke up without an agreement.
 
Discussion centered on a House proposal to return Kansas to the income tax structure of 2012, before the bill that slashed income taxes and eliminated business pass through income taxation.  The proposal to return to 2012 taxes would raise an estimated $1.4 billion over two years.
 
Senate Assessment & Taxation Committee Chair Caryn Tyson (R-Parker) said the Senate negotiators are willing to sign an agreement if it would run in the House first.
 
House Tax Committee Chair Steven Johnson (R-Assaria) wanted the House and Senate to run the concept in bills at the same time. 
 
Neither side would give, so the committee broke up.  No meetings are scheduled at this time.
 
Is there another tax plan in the works?
 
Meanwhile, behind-the-scenes activity suggests another income tax/other revenue sources bill may be in the works.
 
It involves combining House Bill 2380 on removing sales tax exemptions with an income tax increase and elimination of the business pass through income exemption.
 
You will recall that House Bill 2380 passed the House on Monday, so it is eligible to be inserted into a conference committee report.  It adds the sales tax on services to:
  • Motor vehicle towing
  • Mini-warehouse and self storage
  • Collection agencies
  • Investigation services
  • Security guards and patrol
  • Security systems (excluding locksmiths)
  • Certain non-residential cleaning
  • Certain pet care (excluding veterinarians)
 
It also reduced the sales tax on food by a penny in 2020.
 
Behind the scenes talk is to not reduce the sales tax on food at this time.
 
It is possible the sales tax on services exemption list could be revised to bring in $165 million.  A three cent per gallon motor fuels tax increase is also part of the discussion.
 
My best guess is that’s the next plan to emerge from a conference committee if eliminating the 2012 income tax cuts is abandoned.
 
Work the weekend?  Probably not.
 
With no tax conference committee announced yet for Friday and hearings continuing on the Senate school finance plan, it appears likely the Kansas Legislature will not work this weekend, contrary to Senate leadership announcements earlier. 
 
Without conference committee action on major issues, it makes little sense for most lawmakers to mill about waiting for something to happen.
 
The Kansas House of Representatives was scheduled to meet at 10 a.m. Friday with two bills on the agenda for debate, a consumer protection measure and a bill to regulate amusement rides.
 
The Senate has no bills on the agenda for debate (general orders).
 
The Kansas Budget Crisis explained in a video
 
A video released on Wednesday is getting a lot of attention around the Statehouse and the state.
 
It explains the “Kansas Budget Crisis” in 8 minutes and 44 seconds.  The organization that put it together is Loud Light.  I don’t know much about them.
 
I have been following the budget crisis as a lobbyist since it began and can tell you this is an excellent, easy to follow explanation.  It is very accurate.
 
If there are any errors, I can’t spot them.
 

KEPC UPDATE: Senate & house school finance, dems propose alt school finance, sales tax, income tax, Kansas Speaks survey, WSU economist

In this issue …
  • Senate school finance bill introduced – includes utility charge
  • House school finance bill computer runs available
  • Democrats propose alternate school finance plan
  • Senate Tax holds hearing on House sales tax on some services
  • The latest buzz on an income tax bill
  • Kansas Speaks survey is out
  • Wichita State economist: is a state-led recession coming?
 
 
Senate school finance bill introduced – includes utility charge
 
Senate Majority Leader Jim Denning (R-Overland Park) introduced a new school finance proposal in the Kansas Senate through the Senate Ways & Means Committee.  Hearings on the bill are expected to be held Thursday and Friday in the Senate Select Committee on Education Finance.
 
Denning says he wants to pass the bill out of committee by Friday or Saturday.  He indicated debate on the bill Saturday could be a possibility in the full Senate.
 
Denning says his bill is about 90 percent the same as the House school finance proposal that came out of the House K-12 Education Budget Committee on Monday.
 
Denning’s bill has not yet been read in on the Senate floor and assigned a bill number.  That will have to happen Thursday morning.
 
Some reports late Wednesday quote Denning as saying the bill includes a utility surcharge that will raise about $150 million to pay for increased education spending.  Denning also reportedly says his bill depends on collection of an additional $42 million in sales tax to the state as STAR Bonds are paid off for the Wyandotte County Legends development.
 
House school finance bill computer runs available
 
The House school finance bill (Substitute for HB 2410) was voted out of committee Monday.  The agenda for Thursday for the full House shows no bills will be debated.
 
Want to know what happens to your school district with the House Bill?  You have to look at three different spread sheets.
 
Computer runs by school district are now available. 
 
 
The runs are under: Substitute for House Bill 2410 – May 15, 2017
 
You will want to look at SF17-200 – Column explanation.
 
This will explain to you what you are looking at when you look at SF17-200 State Foundation Aid (this is the spreadsheet by school district).  The final column on the right shows you want happens between this year and next by school district.
 
But that’s not the entire picture.
 
SF17-185 – LEBColumn explanation tells you how to read the next spreadsheet, which has to do with the Local Excellence Budget, which really means the cost of living money that school districts can raise through the property tax. 
 
SF17-185 Local Excellence Budget (spreadsheet) – The last column on the right shows how much each school district can raise.
 
But we’re not done yet:
 
SF17-202 – Local Foundation Budget (spreadsheet) – The Local Foundation Budget is the new name for what used to be called the Local Option Budget (LOB).  The final column on the right shows how much each school district would be permitted to raise in an LFB (or LOB if you prefer) compared to the current school year.
 
 
Democrats propose an alternative school finance plan
 
On Wednesday afternoon, the two leaders of the Democratic Party in the Kansas House and Kansas Senate proposed their own school finance plan.  Senator Anthony Hensley (D-Topeka) and Representative Jim Ward (D-Wichita) proposed spending more than the per-pupil funding in place in 2008-2009.
 
That was the all time high in Kansas.
 
Hensley and Ward proposed putting an extra $400 million in schools during the 2nd year of the bill, school year 2018-2019.
 
Senate Tax holds hearing on House sales tax on some services
 
The Senate Assessment and Taxation Committee held hearings Wednesday on House Bill 2380, the bill that puts sales tax on some services that passed the House.
 
You will recall that bill adds the sales tax to the following services:
  • Motor vehicle towing
  • Mini-warehouse and self storage
  • Collection agencies
  • Investigation services
  • Security guards and patrol
  • Security systems (excluding locksmiths)
  • Certain non-residential cleaning
  • Certain pet care (excluding veterinarians)
 
It also reduced the sales tax on food by a penny in 2020.
 
Almost all of those testifying were opponents. Collection agencies showed up in force, providing the most testimony. The Self Storage Association opposed the bill.
 
The Kansas Motor Carriers has a Towing and Recovery Division that opposed the bill.
 
The Wichita Independent Business Association opposed the measure in written testimony, saying it will particularly hurt small businesses.
 
One supporter who testified at the end of the hearing was Representative Kristey Williams (R-Augusta), one of the authors of the amendment that added services and the food sales tax reduction.  Williams said she and others have been working with the Revenue Department to figure out how to implement the legislation. 
 
She also said they have a revised list of $165 million in exemptions.  Some are based on NAICS codes, while others are based on the type of services.  NAICS codes mean the North American Industry Classification System, the standard used by federal statistical agencies.
 
Some knowledgeable observers believe this concept might be included in a final revenue/income tax bill.  It has already passed the House of Representatives, so it can be inserted into a tax conference committee report.
 
The latest buzz on an income tax bill
 
Once again Wednesday, the House/Senate conference committee on taxes did not meet.  Monday, House Taxation Committee Chairman Steven Johnson (R-Assaria) had proposed returning to the 2012 pre-income tax cut rates.  The Senate is not expected to accept that offer and is said to be working on an offer of its own.
 
We believe that will be two-tiered income tax rates, along with repeal of the business pass-through income tax exemption.
 
The House may be willing to accept that offer if the rates are high enough to fund the budget and pay for the first two years of the House version of school finance.  I’m told that would provide $50 million per year to highways.
 
One problem is that some of the rates being floated might not be enough to make final KPERS payments by the state the second year of the two-year budget.  However, almost everyone believes the business pass-through income repeal estimate is very low, and actual numbers could allow for the KPERS payments.
 
Of course, this is a simple majority scenario of 21 Senate votes and 63 House votes to pass, with the assumption that the Governor would sign the bill.  It would likely not garner any Democrat votes.
 
Kansas Speaks survey is out
 
The well-respected Kansas Speaks Survey for Spring 2017 is now out.  The survey is conducted twice a year by the Docking Institute of Public Affairs at Fort Hays State University.
 
The very broad survey covers quality of life in Kansas; taxes and the economy; government and politicians; and public policy issues.
 
Conducted from February 23 to April 11 of this year, a total of 1,362 Kansas residents were contacted by phone with 537 completing the survey.  The margin of error was four percent.
 
Here are two of the bullet points in the summary that caught our attention.  These are direct quotes:
  • When asked their preference for addressing the budget deficit, just over two-fifths wanted to cut spending exclusively, while another one-fourth wanted to increase taxes exclusively.  Just over one-third favored a combination of tax increases and lower spending.  Republicans and those with lower education levels were more likely to favor spending cuts, while Democrats and those with higher education levels were more likely to favor increasing taxes.
  • Respondents who said they were in favor of “increasing taxes” or “both” were asked which taxes they would increase. Over half (56%) favored increasing income tax, 39% favored increasing sales tax, and 19% favored increasing property tax.  Republicans and females were more likely to favor increasing sales tax, while Democrats and males were more likely to favor increasing income tax.
 
Wichita State economist: is a state-led recession coming?
 
The Director of the Wichita State University Center for Economic Development and Business Research says the Kansas economy may have reached its peak, adding, “There are now multiple signs of an economy that is losing steam.”
 
Economist Jeremy Hill made the comment as his revised Kansas Employment Forecast was released by the Center.
 
Hill predicts 2017 nonfarm employment in Kansas will increase by only 0.5 percent, or about 7,049 jobs.  Most new jobs are predicted to come from the service sector, with production and trade, transportation and utilities sectors following.
 
The government sector is projected to remain constant, growing by 0.1 percent.
 
The report says the Topeka, Kansas City, and Wichita metropolitan areas are all expected to grow at rates faster than the state average in 2017, with a combined average growth rate of 1.4 percent.  Excluding those three metro areas, the rest of the state is forecast to experience an employment decline of about one percent.
 
Hill notes the Kansas slowdown contrasts with the U.S. economy, which is growing.
 
Hill said, “Although the forecast calls for employment growth at half of the rate over the past five years, increased caution should be added as a state-led recession is potentially around the corner.”

KEPC UPDATE: Slow day at statehouse, chicken or egg, Wednesday schedule, KEPC in the news

In this issue …
  • Slow day at the Statehouse
  • Which comes first, the chicken or the egg…school finance or income tax?
  • Wednesday’s  schedule
  • KEPC in the news
 
Slow day at the Statehouse
 
The Kansas House and Senate went home before 2:30 pm Tuesday, leaving the statehouse virtually deserted with the exception of a conference committee on a public employee retirement bill.
 
There was no conference committee meeting called on taxes.  Most legislators were off trying to find ways to occupy themselves while waiting for House and Senate leaders to figure out what comes next.
 
The senate debated HB 2278, a bill that deals with whether guns will be allowed in public hospitals, state run mental facilities, and on college campuses. The debate stopped when the senate voted to send the bill back to committee.
 
The senate also passed a bill that allows cities or counties to establish one or more “common consumption areas” and prescribe times during which alcoholic liquor may be consumed in the areas.  The bill, Substitute for House Bill 2277, passed by a vote of 35 to 5.  It was amended in the senate so it will go to a conference committee to iron out differences.
 
Meanwhile, a conference committee working issues related to KPERS employees who wish to work for a KPERS employer after they retire has reached an agreement. The legislature has been touching up changes to the law made in previous sessions.
 
This is the 92nd day of the 2017 Legislative session.
 
Which comes first, the chicken or the egg…school finance or income tax?
 
One of the top GOP House members involved with the income tax legislation told me Speaker of the House Ron Ryckman (R-Olathe) is trying to decide what to run first in the house, school finance or an income tax bill. 
 
A school finance bill (House Substitute for House bill 2410) passed out of the K-12 Education Budget Committee Monday without recommendation.  It’s about ready to put on the agenda for debate.
 
As of this writing, new computer runs on what the bill does to individual school districts were not available from the Kansas State Department of Education.
 
Democrats and many Moderate Republicans have been saying Education should be debated first, so lawmakers know how much money they need to raise.  Those of a more conservative nature prefer to do income tax legislation first.
 
The other problem on income taxes is the Governor.  Ryckman and conservatives would rather pass a bill that the governor will sign.  That would only require 21 Senate votes and 63 House votes, a simple majority instead of a 2/3 majority needed to override a veto.  The veto-proof majority has been very difficult to achieve.
 
Governor Brownback is said to be hard to pin down on what he would sign (slippery as a pocketful of pudding).
 
House leadership is looking at two income tax brackets with rate increases and removing the business pass through income tax exemption.  Although Brownback opposes ending the business exemption, tax negotiators say a bill will not pass the legislature without removing it.
 
All of this would mean that the House does not expect the Senate to accept House Tax Chairman Steven Johnson’s (R-Assaria) proposal to just return to the 2012 tax rates (before the tax cut bill passed).
 
Wednesday’s schedule
 
We’re pretty sure Speaker Ryckman has not yet made his mind up on what issue to run first (see story above) as of this writing because the House Calendar for Wednesday is out.  No bills are listed for debate and amendment on General Orders. 
 
About the only substantive work the House can do is on conference committee reports.
 
The Senate Calendar for Wednesday also includes no bills for debate on General Orders.
 
There is a hearing scheduled on HB 2380 in the Senate Assessment & Taxation Committee.  That’s the bill that passed the House Monday that puts the sales tax on some services like towing, private investigators and security, and pet services.
 
KEPC in the news
 
The Kansas Economic Progress Council was mentioned in a national news media story published on Saturday by Business Insider, a prominent online news website.  The story is about the Kansas budget disaster that sprang from the 2012 income tax legislation.
 
It discussed how Kansas should be a lesson for the Trump Administration, which wants to cut taxes.
 
Business Insider is a German-owned company based in New York that also operates international editions in several countries.
 
 
 
A note on this newsletter: 
 
Because action during the veto session can move rapidly, I will be doing more frequent updates on what’s happening the day it happens (IF something happens).  That will mean my end of the week report may not be as lengthy as usual.  It might even be delayed until the next week.

KEPC UPDATE: School finance, income tax, sales tax

In this issue …
  • School finance passes committee…finally
  • Income tax proposal: just go back to 2012
  • Sales tax on some services passes House
 
 
School finance passes committee…finally
 
There was some progress Monday, the 91st day of the Kansas Legislature, as the House K-12 Education Budget Committee passed a school finance bill after months of study and deliberation.
 
The committee passed Substitute for House Bill 2410 without recommendation. The vote was 10 to 6 after very difficult discussions.
 
Estimated state aid by school district is yet to be determined for certain. The Kansas State Department of Education brought runs to the committee showing what happens to school districts in the version of the bill before it was amendment today. Here’s a link to computer runs that show how the bill stood before today’s meeting began.
 
All of this will change and we will let you know as soon as new runs are available.  However, take these runs with a grain of salt because the committee took actions to lower the proposed new money after the first year.
  • The base funding level remains the same as previously proposed: $4,006 for school year 17-18.
  • That includes an additional $179 million in state general fund aid.
  • Base aid for school year 18-19 would be $4,152.  The bill originally had an additional $150 million for this year but an amendment reduced that to $100 million.
  • After the 18-19 school year (for the next three years) the base would increase by the consumer price index.  This is a change from the $150 million additional each year for three years proposed in the previous version of the bill.
The committee voted the bill out “without recommendation,” which probably means nobody really likes it, but there was a strong desire to move something forward.
 
The House agenda for Tuesday (known as General Orders), does not show the bill is scheduled for debate. The amendments to the bill that were passed Monday will have to be written and inserted and new runs on what the bill does to individual school districts will also be prepared.
 
Income tax proposal: just go back to 2012
 
In a proposal that shocked the Senate Assessment and Taxation Chair, House Taxation Chairman Steven Johnson (R-Assaria) proposed simply repealing the 2012 income tax plan. In other words, go back to rates, etc. from 2012.  The sales tax increases that have since been enacted would not be affected.
 
The proposal would raise an estimated $640 million in 2018 and $772 million in 2019. That is far beyond anything that has been previously proposed.
 
What’s really strong about the proposal is that it’s easy to explain and easy to defend. Instead of talking lots of numbers, it’s just, “We’re going back to what we did before the income tax cuts.”
 
When a legislator gets criticized for raising taxes, the simple response is, “We just went back to where we came from before all this trouble started.”
 
Where were we in 2012:
 
Married, filing jointly
The three bracket structure for married individual income taxes was:
  • For taxable income under $30,000, 3.5%
  • For those making over $30,000 but under $60,000, $1,050 plus 6.25% of the excess over $30,000
  • For those making over $60,000, $2,925, plus 6.45% of the excess over $60,000
The 2012 bill went to two brackets and lowered the rates:
  • For taxable income under $20,000, 3.0%
  • For those making over $30,000, $900 plus 4.9% of the excess over $30,000
(We understand that the old rates would be phased in)
 
Non-wage business income was subject to individual income tax.  That included income reported by LLC’s, Subchapter-S Corporations, and sole proprietorships.
 
Tax credits were allow for individual taxpayers for the following:
  • food sales tax rebates
  • abandoned well plugging
  • adoption expenses
  • agritourism
  • alternative fuel equipment expenditures
  • assistive technology
  • child and dependent care expenses
  • child day care expenses
  • disabled access expenditures
  • environmental compliance expenditures
  • individual development account contributions
  • law enforcement training center contributions
  • small employer health benefit plan contributions
  • swine facility improvement expenditures
  • port authority contributions
  • telecommunications property tax payments
  • venture capital contributions
  • certain temporary assistance to family contributors
The above credits may not all be in the bill.  Initial reports indicated only some.
 
The standard deduction for single head-of-household filers was $4,500, and for married taxpayers filing jointly it was $6,000.  The income tax cut bill increased those to $9,000.
 
The tax law included a subtraction modification for certain long-term care insurance expenditures; and  the ability of individuals to utilize the income tax deduction for expensing enacted in 2011.
 
There was a two-year new pool severance tax exemption.  The income tax bill repealed it.
 
Renters were eligible to participate in the Homestead Property Tax Refund program.
 
There were some other tax benefits allowed after the 2012 income tax bill that were later changed.  For example, mortgage interest and property taxes paid were 100 percent deductible, but were later changed to 50 percent deductable.
 
Further discussion on the proposal is expected by the conference committee.
 
Sales tax on some services passes House
 
The House passed a bill Monday that puts sales tax on some services, House Bill 2380.
 
The original bill authorized a Marion County sales tax.
 
An amendment on the floor by Representative Kristey Williams (R-Augusta) applied the sales tax to:
  • Motor vehicle towing
  • Mini-warehouse and self storage
  • Collection agencies
  • Investigation services
  • Security guards and patrol
  • Security systems (excluding locksmiths)
  • Certain non-residential cleaning
  • Certain pet care (excluding veterinarians)
Williams also include gym memberships, including the YMCA and private exercise businesses, but that was removed by a later amendment.
 
The amendment also included a decrease in the sales tax on food on July 1, 2020, from 6.5 percent to 5.5 percent.  The rate reduction would apply to bottled water, but not to alcoholic beverages, tobacco, candy, dietary supplements, soft drinks, or food sold through vending machines.
 
The bill raises an estimated $52.2 million in FY 2018.  $43.8 million would go to the state general fund.  About $8.4 million would go the highway fund.
 
Beginning in FY 2121, the sales tax reduction would be a negative to the state general fund of less than a million dollars.
 
The bill passed 78 to 42 and was sent to the Kansas Senate.  Here’s how members of the house voted.
 
A note on this newsletter: 
 
Because action during the veto session can move rapidly, I will be doing more frequent updates on what’s happening the day it happens (IF something happens).  That will mean my end of the week report may not be as lengthy as usual.  It might even be delayed until the next week.
###

KEPC UPDATE: Income tax hike, school surcharge, tax cut trigger, 20 mils for schools, tax lid, gas tax, school finance, service sales tax

In this issue …

  • Gone for Mothers Day but then straight through
  • Income tax hike fails in Senate
  • House Chairman introduces new income tax bill with school surcharge
  • Oklahoma repeals tax cut trigger mechanism
  • 20 mills for schools moves without tax abatement change
  • Property tax lid change advances
  • Committee will work on gas tax increase
  • School finance update
  • Sales tax on services still being talked up
  • BILL TRACKING

 

Gone for Mothers Day but then straight through

Senate Majority Leader Jim Denning (R-Overland Park) told Senators Thursday afternoon they would be coming back at 8 a.m. Friday morning, but there will be no floor work.  He also announced they will not be working on Saturday and Sunday (over the Mothers Day weekend).

However, Denning said that beginning Monday the Senate will work 7 days a week until the session is over.

We have not heard the plans of the House of Representatives.

 

Income tax hike fails in Senate

By now you’ve heard that an income tax bill failed to receive a majority of votes in the Kansas Senate this week.

The vote was 18 to 22 on House Bill 2067.  The bill raised enough to cover most of the needs of the budget with the exception of K-12 education.

Those voting for the bill (including two Democrats) generally believed it was okay to come up with education money in a separate second bill once school finance is decided.

Those opposing the bill did so for different reasons.  Conservatives said it was too much.  The majority of Democrats want to do school finance first.

 

House Chairman introduces new income tax bill with school surcharge

The day after the income tax defeat, House Taxation Committee Chairman Steven Johnson (R-Assaria) came up with another income tax bill that he introduced in committee.  This one aims toward raising all of the money necessary for the budget, including education as many legislators demand.

Johnson said the bill would be very similar to House Bill 2178, the bill the legislature passed but Governor Brownback vetoed.  The one difference will be an education “surcharge” to be placed on top of the base rates.  Lawmakers could plug in a surcharge rate established on what was needed to satisfy the Kansas Supreme Court that funding was constitutional.

The motion to introduce in House Taxation Committee was only conceptual and no bill or bill number is yet available.

 

Oklahoma repeals tax cut trigger mechanism

The Oklahoma Senate has passed and sent to the Governor a bill that repeals that state’s trigger mechanism to lower income tax rates.  By a vote of 32 to 9 on Monday, the bill was sent to Governor Mary Fallin, who is expected to sign it.

The trigger mechanism was added to the law in 2014.  When collections increase by $100 million, the individual rate would drop from 5 percent to 4.85 percent.  The Sooner State is facing an $878 million budget deficit next year.

 

20 mills for schools moves without tax abatement change

Senate Bill 146, which extends the 20 mill statewide property tax levy for schools, passed out of the House Taxation Committee Thursday afternoon with a key change taken out.

The bill had previously passed the Senate.

In the Senate version, beginning in school year 2017-2018, any new property tax exemptions granted by the State Board of Tax Appeals for property financed by industrial revenue bonds or for economic development purposes (pursuant to the Kansas Constitution) for which the public hearing was not held prior to May 1, 2017, would no longer apply to the statewide 20 mill school finance levy.

Previously exempted property would continue to be eligible for exemption from the levy.

Opponents of that provision said that would harm economic development.  Those testifying in opposition to that provision included Erik Sartorius of the League of Kansas Municipalities; Trent Armbrust of the Kansas Economic Development Alliance; Ashley Sherard of the Lenexa Chamber of Commerce; and Jason Watkins of the Wichita Regional Chamber.

Watkins said he’s not sure all Senators understood the ramifications of the amendment when it was added in Senate floor debate.

 

Property tax lid change advances

A bill that exempts certain employee benefits from the local property tax lid passed out of the House Taxation Committee Thursday.  The measure is HB 2424.

In addition to exemptions in the law currently for law enforcement, fire protection or emergency medical services, these items are added by the bill: increases in employer contributions for

  • social security
  • workers compensation
  • unemployment insurance
  • health-care costs
  • employee benefit plans and employee retirement and pension programs

 

Committee will work on gas tax increase

At its next meeting on Monday, the busy House Taxation Committee will work on House Bill 2412, which raises the motor fuels tax by five cents a gallon.

The bill would raise an estimated $84.6 million in Fiscal Year 2018, which begins July 1, 2017.

But it’s not just gas at the pump that would change.

E-85, diesel, LP gas, compressed natural gas, and liquefied natural gas would also see tax incrases.

Certain motor fuel permits used by industry would also be increased.

 

School finance update

The House K-12 Education Budget Committee continues to work on substantive changes to school finance.  Much of the work is based on the former school finance formula which was replaced by a two-year block grant program, now declared unconstitutional by the Kansas Supreme Court.

Lately, the committee has been discussing accountability and at-risk student performance and how that should be addressed in a new formula.  Local property taxes and how they should be used are also part of the mix.

No bill has yet passed out of any legislative committee.

The Senate appears to be waiting on the House before taking any action.

 

Sales tax on services still being talked up

As the House Taxation Committee continues to tackle a variety of issues, removing certain sales tax exemptions on services are surfacing in connection with House Bill 2384.

Always a thorny subject, a side group of committee members are trying to put together a list to consider.

The lawmakers are Representative Kristi Williams (R-Augusta); Representative Dan Hawkins (R-Wichita); and Representative Jack Thimesch (R-Spivey).

In a handout delivered to the House Tax Committee, they listed $285 million that could be raised by taxing certain services.

Here’s part of the list:

  • Barber shops
  • Beauty salons
  • Manicure/pedicure personal services
  • Gym memberships
  • Dating services
  • Towing
  • Parking Garage/Parking
  • Limousine and cab rental
  • Detective services
  • Security services
  • Non-residential cleaning services
  • Pet daycare
  • Mini storage/self storage
  • Custom computer software
  • Collection agencies
  • Expanded lawn services
  • State owned cabins
  • Residential and agriculture utilities
  • Coin operated laundries

There’s also an extensive list of personal services.  Here are just a few:

  • Steam and Turkish baths
  • Hair removal
  • Ear piercing
  • Hair replacement
  • Hair weaving
  • Massage
  • Saunas
  • Sun tanning
  • Tattoo services
  • Astrology services
  • Baby shoe bronzing
  • Bail bond services
  • Concierge services
  • Escort services
  • Fortune telling services
  • House sitting services
  • Life coach services
  • Locker rental
  • Palm reading
  • Party planning
  • Personal fitness trainers
  • Psychic services
  • Shoeshine parlors and services
  • Singing telegram services
  • Wedding chapel services (excluding churches)
  • Wedding planning

 

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 UPDATE: Working on the weekend, income tax, school finance, property tax abatements, STAR Bonds

In this issue …

  • Is the Kansas Legislature working this weekend?
  • Income tax: talk but no action yet    
  • School finance still in process
  • 20 mills renewed with change to property tax abatements
  • STAR Bonds action
  • Bill tracking

 

Is the Kansas Legislature working this weekend?

As the first week of the 2017 legislative veto session moves forward, there’s still a question of whether lawmakers will be working over the weekend, especially if there’s nothing for them to do.

This is the time of the year when only the major items and some few leftover bills are around.  The bulk of legislators find themselves with a lot of time on their hands, waiting for leadership and key committee leaders to reach agreement.

In particular, Senate Majority Leader Jim Denning (R-Overland Park) has been insisting that the Senate will work this weekend.  We shall see.

The area around the Statehouse will be largely blocked off for what’s termed a Christian rap concert as well as a car show.  We are told that on-street parking around much of the building will be unavailable.  Getting to the Statehouse parking garage will be difficult due to heavy construction activity on Topeka Boulevard and the fact that Van Buren Street to the North will be closed.

Also complicating the picture is talk that many key lawmakers have tickets for the Garth Brooks concerts this weekend at the Sprint Center in Kansas City.

 

Income tax: talk but no action yet

This has been a week of delay on legislation to raise income taxes.  First the Senate scheduled a debate on a conference committee agreement, and then backed off as Democrats and some Republicans indicated they couldn’t vote for it.

Then it was the House turn and the same thing happened.  Debate was postponed, especially when needed Democrat votes indicated they wanted K-12 education to be handled first, so they know how much money is needed to fund the budget and school finance.

As of this writing, the Senate Assessment and Taxation Committee is trying to put together a new plan.

They are using House Bill 2228 as a vehicle.

What they have put in the bill so far:

  • Repeal of the pass-through business exemption
  • Two income tax brackets: income under $12,600 would pay zero percent and over $12,600 would pay 4.4 percent. This is essentially a flat tax
  • The standard deductions would be the same as federal
  • There is no retroactivity. Everything (including business pass through repeal) begins in 2018
  • State Board of Regents retirees would have pensions taxed beginning in 2018
  • The food sales tax is reduced from 6.5% to 5.5% in 2018
  • The annual business filing fee is increased from $40 to $75 beginning in 2018
  • The income tax deduction for property taxes paid is fully restored in 2018
  • The mortgage interest deduction jumps from 50% to 75% in 2020 and a full 100% in2021

Final action on the bill is being held until sometime Friday.  The committee wants to see fiscal runs and language.

Earlier, Senate Majority Leader Jim Denning proposed a $3 charge on utility bills, which would raise substantial revenue but is opposed by many as unfair.  It was not included.

Meanwhile the House Taxation Committee is looking at possible revenue sources including internet and remote sales; a motor fuels tax increase; increasing the cigarette tax; and maybe some sales tax on services.  Those are still in the early stages.

Members of the committee are mainly doing some informal polling of their colleagues to determine if there is support for any of those sources.

 

School finance still in process

The Kansas House K-12 Budget Committee has a school finance bill (HB 2410) that has been written but is still being tweaked.

Thursday, the Committee heard a presentation from former Kansas Senator Jeff King, the attorney hired by the Legislature to advise on school finance matters.

Some of his analysis included the following:

  • The more money you put into K-12, the more likely the bill is to be accepted by the court.
  • You have to provide the funding and have a funding stream. The legislature needs to provide “real dollars with revenues behind them.”
  • Whatever lawmakers do will become the “constitutional standards” that legislatures will be held to in the future.
  • The Kansas Supreme Court put an emphasis on providing funds to underperforming students. King said he believes the amended bill was less targeting of at-risk students than the original bill, and that will raise red flags with the Court.
  • Asked by Representative Brenda Landwehr (R-Wichita) if the state has to fund the constitutional promise of a suitable education regardless of economic conditions or the impact on other budget areas, King said, “Yes!”

The committee adjourned without taking action on the bill.  Chairman Larry Campbell (R-Olathe) did not set a time for a meeting Friday but said the committee was on call.  He had originally hoped to begin working the bill further and passing it out of committee on Friday.

 

20 mills renewed with change to property tax abatements

The Kansas Senate has renewed the statewide 20 mill property tax for K-12 education by a vote of 39 to one.  The renewal is good for two years.  The first $20,000 of assessed valuation of residential properties would continue to be exempt from the property tax levy.

In FY 2018, the 20 mill levy is estimated to raise about $630 million.

Local governments and economic developers might have a problem with a provision that was added to the bill that concerns property tax abatements.

Beginning in school year 2017-2018, any new property tax exemptions granted by the State Board of Tax Appeals for property financed by industrial revenue bonds or for economic development purposes (pursuant to the Kansas Constitution) for which the public hearing was not held prior to May 1, 2017, would no longer apply to the statewide 20 mill school finance levy.  Previously exempted property would continue to be eligible for exemption from the levy.

There is no estimate yet available for how much the property tax abatement change would be expected to

Bring to the state.

The bill (Senate Bill 146) now resides in the House Taxation Committee.

 

STAR Bonds Action

The economic development tool known as STAR Bonds (Sales Tax Revenue Bonds) will go away this summer without legislative action to renew its use.

The House took action this week, passing HB 2184 by a vote of 112 to 11.

There are some changes:

  • The bill allows STAR bond project costs to include expenses for the renovation and expansion of an historic theater.
  • The bill would eliminate language that allows a county commission or school board to object to a proposed STAR bond district, if it is determined the STAR bond district would have an adverse effect on property tax revenues.
  • The Secretary of Commerce would no longer be required to approve a city or county option to use all or a portion of transient guest tax revenues to be pledged for principal and interest payments on the STAR bonds.
  • The bill would eliminate outdated language for a STAR bond project that involves auto racetrack facilities.
  • The bill extends the sunset date for the STAR Bond Financing Act from July 1, 2017 to July 1, 2022.

The bill was assigned to the Senate Commerce Committee after passing the House, where Chair Julie Lynn (R-Olathe) has expressed concern and a desire to make changes.  Her Commerce Committee has had hearings on STAR Bonds as well as the state’s other economic development tools.

 

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 UPDATE: Legislature returns, income tax, school finance, budget in works, Medicaid expansion, TRIP study, legislative post audits, bill tracking

In this issue …

  • Legislature returns
  • Income tax fast track could come in a conference committee today
  • Action expected on House school finance bill
  • Budget is still in the works
  • Another push expected on Medicaid expansion
  • TRIP study: Kansas roads need help
  • Legislative Post Audits firmed up

 

Legislature returns

The 2017 Kansas Legislature returns to Topeka Monday for what’s expected to be a difficult veto session.  The Senate goes in at 10 a.m. while the House returns at 2 p.m.

There’s not much officially scheduled for this first day.  The annual Shrimp Peel social event will be held to benefit Special Olympics.  It’s a first day tradition of the veto session and has lately been billed as a reunion, where several past legislators return.

Senate Majority Leader Jim Denning (R-Overland Park) told the Senate Ways & Means Committee last week that, “Things are pretty unpredictable.”  He said Senators will caucus Monday afternoon to talk about budget and taxes.  Denning said leadership hopes to have a tax plan passed by both houses by Friday, or Sunday at the latest.

 

Income tax fast track could come in a conference committee today

The direction forward on an income tax increase bill is not certain, but one possibility being discussed could fast track the issue through a parliamentary maneuver.

Some lawmakers familiar with the process believe a conference committee of House and Senate members will meet Monday to review tax bills that have passed one or both houses.  A new income tax proposal could be inserted into an existing tax bill through the process known as “gut and go.”

The proposal would then go to the House and Senate for an up or down vote and would not be subject to amendments.  Otherwise, any new proposal would have to start in a tax committee where hearings might be held, amendments made, and a vote taken before going to the full House or Senate.  That would take longer.

A new economic study we reported last week could have an impact on support for an income tax bill, particularly repeal of the business pass through exemption.  It hasn’t received much attention except on Twitter, but makes a powerful statement because it’s based on examination of over 255-thousand actual federal income tax returns of Kansans that contain business income.

The study by researchers at the University of South Carolina, the University of Indiana, and the U.S. Treasury Department concludes that the main result of exempting pass through income has been tax avoidance.  The study strongly refutes the claims of Governor Brownback and others that the exemption has helped grow the economy.

Here’s a link that will take you to the complete study.

 

Action expected on House school finance bill

As we reported in our newsletter at the conclusion of the regular session April 7, work on a new school finance formula in the House K-12 Education Budget Committee appears to be complete.  We expect House Bill 2410 will be voted out for debate in the full House of Representatives this week..

It’s expected to increase funding for school district general state aid and special education by about $150 million next year; then add $150 million more each of the next four years for a total of a $750 million increase.

Here’s a link to the Kansas State Department of Education web page with the estimated runs

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

 

Budget is still in the works

The House and Senate budget committees met last week to talk about the Omnibus Appropriations Bill.  That’s the annual bill that cleans up the budget as it pertains to new legislation that has passed.

The committees look at new legislation to determine how the budget needs to be adjusted to implement the new laws.  Then they add or subtract from the budget so the legislation can work.

The Senate Ways & Means Committee work is nearly complete.  The committee will finalize its version of Omnibus on Tuesday.

The House Appropriations Committee just reviewed and discussed the list of legislative items that will cause budget adjustments.  It will also meet Tuesday to work the bill.

The regular budget bills (called the Mega Budget) for Fiscal Years 2018 and 2019 are still in the works.   Before adjourning in early April, the House Appropriations Committee passed a mega budget bill.  It’s House Bill 2364.   It may be debated by the full House of Representatives this week.

The Senate budget bill passed on March 30.  It’s Substitute for Senate Bill 189.

Both bills create deficit spending without passage of an income tax increase.  Both versions use PMIB (Pooled Money Investment Board) loans and delayed KPERS payments to balance the budget.  Neither budget cuts K-12 education or higher education.

 

Another push expected on Medicaid expansion

It looked like Medicaid expansion was nearly dead after the House could not muster enough votes to override Governor Sam Brownback’s veto.  Now the issue has new life.

The publicity surrounding the possible closure of Topeka’s St. Francis Hospital and the loss of about 1,600 jobs has given the issue new life.  St. Francis officials have said the lack of Medicaid expansion in Kansas has been one of the roadblocks to remaining open.

We’re not sure how or when the issue will resurface.

 

TRIP study: Kansas roads need help

A report released Thursday by a Washington, DC based national transportation organization warns that a third of Kansas’ major urban roads are in poor or mediocre condition.

The report comes from TRIP (The Road Information Program).

The study also says nine percent of the state’s locally and state-maintained bridges are structurally deficient; and that rural roads in the state have a traffic fatality rate four-and-a-half times higher than all other roads.

The study says, “Roads and bridges that are deteriorated, congested or lack some desirable safety features cost Kansas motorists a total of $2.7 billion statewide annually – as much as $1,600 in some urban areas – due to higher vehicle operating costs, traffic crashes and congestion-related delays.”

TRIP blames the problems on the state’s transfers of $2.4 billion in state highway funds to other purposes between FY 2011 and FY 2017.

Here’s the link to the Kansas TRIP Study.

The report comes as state legislators return for the veto session and ponder what to do about a dwindling amount of funding for even basic road preservation.

 

Legislative Post Audits firmed up

The Legislative Post Audit Committee of the Kansas Legislature approved audit topics for the next year during a meeting last week.

The Legislative Division of Post Audit is the non-partisan audit arm of the Kansas Legislature.  Its mission is to inform policy makers by providing accurate, unbiased information through audit reports.  They focus on three areas: oversight, insight, and foresight.

Here’s the list of approved audits:

  • K-12 Education: Reviewing the accuracy of free-lunch student counts
  • Department of Corrections: Comparing the merits of lease and bond options for improving or replacing the Lansing correctional facility
  • Medicaid: Evaluating issues related to KanCare and other important components of the state’s Medicaid system
  • Follow-up Audit: Reviewing agencies’ implementation of selected performance audit recommendations
  • K-12 Education: Evaluating the use of assessed valuation per pupil as the basis for state equalization aid
  • Kansas Tax Revenues: Reviewing how other states inventory and evaluate tax credits and exemptions
  • Community Mental Health: Evaluating mental health services in local jails (this is an extra audit that the Division may not have time to do)

 

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

In this issue …

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

 

Senate crushes the flat tax

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

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

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

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

The bill had many things that many legislators support:

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

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

What happens now?

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

 

Legislature moves toward first adjournment with FY 17 budget

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

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

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

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

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

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

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

 

House committee has a school finance bill

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

The bill is HB 2410.

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

That totals a $750 million increase.

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

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

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

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

 

What about Medicaid expansion?

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

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

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

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

 

Bill tracking

Here’s our latest bill tracking on measures we think are of interest to our readers.

You should be able to click on the bill number and be taken to the Kansas Legislature’s web site page for that particular bill.  You will be able to see all actions taken, read the bill, and read any supplemental notes (layman’s descriptions) and fiscal notes (how much does the bill cost the state) that have been prepared.

KEPC UPDATE: Perfect storm, school finance, flat income tax, senate budget, highway bonds, rescission, Medicaid veto

In this issue …

  • A perfect storm of issues
  • House committee builds school finance bill
  • House Tax Committee forwards “flat income tax”
  • Senate passes a budget
  • House budget includes highway bonds
  • Rescission bill agreement reached
  • Brownback vetoes Medicaid expansion
  • BILL TRACKING

 

A perfect storm of issues

Legislative leaders are beginning to call them “The Big Three.”  They are the big three issues of the 2017 Kansas legislative session and they began coming together this week with heavy activity on all three expected next week.

The Big Three are:

  • The budget
  • The income tax
  • School finance

The legislature is not meeting today (Friday) but will return for the final week of the legislative session next week.  At the end of the week, they will have what’s called First Adjournment.  After breaking for three weeks, they come back May 1 for the veto session.

Leadership in the House of Representatives hopes to see major advancement on a portion of all three big issues by the First Adjournment.

The senate has already passed a budget.

 

House committee builds school finance bill

Once the Kansas House of Representatives adjourned Thursday for their three-day weekend, the House K-12 Education Budget Committee began meeting to write a new school finance formula.

As of this writing, the committee was working into late Thursday evening.  It was apparent the committee would not finish a formula Thursday evening when at least one item was tabled until Monday.

The committee is using HB 2410 as a base.  That’s the bill that Committee Chairman Larry Campbell (R-Olathe) put forward with the help of House Education Committee Chairman Clay Aurand (R-Belleville).

As of this writing, the committee members appeared to be heavily amending the bill.  We will have to wait to learn (and understand) the results until all of the work is done and Kansas Department of Education officials have a chance to produce data that shows the impact on local school districts.

Among those who have successfully proposed amendments is Representative Melissa Rooker (R-Fairway).  Rooker has been very active on school finance and is considered a leader on the issue among Moderate Republicans and many Democrats.  On the Democrat side, Representative Ed Trimmer (D-Winfield) is considered the go-to guy on K-12.  He’s also deeply involved in the discussion.

KEPC will try to get you information on the bill as soon as possible.

 

House Tax Committee forwards “flat income tax”

After Governor Brownback’s veto of an income tax increase bill February 22, we’ve been waiting to see what’s next.  The House Taxation Committee waited for the Senate Assessment and Taxation Committee to come up with something but that hasn’t happened yet.

So, this week, the House committee has forwarded a “flat tax” bill to the full House of Representatives at the request of Speaker of the House Ron Ryckman (R-Olathe).  Democrats opposed the measure.  Many Republicans on the committee also don’t like the bill but were called in by the Speaker and urged to send it out to the floor for debate.

Here’s what’s in Substitute for House Bill 2395:

  • Business pass-through income would be taxed, retroactive to January 1, 2017
  • Certain non-wage business income losses could be claimed
  • There would be a single 5 percent tax bracket, beginning January 1, 2018 (current law has two brackets of 1.6 percent and 4.6 percent)
  • The “March to Zero” trigger mechanism that lowers rates in the future is repealed
  • Medical expenses would be allowed as itemized deductions. Those deductions were repealed in 2015 in an effort to save money
  • Standard deductions would be increased from $3,000 to $7,500 for single taxpayers; from $7,500 to $15,000 for married filing jointly; and from $5,500 to $11,000 for heads of household
  • The sales tax on food and food ingredients would be reduced from 6.5 percent to 5 percent on January 1, 2019
  • The food sales tax reduction would apply to bottled water, but not to alcoholic beverages, tobacco, candy, dietary supplements, soft drinks, or food sold through vending machines

The best guess on how much it brings in?

The Department of Revenue says the increase for FY18 (beginning July 1, 2017) is $373.7 million.  For FY19, the amount increases to $472.7 million.

The bill is expected to be debated in the house next week, but it is not listed on the agenda for General Orders on Monday.

The Ranking Minority on the Tax Committee, Representative Tom Sawyer (D-Wichita), is an accountant.  He quickly pointed out that some single taxpayers income tax liability would go up 29 percent and some married taxpayers with two children and $70,000 of income would see an increase of 48 percent in Kansas income taxes under the bill.

The Kansas Department of Revenue agreed with Sawyer’s calculations.

Some Moderate Republicans who voted to get the bill out of committee tell me they will not vote for it on the House floor.

The hallway talk is this bill will fail, but may have to be debated to move the process forward.  In addition to concern about income tax increases for lower income Kansans, the bill does not appear to bring in enough to meet the needs of the state, particularly for school finance.

Meanwhile, the Senate Assessment and Taxation Committee continues to discuss a similar flat income tax proposed by Senate Majority Leader Jim Denning (R-Overland Park).  That committee is scheduled to continue income tax discussion, beginning at 8:30 a.m. on Monday morning.

The Kansas Center for Economic Growth (KCEG) has put out an informational piece critical of flat income taxes.  It’s available online.

 

Rescission bill agreement reached

An agreement on the current fiscal year budget has been reached by House and Senate negotiators.

The current fiscal year for Kansas ends on June 30 and the budget is deeply in the red.  The rescission bill is HB 2052.  It does not cut K-12 or higher education.

It relies on transfers from the Pooled Money Investment Board (PMIB), to be paid back in six payments sometime in the future.  State KPERS contributions are reduced with further review of more KPERS contribution delays in May during the veto session.

Nobody really likes any of that, but the only other options are deep cuts.

A final vote on passage is expected next week in the House and Senate.

 

Senate passes a budget

While the Kansas House of Representatives was dramatically talking about Governor Brownback’s veto of Medicaid expansion Thursday, the Kansas Senate was passing a budget for the next two years. The vote was 25 to 15.

The spending in the bill, which funds Fiscal Year 2018 and 2019 budgets, is not currently supported by expected revenues.

Once an income tax increase is passed, along with a school finance bill; another bill will adjust everything to fit.  That’s most likely to come during the veto session in what’s called the Omnibus Appropriations Bill.  That’s the final catch-all bill of the session that balances everything.

The Omnibus bill is usually the final bill, or nearly final bill, passed in any legislative session.

 

House budget includes highway bonds

Meanwhile, the Kansas House Appropriations Committee has passed their version of a two-year budget on to the full House for debate.  That’s expected next week.  It is House Bill 2364.

Like the Senate budget passed on Thursday, it currently creates deficit spending, but relies on an income tax bill to be passed in the future.

Without more revenue, the House budget has a negative $248.6 million ending balance for FY18 and negative $237 million ending balance in FY19.

Like the Senate budget, the House version uses PMIB loans and delayed KPERS payments to balance the budget until new income tax revenue arrives.

Also like the Senate budget, it does not cut K-12 education or higher education.

There are two items of interest that provide some hope for highway supporters who have suffered through raids on the highway fund over the past years, delays of major projects, and a dramatic drop on basic preservation (maintenance).

The bill suspends the 18 percent limit on annual debt service to the highway fund for FY 2018 and 2019.  It also provides authority to bond an additional $400 million for KDOT, which would provide a much needed infusion of funds.

How bad is it?  During a little reported presentation to the Senate Ways and Means Committee January 25, KDOT predicted a substantial decrease in preservation projects under Governor Brownback’s proposed budget at that time.  KDOT officials said only $28 million was available for preservation projects, compared to $88 million in FY 2017.

The bonding authority will provide some breathing room and more attention to maintenance.

Expect a debate on the House floor next week on the two-year budget.  It is not on the General Orders list of bills for debate on Monday in the House.

 

Brownback vetoes Medicaid expansion

A rapid series of events on Medicaid expansion took place this week on House Bill 2044.

A week ago on February 23, the House passed the bill, 81 to 44. Here’s how House members voted.

The Senate passed the bill on Monday, 25 to 14.  Here’s how Senators voted.

Governor Sam Brownback vetoed the bill on Thursday morning.

Within minutes, opponents of Medicaid expansion in the House brought the matter up for a motion to override the Governor.  They weren’t trying to help the bill.  This was a parliamentary maneuver.

They didn’t want supporters to have the time to whip up support for an override.

After some discussion and motions, expansion supporter Representative Russ Jennings (R-Lakin) made a motion to lay the veto override on the table.  It passed 81 to 43 on an unrecorded vote.

That gives health care providers and other Medicaid expansion supporters the weekend to whip up support for a veto override.  It takes a majority vote (63) to bring the veto override vote back before the House.

Supporters of Medicaid expansion need 84 votes in the House to override a veto.  If successful, the override will go to the Senate, which must have 27 votes to override a veto by the Governor.

 

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 UPDATE: school finance, Medicaid expansion, income tax, recission, senate cmte budget, gas tax, STAR Bonds, property tax, early break

In this issue …

  • Lawmakers and educators try to understand House school finance bill
  • Medicaid expansion goes to the full Senate
  • House Tax Committee may move ahead on income tax
  • Rescission bill in conference
  • Senate Committee passes a budget
  • House holds hearing on 11 cent gas tax increase
  • STAR Bonds out of House committee
  • Property tax lid changes
  • Will lawmakers break early?
  • KEPC Bill Tracking

 

Lawmakers and educators try to understand House school finance bill

A long-awaited school finance bill was unveiled this week by the House K-12 Education Budget Committee.  The bill was not available in print until Wednesday and hearings were held Thursday and will continue today (Friday) and Monday.

The quick timing has caught many school officials off guard because it came during Spring break.

Committee Chairman Larry Campbell (R-Olathe) wants the committee to begin working the bill Monday and hopes to have something voted out of committee by Thursday.

Although similar to the previous formula, House Bill 2410 also has differences.

Lawmakers and education groups are trying to understand how it works and what it does.

Here are some of the highlights:

  • 107 of the 286 school districts lose money, mainly because of declining numbers of students
  • The state would only spend an additional $75.6 million next year. Many education groups and lawmakers say this number is too low and will not satisfy the Kansas Supreme Court
  • It appears this formula relies more heavily on local property taxes to fund schools, depending on the will of local school boards
  • School boards could raise property taxes for local enhancements and extracurricular activities
  • School districts would receive $5,320 per student. About 80 percent ($4,170) would come from the state, while about 20 percent ($1,150) would come from local property taxes that would be required to be levied
  • Any school district whose enrollment declines more than five percent from the previous year would base their budget on 95 percent of the preceding year’s enrollment
  • Beginning in the 2018-19 school year, the September 20 and February 20 enrollments would be averaged for budget purposes
  • All day-kindergarten would be phased in by 2019-20
  • Vocation weighting would be eliminated and $100 per full-time equivalent student would be transferred from the general fund to pay for vocational education
  • Virtual state aid remains the same as it is now
  • At-risk weighting remains the same as it is now
  • Transportation state aid is reduced $4.3 million
  • High density at-risk and bilingual state aid are included

Want to know what this means for your school district?

Here’s a link to the Kansas State Department of Education spread sheet. To see whether your school district gets or loses from the state, look at column 14 in the SF17-091 (State Foundation Aid) spreadsheet.

If you really want to delve into everything about the bill, here’s the link to the full KSDE web page on it.

This is not an easy review and not for the faint of heart.

The committee chairman, Representative Larry Campbell (R-Olathe) says this is just a starting point.  It is widely believed there are enough votes on the committee to significantly change the measure.

 

Medicaid expansion goes to the full Senate

After only brief discussion Thursday, the Senate Public Health and Welfare Committee passed out a bill that expands Medicaid in Kansas by a vote of 6 to 2.  The bill is House Bill 2044.

Supporters of Medicaid expansion are confident the bill will be passed by the full Kansas Senate.  The question is whether Governor Sam Brownback will veto the measure.  He continues to say he opposes it.  The question then becomes whether there are enough votes to override his veto.

Complicating the situation is the legislation in Congress to repeal the Affordable Care Act (Obamacare).  As proposed, the legislation would freeze Medicaid.

House Bill 2044 is currently exactly the same bill that came over from the House of Representatives. There were no amendments. That means if the Senate passes it without amendments, it will go directly to the Governor for his consideration.

 

House Tax Committee may move ahead on income tax

The House Taxation Committee may be weary of waiting on the Kansas Senate to come up with a new income tax bill and appears to be poised to come up with another plan of its own. However, one representative deeply involved in the issue tells us the House will let the Senate struggle a bit longer.

Committee Chairman Steven Johnson (R-Assaria) told the committee this week he would like the members to consider looking at perhaps four income tax brackets in a new bill. Johnson said the committee would use the bill vetoed by Governor Brownback (HB 2178) as a base.

The 2012 income tax cuts moved Kansas from three brackets to two. HB 2178 returned to three brackets.

There is another bill currently in the Tax Committee similar to HB 2178 that could be used for a new income tax measure.

The committee may also put forth a flat income tax with one rate, somewhere around 5 percent.

 

Rescission bill in conference

The budget bill that reconciles the current state budget is in a conference committee of House and Senate members. They will try to iron out differences in each version. The bill does not cut K-12 or higher education.

It is House Bill 2052. The bill essentially relies on internal borrowing to balance the budget and leaves an ending balance in the bank of about $50 million.

The current budget year is FY 2017.  It ends on June 30.

 

Senate Committee passes a budget

Meanwhile, the Senate Ways and Means Committee passed a budget Thursday for the next two years with little fanfare.

It’s Senate Bill 189, the so-called “mega budget” bill. The guts of the bill contain a state budget for Fiscal Years 2018 and 2019. Because school finance and income tax increases are still in the works, the budget does not contain K-12 funding or some other items. Those will be added later once the revenue and education pictures become more focused.

The bill now goes to the floor of the Kansas Senate. The house and senate have very few committee meetings next week and are expected to be spending most of their time on the house and senate floors debating bills.

 

House holds hearing on 11 cent gas tax increase

The House Taxation Committee held a hearing Thursday on a bill to increase the motor vehicle fuels tax by 11 cents a gallon.  It’s House Bill 2382.

A bill raising the tax by five cents a gallon had a hearing a week ago in the Senate Assessment and Taxation Committee.

 

STAR Bonds out of House committee

A bill that extends STAR Bond financing until 2022 has passed the House Appropriations Committee and will be debated in the full House of Representatives.  Without the bill, STAR Bonds could no longer be used as an economic development tool.

STAR Bonds provide Kansas municipalities the opportunity to issue bonds to finance the development of major commercial, entertainment and tourism areas and use the sales tax revenue generated by the development to pay off the bonds.

The bill is HB 2184.  It contains some other changes:

  • The bill allows STAR Bonds projects costs to include expenses for the renovation and expansion of an historic theater
  • Language is eliminated in the law that allows a county commission or school board to object to a proposed STAR bond district, if it is determined the district would have an adverse effect on property tax revenues
  • The Secretary of Commerce would no longer be required to approve a city or county option to use all or a portion of transient guest tax revenues to be pledged for principal and interest payments on the STAR bonds.
  • The bill eliminates some outdated language about the NASCAR facilities in Wyandotte County.

Meanwhile, reliable legislative sources tell us the Senate Commerce Committee has ended its look at economic development incentives and may not make any changes to programs like HPIP and PEAK.  A quick check of next week’s agenda shows no committee meetings scheduled.

 

Property tax lid changes

Here’s one of those crazy things that happens in the final weeks of a legislative session.

The Senate Assessment and Taxation Committee held hearings last week on a bill to repeal the local property tax lid.

Senate Bill 167 was completely gutted in committee Thursday of any mention of the tax lid.  It has now become a bill that requires County Appraisers be elected to four year terms, beginning in 2018!

There are also several provisions in the bill having to do with how appraisals will be conducted.  Attorneys familiar with government appraisal of property believe some of those provisions are probably unconstitutional.  The bill is still in the Senate committee.

The committee has an 8:30 a.m. meeting scheduled this morning (Friday) to hear from the Revenue Department’s Property Valuation Division (PVD).  PVD may inform them of problems with the bill.

The House Taxation Committee has held hearings on a House Bill 2376, which changes the local property tax lid from requiring an election to only requiring an election when 10% of the voters sign a protest petition asking for an election.

Our best guess is that this bill will be passed out of the committee, but with changes that lower the number of signatures needed on a protest petition.  It will then probably sit on the agenda for debate in the full house until some of the other major issues of the session (school finance, taxes, and the budget) have some movement.

 

Will lawmakers break early?

Next week’s schedule indicates the Legislature will NOT meet on Friday.  Lawmakers were originally scheduled to be in session the next week (the week of April 3).  There are rumblings around the Statehouse (usually reliable) about how that week could be a short one.  Depending on how much has been accomplished, legislative leadership may decide to hold the First Adjournment early to save more days for the veto session.

The veto session is scheduled to begin May 1 this year.

 

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.