Which Will Kansas Legislature Tackle First: School Funding Or Tax Plan?

May 17, 2017

Kansas legislative leaders working on a plan to end the 2017 session have what amounts to a chicken-and-egg dilemma.

They must satisfy members who want to set a school-funding target before voting on the tax increases needed to fund it and those who first want to close a projected $900 million gap between revenue and spending over the next two budget years.

“There are a lot of folks wanting one before the other. But at this moment I’m expecting the tax issue to be the next to move,” says Rep. Steven Johnson, the Assaria Republican who chairs the House tax committee.

The timing issues are real.

They played a role in last week’s Senate defeat of an income tax bill that would have generated more than $1 billion a year in additional revenue. Only two of the Senate’s nine Democrats joined with 16 moderate Republicans in voting for the measure, leaving it three votes short of the number needed to pass and nine shy of what would have been needed to override a veto by Republican Gov. Sam Brownback.

The governor vetoed a similar bill in February. The House overrode the veto but an attempt in the Senate failed by three votes.

Senate Democrats who joined conservatives last week in opposing the new bill said they feared it wouldn’t generate enough additional revenue to balance the budget and increase state spending on schools by enough to satisfy a Kansas Supreme Court ruling.

The vote frustrated some moderate Republicans, who warned it could force them to negotiate with conservatives on a package that combined smaller tax increases with spending cuts.

That is now under discussion, Johnson says.

“We’re trying to get a sense for what can work, what can get us out of here,” he says.

It’s possible but not likely, Johnson says, that senators on the tax conference committee will accept a proposal floated earlier this week by House negotiators to reinstate the income tax laws that were in place before 2012 when Brownback convinced lawmakers to cut rates and exempt more than 330,000 farmers and business owners.

A total rollback of the tax cuts would raise an estimated $1.4 billion over two years.

If, as expected, the Senate rejects the proposal, House conferees would likely offer “something to the right” of the tax bill defeated last week, Johnson says, meaning something that makes more modest changes, lessening the likelihood of a veto.

Lawmakers still grinding on school finance

The day started with many thinking that efforts to reach agreement on a school funding plan finally might hit top speed, with bills moving in the House and Senate and on to the inevitable conference committee.

By afternoon the pace slowed considerably.

House members were briefed Wednesday on the bill the K-12 Education Budget Committee kicked out Monday, but there was no action on the floor. Many lawmakers think that leadership wants to pass a tax bill before tackling how much to put into school funding.

That House bill, which would add $279 million in school funding over two years and then increase it by the cost of inflation, was the starting point for the Senate Select Committee on School Finance, which met briefly Wednesday. 

The Senate committee discussed some minor changes to the House bill and plans on at least two days of testimony. Chairman Jim Denning, an Overland Park Republican, says the panel may work Saturday.

To get this moving, Denning attempted to resurrect his proposal to tack a surcharge onto Kansas utility bills to generate the money needed to fund a school finance plan. His original proposal called for adding $3 to every residential utility bill in the state and $10 to each commercial bill.  

The revised proposal, which Denning says is fairer to consumers, would add $2.25 to residential bills only, enough to generate $150 million a year.

“It’s a new fee on consumers, some of them are on fixed income, we tried to get it a low as we can,” Denning says.

Senate Democratic Leader Anthony Hensley says the surcharge idea is a non-starter with his members.

“I just don’t think we ought to be adding surcharges to utility bills that are already too high, particularly as it relates to people who live on fixed incomes,” Hensley says.

However, moderate Republican Sen. Barbara Bollier of Mission Hills says she’s not ready to say “no” just yet. If a surcharge is what it takes to adequately fund schools, she says, she’ll consider it.

Businesses trying to sidetrack sales tax bill

Business officials lined up Wednesday against a plan to impose sales taxes on certain services that Kansas lawmakers are considering to help balance the budget and reduce the sales tax on food.

Under the bill, services including towing, non-veterinary pet care and debt collection would be subject to sales taxes

Irene Hoheusle of Account Recovery Specialists Inc. based in Wichita says the company can’t pass that cost along to customers or it would lose business to out-of-state companies and other competitors.

“They’re all handling the same exact actions and services, but they don’t have that fee assed to them, so of course they can offer lower rates,” she says.

Hoheusle says Account Recovery Specialists, a collections agency, would have to absorb the sales tax cost and layoff some of its 100 employees in Kansas.

Representatives of KC Healthy Kids were the only people who spoke in favor of the bill before a Senate committee.

Members of that group say lowering the sales tax on food is a step in the right direction, even if the lower rate wouldn’t take effect until 2020.  

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