Last Thursday was supposed to be the day the Kansas Senate met in a spirit of tough but earnest compromise to finally forge a lasting solution to the toughest question they will face: how to close the looming budget shortfall.
Down! Set! Nope.
The Senate Assessment and Taxation Committee had passed out a package said to restore structural balance to the Kansas tax code. The package raises the lowest income tax rate paid by individuals from 2.6% to 3.0% and the highest rate from 4.6% to 4.9%. It also eliminates the so-called LLC exemption, the highly controversial feature of the 2012 tax package which exempts income earned by pass-through business entities from state income tax. The bill is estimated to raise about $290 million in revenue the first year and over $350 million annually after that.
At about the same time, the Senate Ways and Means Committee finished its work on the large budget cutting bill which saves roughly $343 million in state spending in large part by cutting $128 million for K-12 public education funding and just over $23 million from higher education funding. The rest of the savings comes from budget reductions to a variety of other state agencies and from delaying repayment of $90 million the state borrowed from KPERS last year.
Each of these all-important fiscal bills was cued-up for discussion on the floor of the Senate on Thursday morning. Republican leaders apparently believed they had managed the process so that enough Senators were standing at the ready to vote Yes. But no sooner had the 8:00 A.M. session been gaveled in than it was promptly adjourned so each party could huddle-up separately and double-check their numbers. Once Republican leaders figured-out they did not, in fact, have the votes to pass these tandem packages, they called the whole thing off until the following week.
The medicine which some Republicans (and presumably all the Democrats) simply could not swallow was the 5% cut in public school funding. Senate leadership attributed this apparent change of heart to a withering lobbying effort by educators but reticent senators countered that they are quite capable of thinking and speaking for themselves and they simply are not willing to take that much more money from public schools.
The same scene is set for this week but whether the wheels are any less likely to fall off this time is yet to be seen.
Meanwhile Across the Dome
The House Taxation Committee passed its own package on Thursday. The bill raises individual income tax rates and creates a third tax bracket. It also closes the LLC exemption and makes medical expenses fully deductible against income. The bill is preliminarily estimated to raise roughly $500 million and is headed for the full House for a debate which, hopefully, will not collapse before it even begins.
Other Items of Interest
On Thursday, a bill was introduced in concept in the Senate which would suspend for 3-years three of the state’s most important and impactful economic development programs: the High-Performance Incentive Program (HPIP) and Promoting Employment Across Kansas (PEAK) and STAR bonds. HPIP and PEAK have been key tools used by the Department of Commerce to help attract new and expanding employers to the state. Economic development groups across Kansas, including Go Topeka, rely on the state as a partner in the never-ending effort to draw new and higher paying jobs to the region. Suspending these programs could essentially remove the state as a resource, leaving local economic developers on their own. The Topeka Chamber will work in concert with other chambers of commerce and economic developers to strongly oppose this legislation.
The House Local Government committee held hearings on a bill which empowers cities to allow adults to carry alcoholic beverages within tightly prescribed areas immediately adjacent to buildings where the liquor was sold. Committee members seemed generally receptive but listened intently to enforcement concerns raised by the Division of Alcoholic Beverage Control, as well as questions about liability raised by bar owners. The legislature may be slowly warming to this concept, which young professionals and the young at heart consider to be thoroughly modern and long past-due in Kansas, but there is still much work to be done before a bill which satisfies various important concerns can be passed.
The House Health and Human Services Committee heard testimony from both sides of the Medicaid Expansion debate. House Bill 2064 creates the Bridge to a Healthy Kansas program. The Bridge to a Healthy Kansas would require participants to be accountable by requiring them to participate in a work referral and job training program to remain eligible for expanded Medicaid. It will be budget-neutral, as well. The cost of insuring more Kansans will be offset by new federal funding, reductions in health care spending and revenue gains that result from insuring more people. While the Affordable Care Act, as such, may be changing, most elected officials at the federal level, from President Trump through Congress, espouse the goal of insuring as many Americans as possible. However, the federal law evolves in this area, it will almost certainly continue to entail some form of federal reimbursement for those states which have taken on the additional burden of expanding their Medicaid coverage. It will be critical that Kansas expand Kancare to establish a fair baseline for federal funding, whether in the form of a block grant or otherwise. Because the Chamber supports common sense compromise on the issue of closing the Medicaid coverage gap and the Bridge to a Healthy Kansas is the right solution, the Chamber testified in favor of this program.
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