Tax Package Fails
Last week was a roller coaster ride in the legislature. Both the House and Senate had passed a significant tax reform package which would have raised the rate at which individuals pay taxes and eliminated the so-called LLC exemption, among other things. The speed with which the package moved through both sides of the Statehouse, as well as, the paucity of debate took many by surprise. By Tuesday, the bill was on the Governor’s desk and he’d made it clear he disapproved of the legislature’s attempt to dismantle his signature 2012 tax plan. All eyes in the Statehouse and elsewhere waited and wondered whether he would veto the bill outright or, perhaps, simply allow it to become law without his signature. He didn’t leave them waiting for long.
At a banquet on Tuesday night, the Governor strode to the podium and declared in no uncertain terms that he would veto the bill. By Wednesday morning, his pen had matched his words. The House moved quickly. That very morning, they voted 85 to 40 to override the veto; it takes 84 votes to get that done. The Senate followed-up that afternoon and voted on their own motion to override. It takes 27 Senators to override a gubernatorial veto; 24 said aye. The motion to override failed and the Governor had successfully stopped the legislature’s first attempt to grapple with the state’s budget crisis.
With that, lawmakers were back where they started. They still face a looming budget shortfall this year and next, so they still need to find the right mix of spending cuts and revenue increases to close that gap. All the while, the Kansas Supreme Court watches from across 10th street waiting to unveil its ruling on the school finance case; a ruling which could add over half a billion in spending to the state’s general fund. Legislators will return to Topeka on March 6, following a short breather, to roll their sleeves back up and try once again to find a solution before the current fiscal year ends on June 30.
It is important to note that, while some Senators stood to express their unwavering commitment to lower taxes, others explained a more nuanced objection to the tax package. As written, the tax plan would have taken effect as of January 1, 2017. Senators, as well as the Governor, had drawn special attention to the problems this retroactivity would cause for individuals and small businesses. Given that every proposal which has come before legislators thus far includes repeal of the LLC exemption, that part of the package seems all but inevitable. The part which may still be debatable is the date the repeal takes place.
The Topeka Chamber, along with 17 other local chambers of commerce across Kansas, have urged lawmakers to return the state to a more balanced, sustainable tax structure. If that means the repeal of the LLC exemption, so be it. However, the Coalition is urging legislators to look for ways to minimize the disruption repeal will cause to small business and even potentially redesign the LLC exemption so it truly does accomplish its original purpose of helping small businesses grow and create jobs.
We have suspected since before Day One that this topic would overshadow the 2017 legislative session. We were not mistaken.
So as not to waste all this perfectly good dramatic tension, the House decided on Wednesday to debate and pass another hugely controversial bill. The Medicaid Expansion bill called Bridge to a Healthy Kansas had been tabled in committee just the week before. If you are a piece of legislation, getting tabled is a near-death experience. But don’t go into the light. Champions of expanding Medicaid in the House wrangled and wrestled and managed to pull the lifeless bill out of its committee and resuscitate it right there on the floor of the House. Clear!
Over 150,000 Kansans earn too much to be eligible for Medicaid currently but are unable to afford private health insurance. Kansas’ decision thus far not to take advantage of the federal dollars available to states which close that Medicaid coverage gap, has left over $1.6 billion Kansas tax dollars in Washington. As a result, Kansas hospitals and health care providers, including many in Topeka, have delivered hundreds of millions of dollars in services with no reimbursement. This puts them under a financial strain and can make it difficult for them to recruit doctors and nurses. The Topeka Chamber supports a common sense compromise to close the Medicaid gap so we had this to say:
The Bridge to a Healthy Kansas is the right solution for Kansas. It works within the KanCare system and requires participants to be accountable by requiring them to participate in a work referral and job training program. 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, federal law 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 in order to establish a fair baseline for federal funding, whether in the form of a block grant or otherwise.
At the end of a very long debate, the House voted 81-44 to adopt the Bridge to a Healthy Kansas. Its chances in the Senate are thought to be dimmer and the Governor seems as determined to block Medicaid Expansion as he was to reject the tax plan. He has likened expanding Medicaid to buying a ticket on the Titanic. Nevertheless, at this time last year, Medicaid Expansion had not even been mentioned in an obscure committee room, let alone debated on the floor of the House of Representatives. The Chamber thanks Representatives John Alcala, Brenda Dietrich, Jim Gartner, Annie Kuether, Vic Miller and Virgil Weigel for their role in advancing this important issue.
The third and final installment of the Chamber’s popular Pie & Politics series will be Monday, March 6, starting at 3:30 p.m. in the Chamber Boardroom. Don’t miss this opportunity to meet directly with freshman legislators Brenda Dietrich and Virgil Weigel, as they share their unique perspectives on the 2017 session, which shows every indication of going down as one for the history books. Click here to register. There is no cost. Thanks to Dillon’s Food Stores. Without them, this series would just be called “And Politics.”