School Finance

The legislature continues to study possible ways to address the supreme court’s school finance ruling. Lawmakers are loath to raise taxes, especially in light of last year’s tax overhaul and this year’s elections. Last week, the House Appropriations Committee was told that one way to find the $600 million over five years which the court seems to be demanding would be to implement an 18% across the board budget cut in overall state funding. This is scarcely more palatable than raising revenues; one legislator flatly received the report as “insightful.”

The legislature has engaged a professor from Texas A&M to study the cost of providing constitutionally adequate school funding in Kansas. That is considered by some to be an important step, but the scholarly study probably won’t be done until mid-March, which would be about two weeks too late for the Attorney General. He is urging the legislature to take final action on school finance by March 1 so he can be ready to submit briefs by the court’s April 30 deadline.


Possible New Highway Program

This week, the Senate Ways and Means Committee will be hearing testimony on a bill which would lay the groundwork for a new highway program in Kansas. The bill establishes a joint legislative transportation task force to evaluate the condition of the state’s current highway system under the 2010 T-Works transportation program and the sufficiency of funding mechanisms for it.  The task force would report back to the legislature by January 31, 2019. As if on cue, KDOT Secretary Richard Carlson told the Senate Transportation Committee that, given the legislature’s recent practice of redirecting sales tax dollars from T-Works, his department may not be able to match federal funds in the year 2021. Schools are the main headline, but it will important that the legislature get highway funding right, too.


Tax Incentives Audit

The Kansas House Tax Committee spent time last week reviewing an October Legislative Post Audit report on how other states inventory and evaluate tax credits and exemptions. Kansas reportedly gives-up about $6 billion each year in tax credits and exemptions. The Legislative Post Audit report showed Kansas lacks formal policies for evaluating its major tax incentive programs, such as HPIP and PEAK, and that surrounding states generally do a better job of tracking the results of similar programs. Many observers, including economic developers, were argue strenuously that such credits are indispensable tools for attracting and growing jobs in Kansas.  The audit did not necessarily challenge that assertion. It just noted the state could be doing a better job of collecting data about the programs so policymakers could know for sure just how valuable the programs are. The House Tax Committee is likely to continue its exploration of all the state’s tax credits to understand which ones help business and drive growth and which ones might be outdated or ineffective.


Expensing for Small Business

The Senate Assessment and Taxation Committee will introduce a bill that restores the pre-2012 expensing of capital investments for small pass-through business entities. The bill, requested by the state chamber of commerce, would allow businesses to deduct their full investment in equipment in one year instead of over several years. This type of expensing was part of Governor Brownback’s original tax plan years ago but the subsequent exemption of pass-through income from taxes meant businesses had nothing to deduct their expenses against. Now that taxes are back, the one-year expensing should arguably come back, as well.


Medicaid Expansion

A leading House Democrat is preparing a bill to expand KanCare, the state’s Medicaid program. A Medicaid Expansion bill passed the House and Senate last year but was vetoed by Governor Brownback. The Topeka Chamber has long supported a common-sense response to federal healthcare laws, including expansion of Medicaid, to ensure the ongoing viability of health care providers who serve the uninsured and under-insured.