What’s coming up?

Feb 8, 2019 by Mark Desetti

The Reamortization of KPERS remains a hot topic

Many people are wondering and worrying about a proposal to reamortize KPERS and rightfully so. We know how important a secure retirement is to school employees and to all Kansans. KPERS benefits are spent by retirees over and over in our communities supporting local businesses and local economies. So we will do everything to protect your retirement. We are following KPERS issues in the Statehouse and working with our many partners – other labor organizations, state and municipal employees, and current KPERS retirees to make sure the right decisions are made.

But the first question is, “Why are we here?” Well, it’s a long story starting with the continued failure of many legislatures to meet their actuarial obligations to the system. The unfunded liability grew to a point that lawmakers really began to sit up and pay attention a few years prior to the election of Sam Brownback as governor. Legislators increased employer payments, issued bonds and worked with employee groups to restructure retirement plans without ending the defined benefit system.

Then along came Brownback in 2010 and the passage of his reckless tax overhaul in 2012. He and his allies passed tax cuts that put the state on the brink of collapse and drained the state treasury. There was no money for schools, highways, social services, and public safety. And funding for KPERS also suffered. In recent years, the legislature just stopped making payments, offering promises to pay it back but then not doing that.

Today, thanks to actions taken in 2017 to reverse the Brownback tax disaster, our state has been in recovery. Revenues are improving and the fiscal condition of the state is looking better. But Kansas is not yet out of the woods. We need time to finish the work started in 2017. Today we have a new governor and Laura Kelly’s priorities are much different from those of Brownback. She has pledged to fund our schools, repair our damaged foster care system, and secure health care for 150,000 uninsured Kansans through Medicaid expansion.

Governor Kelly proposed a budget that does those things without raising taxes because she believes big tax changes while in this recovery are not wise. In her budget, she proposed reamortization of KPERS in order to bring down the annual cost (much like refinancing your home loan) so that priorities can be met and the state can have an ending balance as a safety net. You can see Governor Kelly’s explanation of this by clicking here.

Everything that is happening now is mixed up with the budget and taxes. And right now there are forces in the Kansas Senate who appear to want to do everything they can to see that Governor Kelly’s priorities are torpedoed. That’s why this week, the Senate passed legislation that takes more than $300 million out of the state treasury before any other decisions are made. Senate Bill 9, sponsored by 18 conservative Republicans, would immediately put $115 million into KPERS. Senate Bill 22, Senate President Susan Wagle’s tax cut bill, will cost the treasury $191 million in mostly cuts for multi-national corporations.

Taking $306 million out of the treasury before deciding what is necessary for a responsible budget is irresponsible legislating! Let’s be clear, we would love to see KPERS repaid the money that was withheld to pay for Brownback’s failed tax policy. There was a plan in place to make those payments. If the state had plenty of money and could repay KPERS in full while also funding our schools AND our highways, AND our public safety programs, AND the foster care system, then making the full payment immediately would be the right thing to do. As the situation is now, passage of SB 9 only makes fixing the Brownback damage more difficult. And that is compounded if SB 22 should pass.

We would be remiss if we did not point out that there is some serious hypocrisy here. The same legislators who have sought to do away with our defined benefit pension, who made the decisions year after year to not meet the actuarial rate in employer payments, and who voted to strip the KPERS payments out of the budget entirely, now seem to have had an epiphany. Frankly, if one really cared about school and state employees, it would be reflected in one’s votes every day of every year and not just when it might help discredit a governor you don’t support.

We at KNEA believe in and support KPERS. We have been unwavering in our advocacy for our teachers, our education support personnel, our school administrators, and our friends working in state and municipal jobs. We will continue to fight this fight and work with our friends to protect the system.

We want to assure you, as KPERS has, that no benefits are in danger if reamortization passes. Yes, it will take longer to pay off the unfunded actuarial liability but you can rest assured that your benefits are safe.

Time for school finance to move?

Governor Kelly’s school finance plan, Senate Bill 44, is in the middle of a hearing in the Senate Select Committee on Education Finance chaired by Sen. Molly Baumgardner, R-Louisburg. The hearing began on Wednesday with many superintendents, Schools for Fair Funding, and the Mainstream Coalition all testifying in favor of the bill.

The hearing will continue on Tuesday of next week with KNEA, KASB, the PTA, and Game On For Kansas Schools – all testifying in favor. The only opponent, also testifying on Tuesday, will be the Kansas Policy Institute.

The most notable testimony came from Schools for Fair Funding (SFFF), representing the Gannon lawsuit districts.

SFFF told the committee that should the legislature pass SB 44 without amendment and with no changes to the school finance formula, they would stipulate to the Kansas Supreme Court that the solution met the funding needs of schools providing the Court retained jurisdiction in order to ensure that future legislatures do not renege on the promises made in this legislation.

Senate Majority Leader Jim Denning, R-Overland Park, pressed SFFF repeatedly on this issue to make it clear that the bill would be acceptable despite the fact that the inflation factor used in the bill – and recommended by the Kansas State Board of Education – is somewhat lower than the actual Consumer Price Index, or CPI.

Here is what is most important to understand: If SB 44 were to pass the legislature WITHOUT AMENDMENT, if no other changes were made to the school finance formula, and if the Court retains jurisdiction (to make sure promises are not broken in the out years), then the plaintiffs and the state would agree to end the litigation.

In other words, the legislature has the opportunity right now to “end the cycle of litigation.”

Time is of the essence here. The Court hearing is scheduled for this April 15. Both sides must be ready for that day. Senate Minority Leader Anthony Hensley, D-Topeka, asked Kansas Attorney General Derek Schmidt to weigh in on when he needed the legislature to act in order to be ready.

Schmidt said, “Assuming we can timely obtain from the legislature all necessary documents and explanations regarding legislative history, it would seem to me we could properly prepare the State’s briefing if the new enactment becomes law by March 15, 2019.”

Schmidt went on to say, “On the other hand, if the legislature were to decided to make other material changes in school finance law, or if the legislature and governor were to disagree about the appropriate enactment this year, then I would respectfully request enactment into law by March 1, 2019.”

You can read AG Schmidt’s letter to Senator Hensley by clicking here.

What can you do? This is the time to start contacting your state senators and urging them to support SB 44 without amendment and to move this process forward. Start with email messages to the members of the Senate Select Committee on Education Finance – Molly Baumgardner, Jim Denning, Anthony Hensley, Bud Estes, Dan Goddard, Dan Kerschen, Carolyn McGinn, Pat Pettey, and Eric Rucker. You can email them using the format firstname.lastname@senate.ks.gov. After you email those committee members, email your local senator using the same email format.

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Wasn’t that a mighty storm?

Feb 8, 2019 by Mark Desetti

One storm was on the Senate floor

The tax debate storm hit the Senate floor Wednesday night as the ice was moving in on most of the rest of Kansas. And frankly, some of the exchanges in the debate were a tad icy as well!

Senate President and self-appointed chair of the Senate Select Committee on Federal Tax Code Implementation Susan Wagle (R-Wichita) brought her pet project, Senate Bill 22, to the floor for debate. While Wagle has tried to portray her bill as real help for working Kansans, it is in reality a large corporate tax giveaway with little benefit for individual tax filers and no relief to working families.

We’ve been reporting on this bill as it was discussed in Committee but just to review, here are the facts in a nutshell:

• It decouples the Kansas income tax code from the federal income tax code,
• It stops retroactively the collection of Kansas income taxes on overseas earnings by multi-national corporations through the repatriation of overseas earnings,
• It protects multi-national corporations from paying additional Kansas income taxes under the GILTI tax provisions,
• It allows individual tax filers who will not longer itemize on their federal taxes due to the increase in the standard deduction to continue to itemize on their Kansas income tax forms

The bill has an estimated fiscal note of $192 million with $137 million of the benefit going to the multi-national corporations. $54 million would go to Kansas individual taxpayers who cannot itemize on federal taxes but would benefit by doing so on state taxes.

In the debate Sen. Wagle noted that 9% of Kansas tax filers can continue to itemize under the federal law and see a tax decrease under the Trump tax cut. Those 9%, the wealthiest Kansans, get no benefit from SB 22.

Another 9% of Kansans will see a tax benefit by no longer itemizing on their federal taxes and will see a modest tax increase in Kansas as a result. This 9% of Kansas tax filers will get a small benefit from SB 22.

The other 82% of Kansas tax filers – those working families and low income workers – get no benefit at all. Talking about this bill as tax relief for working Kansans is just not right. It really only benefits the wealthiest individuals and multi-national corporations.

What the bill will do, especially coupled with Senate Bill 9, is to drain much of the state treasury before a budget can be adopted making it much harder for Governor Kelly to address school finance, the failing foster care system, highway maintenance, health care, and the mess in our prison system. This bill is essentially a cynical political attempt to hamstring the Governor.

The only amendment considered last night was offered by Senator Dennis Pyle (R-Hiawatha). The Pyle amendment would have exempted social security income from state income taxes. Pyle asserted that retirees are fleeing Kansas seeking homes in those states that don’t tax social security. Pyle also admitted he had no research or data to prove his point. His amendment received only five votes. Pyle had asked for a roll call vote but failed to get five senators to support him on that.

Senator Tom Holland (D-Baldwin City) moved to send the bill back to committee with the intent of splitting the corporate and individual tax provisions and considering alternatives to simply decoupling from the federal code. His motion failed on a vote of 12 – 28 with Senator Mary Jo Taylor (R-Stafford) joining the Democrats in supporting the motion.

In the end the bill was advanced to final action on a voice vote.

Overnight storm closes almost everything…but not the Statehouse

While most of Northeast Kansas was closed due to a nasty ice storm and a dusting of snow on top of slick roads, Wagle announced that the Legislature would open so she could get her bill voted on final action.

In explanations of vote, Senator Bollier (D-Mission Hills) noted that the bill was fiscally irresponsible, that the fiscal note was speculative, and that the budget should be settled before considering tax changes. Senator Hensley said, “Kansans made it clear they don’t want more irresponsible policy when they elected Laura Kelly.”

“For the cost of this bill,” said Hensley, “the food sales tax could be cut in half.”

Republican Senator Mary Jo Taylor voted NO and suggested that the Legislature should first address their responsibilities before considering this bill.

In the end the bill was adopted on final action on a vote of 26 to 14. Senators John Doll (I-Garden City), John Skubal (R-Overland Park), and Mary Jo Taylor (R-Stafford) joined all 11 Democrats in voting no. The bill must now go through hearings and votes in the House before it can go to the Governor for signature or veto.

Governor’s school finance plan hearings in Senate Ed Finance Committee

Senate Bill 44 is currently in the Senate Select Committee on Education Finance. The hearing on the bill began yesterday and will continue on Tuesday next week.

This week many superintendents from around Kansas testified in favor of the bill, as one might expect. But the most notable testimony came from Schools for Fair Funding (SFFF), representing the Gannon lawsuit districts.

SFFF told the committee that should the Legislature pass SB 44 without amendment and with no changes to the school finance formula, they would stipulate to the Court that the solution met the funding needs of schools providing the Court retained jurisdiction in order to ensure that future Legislatures do not renege on the promises made in this legislation.

Senator Denning (R-Overland Park) pressed SFFF repeatedly on this issue to make it clear that the bill would be acceptable despite the fact that the inflation factor used in the bill – and recommended by the Kansas State Board of Education – is somewhat lower than the actual CPI.

We will see if this information has an impact. If adopted as is with no changes to the formula, SB 44 could actually end the Gannon school finance lawsuit.

This hearing will continue next week when KASB, KNEA, Game on for Kansas Schools, and the PTA will testify in favor. The only opponent will be the Kansas Policy Institute who consistently asserts that schools have more than enough funding right now and are failing.

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