House Saves the Day; Kills Corporate Tax Giveaway & Tax Cuts for the Rich

May 7, 2018 by

Later this week, we will provide a more comprehensive review of the 2018 Legislative Session but for today, we talk about the taxing events of Thursday and Friday, May 3 and 4.

Two highly controversial bills dominated the discussion for these two days. One was Sub for SB 284, a bill enacting the so-called “Adoption Protection Act.” (We will report on this bill later.) The other was Sub for HB 2228, the Senate’s large corporate tax giveaway and tax cut for the wealthiest Kansans.

Both were contained in Conference Committee Reports (CCR). So you understand the order of business, a conference committee report on a Senate bill goes first to the House for action while a conference committee report on a House bill goes first to the Senate. Conference committee reports cannot be amended. There is a motion to adopt the CCR which is debated and then voted on. Both chambers must adopt the report for it to go to the Governor for his signature or veto.

Because of the controversial nature of both reports and the fact that they were running almost simultaneously, it meant the atmosphere under the dome was tense.

The tax bill (Sub for HB 2228) was really the brainchild of Senate leadership, in particular, Sen. Caryn Tyson (R-Parker). The original fiscal note on the bill as it came out of the Senate and before it went to conference was a more than $500 million loss in revenue to the state. It essentially offset all of the spending increase in K-12 education.

Fiscal notes on the measure as it was debated and amended in conference changed constantly because there was no actual way to calculate the impact of changes to Kansas income taxes before the full impact of federal income tax changes were known.

The two biggest threats to the state budget included in HB 2228 were directly tied to the federal tax act passed last December.

One of these was a provision to decouple the state income tax from the federal code so that taxpayers who could no longer itemize on the federal form could still itemize on the state form. The federal code has changed so much that many filers will no longer be able to itemize. While some taxpayers may find a federal benefit (although most will not), the loss of itemization at the state level means higher revenue collections at the state level. But because those who itemize are generally the wealthiest taxpayers (Kansas estimates only about 20% of taxpayers itemize), this revenue would come from the wealthiest Kansans.

The second big item was the “repatriation” of overseas corporate earnings. Among the federal tax changes was a provision to bring the overseas earnings of multi-national corporations back to the United States for tax purposes. These corporations have long been able to essentially shelter much of their earnings overseas to avoid U.S. taxation. These earnings are now being “repatriated” – brought back to the U.S. – and taxed. Tyson wanted to block taxation of these repatriated earnings in Kansas, a measure that is essentially a big corporate tax giveaway.

So – big item number 1 cuts taxes on the wealthiest Kansans while big item number 2 allows corporations to avoid taxation in Kansas. All while providing no relief to the 80% or more of working Kansans.

On Thursday, May 3, the Senate approved the measure on the slimmest of margins 21 to 19, sending it on to the House for a vote on Friday. See how your Senator voted by clicking here.

Now our attention turned to the House where it was expected the vote would be close. As we watched discussions and followed caucus discussions, it was often unclear as to which way the vote would go.

One thing we knew for certain was that if this bill were to pass, the chances that our schools would close in August would be much greater. As it is, many people think the school funding bill passed is likely not to meet adequacy but a tax cut bill that puts the budget underwater in the second year of the school finance plan is almost certain to result in rejection of the plan. Remember the Court was clear in their earlier ruling that the state needed to demonstrate the money would be available to fulfill the promise of a phased-in funding plan.

Debate on the bill in the House began mid-afternoon on Friday. Rep. Steven Johnson (R-Assaria), as chair of the House tax committee, made the motion to adopt the report. Rep. Tom Sawyer (D-Wichita), the ranking Democrat on the committee made the arguments against the bill. Nearly every member who went to the well to speak on the bill was a conservative who supported it. They tried to persuade others that they were giving the people back what was theirs and helping the middle class. Unfortunately, the bill only provided benefits for corporations and the wealthiest Kansans, leaving most of us holding the bag for funding critical state services including schools.

With seven members out as excused absences, the vote came in at 59 to 59. It is important to know that a final action vote such as this requires 63 votes to pass and on a tie vote the bill fails. Conservatives put on a call of the House under which the doors are locked and Legislators are kept in their seats until the call is lifted. The time is then used to pressure anyone that proponents believe to be “weak” in an attempt to get the win. Often the Highway Patrol is sent out to bring absent Legislators back. A call can go on for hours.

In this case, because they were working on Sine Die, the last day, they could not go past midnight. So if people held their positions until midnight the bill would fail.

There were a number of calls to raise the call of the House but if 10 members object, it is not lifted and so the call went on and on. But no votes changed. It held at 59 to 59 until a call to raise the call was successful. Speaker Ryckman (R-Olathe) asked if there were any explanations of vote. There were none. He asked if there were any changes of vote. There were none. He closed the roll, tallied the vote, and declared the bill dead. You can see how your Representative voted by clicking here. 

Another tax conference committee report dealing with motor vehicle rebates was quickly passed and the House adjourned Sine Die.

Thanks to the failure of HB 2228, there is a greater chance that schools will be open come August and that a special session is less likely. Understand that both are still possible! We won’t know until the Court finishes its review of school finance plan but had HB 2228 passed,  a special session and closing of schools would’ve been almost assured.

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Budget Negotiations Progressing; Taxes? Not So Much

May 1, 2018 by

While budget negotiations between the House and Senate are definitely making some progress, the same cannot be said about the tax negotiations which took an interesting turn late this afternoon.

In earlier tax conference committee meetings, Senate Chair Caryn Tyson (R-Louisburg) made it clear that she wanted one big mega tax cut bill that included everything the Senate voted for in Sub for HB 2228 (the massive reduction of over $500 million) and a whole bunch of small tax cuts rolled in. We suppose that as a candidate for Congress she wants to demonstrate her ability to crush revenue streams just like real members of Congress!

The House, while certainly not rejecting the idea of tax cuts, has taken a more cautious approach and appears reluctant to adopt one massive conference committee report, suggesting that some ideas should stand separately.

The conference committee was scheduled to return to meet at 5:00 pm but the House was still on the floor. It was right about 5:00 when House Tax Chairman Steven Johnson (R-Assaria) made a motion to concur in HB 2492, a bill in the conference committee that contains several tax changes that Tyson wanted in the big bill (a sales tax exemption on the purchase of gold bullion, a sales tax exemption on certain hospice providers, and permission for four counties to hold elections to raise local property taxes for local projects. If the House concurred, then these items would no longer be available to be put in a bigger conference committee report; if the House did not concur, the bill would stay in the conference committee but the House would have an official position against these items. The House voted 19 to 102 not to concur.

Senators were listening in downstairs in the committee room and reports have it that Tyson was not happy. She called the meeting off and left the room. Johnson and the other conference committee members showed up and, after much discussion and calls to Tyson agreed to meet again at 9:00 tonight.

We will report on tonight’s ongoing discussions tomorrow.

Schwab Says Good-bye

House Speaker Pro-Tem Scott Schwab (R-Olathe) took a moment of personal privilege this afternoon to announce that today would be his last day in the House. He is leaving tomorrow to accompany his child’s class on a trip to Washington, DC and as a candidate for Secretary of State is assured he will not be in the House in 2019 win or lose.

Schwab has twice served in the House with his two terms of service separated by two years after losing a bid for Congress. He was briefly replaced by former Rep. Ben Hodge (R) who earned a reputation for uncooperativeness with most people under the dome. Schwab has always been a gentleman even to those with whom he disagrees. We wish him well whatever he does next.

 

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Quiet Day One of Wrap-up Session

Apr 26, 2018 by

Day one of the 2018 legislative wrap-up session was a quiet one. A number of conference committee reports were adopted and some new bills were introduced. The House was done shortly after noon today and the Senate later in the afternoon. Neither chamber planned to work into the night as this is the day of annual Legislative Shrimp Peel, an event to raise money for Kansas Special Olympics.

School Finance Measures

Of the bills introduced in the House, several were addressing the error in SB 423, the school finance bill. We don’t have the numbers yet and they won’t be available online until later but here’s what we understand about three of them:

HB 2796 – This would repeal the mandatory LOB provision that caused the error, restore other LOB provisions that had been changed, and adjust BASE aid accordingly.

HB 2797 – This would somehow amend the mandatory LOB provision so that the lost $80 million would be restored but we believe would keep the mandatory 15% LOB levy.

HB 2798 – This would strike provisions requiring school districts to adopt a minimum local option budget and transfer funds from the supplemental general fund to certain categorical funds; restore certain provisions relating to local option budgets and adjust the BASE aid accordingly.

There was another bill read in – probably HB 2799 – that would do what HB 2798 does and increase BASE aid by adjusting how the cost of living index was applied. It would also increase special education aid to the statutory 92% reimbursement and repeal a cap on bond and interest payments.

There is also a bill in the Senate (we do not have a number yet) that we understand is the same as HB 2796.

We will be keeping an eye on these bills as the session continues.

The KPERS Repayment

Yesterday we reported on a Governor’s Budget Amendment (GBA) that would prepay $82 million in money owed to KPERS. KNEA supported the GBA. The House Appropriations Committee not only supported it, they augmented it by increasing the payment to $192 million before passing their budget bill out of committee.

In response to good revenue projections, the budget committees now have the ability to not just afford the school finance costs in SB 423 but to do good work in other areas as well. These revenue projections are why there is a move to increase the funding in the school finance plan which would, in turn, raise the chances of the plan being constitutionally adequate thus keeping our schools open and ending the need for a special session.

But after adding the increased spending to the budget bill, the committee adopted an amendment by Rep. Brenda Landwehr (R-Wichita) that would lapse all the new spending if the Supreme Court did not accept the school finance plan. House Minority Leader Jim Ward (D-Wichita) said the Landwehr amendment was cruel in that it “dangles money” in front of constituents only to pull it back based on the Court ruling. 

The Landwehr amendment was adopted after an 11 to 11 tie vote with Committee Chair Troy Waymaster (R-Bunker Hill) breaking the tie with his YES vote.

In other words, don’t count on the KPERS restoration just yet.

The House will debate the budget bill tomorrow.

House Doesn’t Take the Senate’s Massive Tax Cut

The House did take action today on Sub for HB 2228, the Brownbackian tax cut bill passed by the Senate on April 7. Because the Senate put the plan in a House bill, the House could not amend it, only vote to concur or non-concur in the changes.

Tax Committee Chairman Steven Johnson (R-Assaria) made a motion to non-concur in the Senate changes and send the bill to a conference committee. That motion was passed on a voice vote. What this action means is the chances of the House adopting the Senate tax cuts is remote but what tax cut bill might emerge from conference is anyone’s guess.

KNEA continues to believe that Kansas would be best served if legislators would resist the urge to cut taxes while we are only 10 months into recovery from the disastrous Brownback tax experiment.

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Are We Ready for Tomorrow?

Apr 25, 2018 by

The Legislature is set to return on Thursday, April 26 and at the top of everyone’s list of questions is “What about the school finance error?”

Maybe not everyone’s, but it’s on the top of our list!

We’re working on rumors and some good intelligence gathering to try and figure out how things will go down come Thursday.

First, we know there is a planned fix for the error which is tied to Rep. Clay Aurand’s (R-Belleville) effort to mandate a certain level of LOB effort and label it as part of BASE aid. The error can be fixed simply by repealing that provision and we are hopeful that will be the first order of business.

Of course, in the meantime, the state has received more good news about revenue collections and that has spurred a lot of talk about what to do with this “extra” money.

Rumor has it that the some in the House will again try to add to the school finance bill perhaps by pursuing either an amendment offered earlier by Ed Trimmer (D-Winfield) to change how the CPI was calculated in determining  a funding level or one by Jeff Pittman (D-Leavenworth) that would boost the reimbursement of special education funding to the statutory 92%. Both amendments were considered in floor debate on SB 423 earlier and were not adopted, having received only 41 and 43 votes respectively.

If SB 423 is amended to fix the LOB issue and restore the $80 million, we believe there is a chance that the Court will still believe the bill falls short of constitutional adequacy either for the overall increase or for the five-year phase in. Such a Court decision could result in a special legislative session this summer. There is also a chance the Court could call this bill a “good faith effort” and give the Legislature another year to augment the future-years in the plan. We’ll just have to wait and see.

If either the Trimmer or Pittman amendments were to be added, it increases the chances that the Court will approve the plan but it may also create a greater challenge getting the bill through the Senate – we are confident Senate President Wagle (R-Wichita) and Majority Leader Denning (R-Overland Park) will oppose such increases. We just can’t predict what might happen to the 21 votes in the Senate if the bill gets costlier.

KNEA supports the Trimmer and Pittman amendments because both align with our Legislative Agenda and priorities. But we also believe that, should they be offered and fail, that is not a reason to vote NO on the $80 million fix. To allow SB 423 with the error to stand as the proposed solution to Gannon would be irresponsible, to say the least. And it would guarantee a negative reception in the Court, a special summer Legislative Session, and the possibility that our schools will be closed come August.

Now throw into this the Senate’s massive, “Brownbackian” tax cut bill, HB 2228. This bill, which now goes to the House, gives away more than $500 million in new tax cuts and tax adjustments. Coincidentally, the new school finance bill with the fix costs more than $500 million. Passage of HB 2228 cancels out the revenue needed for SB 423!

The Court has been very clear that they want a school finance plan that has the money in it. They have essentially said, “show us the money.” To pass a $500 million finance plan concurrent with a $500 million tax cut would be a disaster. Remember that in the early stages of Gannon, the State argued that there was no revenue for increased school funding and the Court responded that the money was there but the Legislature gave it away in the 2012 Brownback tax cuts. Deja Vu all over again!

Our hopes for the next nine days?

Fix the mistake. Repeal the Aurand LOB amendment. That will restore the bill to the level of funding that was intended on April 7 and take care of new equity challenges.

If the votes are there to increase the funding, do so. We support full funding of special education – we always have and always will. If such amendments are not adopted, pass the underlying bill that fixes the error. Do not use a desire to do more as an excuse to not fix the underlying problem.

Resist the temptation to cut taxes again. Kansas is still in recovery from the Brownback disaster. Things are looking good but this is not the time to cut taxes. We still have to meet school funding adequacy and we also need to address the mess in our foster care system, the challenges faced in public safety, the restoration of funds taken from the highway program and KPERS, and many other vital services. Tax cuts can wait. Remember that voters in 2016 sent many new legislators to Topeka specifically to restore our revenue system. It’s only been 10 months since that happened.

Good Revenue News Means We Can Have Necessary Things Again

We, like all Kansans, are happy to see continuing good news about revenue collections. We’ve repeatedly exceeded estimates thanks to the work of a bipartisan group willing to vote to repeal Brownback’s income tax changes and then vote to override his veto of their action. It looks like the state is on a path to stability once again. We’re not out of the woods but, as Sam would have said, “The sun is shining in Kansas.”

The revenue news means different things to different legislators. Some, as we noted earlier, want to go back to handing out tax cuts as if we had already satisfied the Court school finance ruling, restored the highway plan, paid KPERS back, found the 70 missing children in DCF, and so much more.

In truth, the news means that while we can have some necessary things, we still have a lot to do to get back to our beautiful Kansas.

For the first time in a long time, the legislature is looking at budget profiles with ending balances above zero. In fact today the budget committees are looking at reports that show the state meeting the required 7.5% ending balance. HB 2228, the tax cut bill would wipe that out of course but in the meantime, they can look at other things to fix.

Governor Colyer has submitted a Governor’s Budget Amendment (GBA) that would take funds above the 7.5% ending balance and make an early payment to KPERS. The Legislature is supposed to be making back payments to KPERS by 2020 and this GBA would bring a portion of that payment up now. KNEA supports this GBA. It is critical that KPERS be paid back and the sooner, the better.

This one opportunity and action should be enough to convince responsible lawmakers to step back from the temptation to return immediately to the tax policy decisions that led Kansas to the brink of disaster. We don’t need another radical tax cut – that’s how the Legislature created the problems we are facing today. Now that things are turning around, we hope the Legislature will focus on restoration of services and programs that have made Kansas a great place to live, work, and raise a family.

Join with Our Partners and Urge Your Legislators to Reject Irresponsible Tax Cuts

KNEA is working with other organizations to make sure that our state has ample time to recover from the Brownback experiment before considering any reductions in taxes. As they return to Topeka, it’s important for them to hear that voters want them to act responsibly to ensure our economic and budget recovery. Please take the time to email your Legislators.

Click here to send a message to your Legislators.

 

 

 

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Still a Lot to be Concerned About!

Apr 19, 2018 by

The School Finance Mistake

There’s been lots of talk about the school finance bill (SB 423) error and what to do about it. Governor Colyer signed SB 423 into law and at the same time urged the Legislature to waste no time in fixing the error so that the bill matches what everyone thought they were voting on back on April 7.

The $80 million error is the result of an amendment by Rep. Clay Aurand (R-Belleville). Aurand has been pushing amendments to require a certain level of LOB authority in an effort to “get credit” for the state for more funding than the state was actually providing. Essentially, he wants the Court to believe that, since LOB levies are not being used for enrichment as per the original intent, those levies should be credited as state aid. Of course, the reason the LOB is not being used for enrichment is because the state has not even kept pace with inflation in what is provided to schools.

To get this “credit,” Aurand has proposed amendments to mandate a certain level of LOB authority. He has tried various levels from 30% down and when he finally put the level at 15%, he got what he wanted. SB 423 contains a provision mandating that every school district levy a 15% LOB. Aurand has been pressing this issue since Montoy and his fellow legislators finally agreed when he put the mandate at a level that all school districts were now meeting anyway.

But what his amendment did was make that 15% levy part of the “new funding” in SB 423, lowering the actual amount of new money by $80 million. Without that new money, the Court is highly unlikely to approve SB 423 – as it is, they may not approve it.

When the Legislature returns on April 26, the first order of business ought to be fixing SB 423. One way to do that is to strip out the Aurand amendment. We know that some will be trying to do that. We have also heard that with the bill opened up again, some legislators may try to do all kinds of mischief. Remember that the bill passed with the smallest possible majorities. While most legislators speaking on the issue have expressed a desire to simply fix the error and move on, there are others who have openly called this an opportunity to change the funding entirely.

Tell your legislators to fix SB 423 so that it matches what was intended on April 7.

Giving Away the Money

Then there is Sub for HB 2228, a disaster of “Brownbackian” proportions.

One would think after the disastrous Brownback tax experiment of 2012 and the struggle to reverse it in 2017, legislators would have little appetite to once again damage the state’s revenue stream. But one would think that only if one had never met the Kansas Senate.

The 500 or so KNEA members gathered outside the Senate chamber on the evening of April 7 had the pleasure of listening to a long and complicated tax debate as the Senate worked HB 2228. The bill is a mad hodge-podge of tax changes, some worthy and some disastrous but the best words to describe it are “experiment” and “uncertainty.”

The bill is expected to cost the state treasury a half-billion dollars over the next five years and, coincidentally, the new school finance bill will provide a half-billion dollars to schools over the next five years! It was almost as if the Senate was looking for a way to justify voting NO on SB 423!

Less than one year after the Kansas Legislature ended the disastrous Brownback tax experiment, why would they pass a new tax plan riddled with uncertainties?

Fortunately, it is not passed yet! The House will have a chance to end this new disaster when they return on April 26. They will not be able to amend HB 2228, only to vote to concur or non-concur in the Senate changes to this House bill.

The best thing the House could do is to kill Sub for HB 2228. There is no good reason to jeopardize the state’s recovery from the Brownback experiment. Instead of unaffordable tax cuts, Kansas needs to invest in education, healthcare, infrastructure, and communities.

Tell your Representative to reject Sub for HB 2228.

Speaking of Giving Away Revenue…

Secretary of State Kris Kobach, as a candidate in the Republican primary for Governor, held a news conference in Wichita where he announced that, if elected, he will work hard to restore the failed Brownback Tax experiment. But he will do it differently. He will start by slashing budgets and then restoring the tax experiment. He also promised to veto any tax increases and sign a pledge never to raise taxes.

We’d like to hear his ideas for restoring the highway plan, paying back KPERS, funding our public schools, and making higher education affordable.

Kobach has lots of competition in the Republican nomination race including Governor Jeff Colyer, Insurance Commissioner Ken Selzer, and former State Senator Jim Barnett. The most prominent candidates in the Democratic Primary are State Senator Laura Kelly, House Minority Leader Jim Ward, former Wichita Mayor Carl Brewer, and former Secretary of Agriculture Josh Svaty. We look forward to hearing what all of the other candidates have to say about tax policy and state revenues.

Read about Kobach’s news conference by clicking here. 

A Constitutional Amendment Still Looms

We must oppose any attempt to change the state constitution. Lawmakers should work together to fully fund all of our state’s priorities, including education. Eliminating judicial oversight of the education weakens us all.

The position the state is in today was not created by the schools or the Courts. It was created by past Legislatures who avoided their responsibility to care for our state and the services we share as common priorities. Education is certainly one of those priorities but so are the social service safety net, public safety, good roads and highways, and health care.

We should never say that Kansas can’t have both good schools and good highways, good schools and safe communities. This is not a zero sum game in which everyone is fighting everyone else for a piece of a limited pie. We can make the pie bigger. We can apply our state sales tax to online retailers (HB 2756). We can increase tobacco taxes (HB 2231, SB 376). We can modernize our tax code. In truth, there is much that can be done if we have the will.

Changing the constitution is a distraction, not a solution.

Urge your legislators to vote NO on constitutional amendments.

 

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