Wasn’t that a mighty storm?

Feb 8, 2019 by

One storm was on the Senate floor

Senate President, Susan Wagle

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.

read more

Of Taxes and Torpedoes

Feb 1, 2019 by

A Tale of Two Tax Committees

Senate President, Susan Wagle

If you’ve been reading our reports, you know that we are focused for the time being on the tax discussion in the House and Senate where the latter is grappling with Senate leadership’s desire to give away hundreds of millions of tax dollars before we figure out how to finally fund our schools, expand Medicaid, restore our highway department, and fix our damaged foster care system. It almost feels like the plan is to give away as much revenue as possible so it won’t be possible to do those things. Partisan politics where Senate leadership is willing to risk returning to Brownback-style policies appears to be the prevailing strategy to torpedo Governor Kelly’s budget.

The House is taking a different approach to dealing with the unintended consequences of President Trump’s tax policy- which has been derided by Republican leadership in the Kansas Senate but willingly supported by the six Kansas Republicans in the U.S. House and Senate when the bill came to them.

In the Senate, Senate President Susan Wagle (R-Wichita) has taken the matter into her own hands, stripping authority for tax issues from Tax Committee Chair Caryn Tyson (R-Parker) and forming her own committee with herself as chair, the Senate Select Committee on Federal Tax Implementation.

Wagle’s Committee held a hearing on SB 22, a bill to decouple the Kansas income tax from the federal income tax in order to allow individuals to continue itemizing and to assist corporations in not paying taxes on their overseas earnings.

In the days of discussion – first in Tyson’s Assessment and Taxation Committee and now in Wagle’s Senate Select Committee – the conferee time has been handed over to the Kansas Chamber of Commerce and the chamber has happily filled that time bringing in corporate tax accountants to wail about the unfairness of it all while making veiled threats about leaving the state if they don’t get what they want. Department of Revenue staff- whose jobs are to provide careful and reasoned analysis of these issues- sit in the committee room waiting patiently to be asked to what seems to be a party they’ve clearly not been invited to.

With about six minutes left in the meeting today, Wagle pushed the bill out of committee on a voice vote. It will now go to the full Senate for debate, probably next week.

Then there’s the House Committee on Taxation chaired by Steven Johnson (R-Assaria). In contrast to the Senate, Johnson has not brought a bill forward. Instead he is holding briefings by the Department of Revenue on how the various issues play out in reality. They spent one day on itemized deductions diving into how many Kansans actually did itemize before the change and what the impact is on those taxpayers who can no longer itemize. They even reviewed hypothetical scenarios to reveal the impact on middle class taxpayers.

They had another day to dive into the two corporate provisions – GILTI and Repatriation – to find out how these provisions work in the real world, again looking at how a typical corporate entity would be taxed with and without the changes sought by the Chamber.

The Chamber will have their time before the committee but not until a bill is scheduled for a hearing. The difference is that in the Senate, the Chamber has essentially been given the spotlight before the committee while the Department of Revenue waits silently in the wings.

It’s a rhetorical question, but we must ask; which chamber is interested in ramming a corporate wish list through the process and which is working deliberately and thoughtfully?

So back to cynical, partisan politics. There are some who believe that Wagle and her allies in the Senate want to ram as many revenue slashing bills through the Senate as they can simply to deny Governor Kelly the ability to responsibly deal with the State’s budgetary obligations – schools, highways, health care, and the crumbling foster care system. In that way, Wagle and her supporters can criticize the Governor for not solving those problems. It’s kind of like a similar strategy used against public schools. Defund them so they’ll struggle, label schools a failure and enact policies that benefit a select few while calling it all “reform.” The Kansas City Star has hypothesized that this is all about Senator Susan Wagle and her desire to run for the United States Senate now that Pat Roberts is retiring. The Star noted, “It’s a deeply cynical, hyper-partisan approach to tax policy.” To read the Star’s take, click here. We’ll have to wait and see how this plays out in the coming weeks.

Governor’s school finance bill to get a hearing next week- A CALL TO ACTION.

Senate Bill 44, Governor Kelly’s school finance bill that would enact the State Board of Education’s finance recommendation in response to the latest Supreme Court ruling in the Gannon lawsuit, will get a hearing in the Senate Select Committee on Education Finance next Wednesday.

The bill will provide for the inflationary funding increase called for in the Supreme Court ruling without making any other changes to the school finance formula. If adopted as is, most education advocates believe that it will finally result in a fully constitutional school funding system – the first such system in about a decade!

We hope that the Senate will approve the bill with no changes and do so quickly. With the deadlines set by the Supreme Court, the Legislature’s response should be done by March 1. That would allow time for the Attorney General to prepare for the April Court hearing.

We would urge you to contact Senators and let them know how important this issue is. Kansas school employees want to be assured that their schools will open on time for the 2019-20 school year. The time for games and posturing is over. Kansas is close to closing the book on the Gannon suit and ensuring our school finance system is constitutional.

Members of the Senate Select Committee on Education Finance are; Molly Baumgardner, Jim Denning, Anthony Hensley, Bud Estes, Dan Goddard, Dan Kerschen, Carolyn McGinn, Pat Pettey, and Eric Rucker. You can email them using firstname.lastname@senate.ks.gov. Ask them to support Senate Bill 44 without amendment.


read more

Windfall? Not Really. & Kansas Teacher of the Year Team Visits Legislators

Jan 29, 2019 by

Fiscal note on SB 22, tax cut bill, is out … and it’s a doozy!

The fiscal note for SB 22, the so-called “windfall” tax bill being pushed by Senate President Wagle (R-Wichita) is out and it’s big. Passage of SB 22 would strip about $400 million out of the state treasury in three years – $191 million in 2020 alone.

The issue is relatively simple to understand. When Congress, with the full support of all six conservative Republican members of the Kansas delegation, passed the Trump tax bill they simply ignored the fact that their huge tax break for the wealthy would result in a state tax hike for average Kansans. By raising the standard deduction in the federal tax code, they wiped out itemization for most middle-income taxpayers. And since the state and federal codes are “coupled,” that means that if you can’t itemize on your federal taxes, you can’t itemize on your state taxes. Thus state taxes for most middle-income earners went up.

The Department of Revenue released three hypothetical Kansas taxpayers (married filing jointly with 2 children and a federal adjusted gross income of $120,000; married filing jointly with no children and a federal AGI of $60,000; and married filing jointly with one child and a federal AGI of $60,000). In those three scenarios, the first taxpayer with the AGI of $120,000 saw an increase of $39 in state taxes due to the federal law while the other two saw an increase of $12. That state tax increase was not passed by the Kansas legislature but instead by Trump and the congressional Republicans.

Kansas Republicans are aghast and seek to immediately decouple from the federal tax code to prevent this increase. Wagle wants to do this so quickly that she formed a special committee in the Senate naming herself as chair to get it out of committee this week. Today the Kansas Chamber and some corporate tax advisers talked to the committee about provisions in the bill that would exempt corporations from paying state taxes on overseas earnings that are “repatriated” to the U.S.

KNEA is neutral on the policy – whether or not to adjust the Kansas tax code to deal with the unintended consequences of rushed tax changes by Congress is a decision the Legislature should debate. But we are not neutral on the impact. If a bill is passed that strips nearly $200 million out of the treasury in one year with more than $100 million per year lost in the following two years, how does the Legislature plan to pass a responsible budget that funds our schools and restores service cuts across agencies? And perhaps that is the point.

We all know what happens when tax policy is done in a rush! Trump and his supporters in the House and Senate in Congress rammed through their tax bill without having any idea of its impact and the harm it might do to middle income taxpayers. Sam Brownback and his allies rammed through a tax bill in 2012 that brought Kansas to the brink of collapse.

So here’s our plea. Stop the rush! Be deliberate; consider the consequences of each change; look for alternative ways to address the issue without decoupling. Try exercising a little restraint. SB 22 will strip too much money out of the Kansas treasury while we are still in recovery from the Brownback disaster.

Kansas Teacher of the Year Team 2019

KTOY Team 2019

As today was “Kansas Day,” it was a perfect time to celebrate all that makes our state great, including the dedicated professionals who work so hard to make sure our kids are safe, learning and growing in our public school classrooms. The 2019 Kansas Teacher of the Year team is recognized for its members’ outstanding contributions to their students, but also works to be a strong voice for educators during the year. Today, the team addressed a joint House and Senate Education Committee to bring both their optimism and concerns before our state representatives.

2019 Kansas Teacher of the Year, Whitney Morgan

The 2019 Kansas Teacher of the Year, Whitney Morgan shared some of what she believes would be beneficial for students including embracing diversity, targeted interventions, smaller class sizes and professional development. Whitney teaches English and English for speakers of other languages in Kansas City, Kansas.

Team member Sharon Kuchinski, a high school social studies teacher from Leavenworth, gave some very strong testimony over concerns for the difficulty our state is facing attracting new teachers to the profession, particularly when many teachers- but certainly early career educators- are faced with working multiple jobs in order to make ends meet.

We applaud the Kansas Teacher of the Year team for their efforts and advocacy. The team will continue to meet with various groups throughout the state, including Kansas NEA, to share their insights throughout the coming days and weeks. We look forward to hearing and learning from them.

read more

Of Taxes, College Credits, and the Sad Case of Foreign Languages

Jan 28, 2019 by

Tax decoupling on the Senate fast track

There’s been quite a tax kerfuffle in the Senate. Tax Committee chair Caryn Tyson (R-Parker) appeared to have fast tracked a tax giveaway bill – the so-called “windfall” bill. Her intent was to decouple part of the Kansas income tax code from the federal income tax code. 

When Congress adopted the Trump tax cuts for the wealthiest Americans, the changes they made to the code would prevent many middle income Americans from itemizing deductions and instead taking a higher standard deduction. But since the state code and federal code are “coupled,” itemization would go away for most Kansans but without the benefit of a higher Kansas standard deduction. Thus some Kansans would see their state income taxes go up. 

This additional tax revenue is being portrayed as a “windfall” to the state that the state never planned on getting. Republican conservatives are crying foul and demanding that the state give this revenue back to the taxpayers (and conveniently forgetting that the entire Kansas Republican Congressional Delegation gleefully voted for the Trump tax changes). 

So here’s where things get sticky. Tyson’s bill also included a number of other tax changes not related to the income tax changes. Then Tyson invited the Kansas Chamber to present their wishlist of tax changes to benefit corporations. These are tied up largely in two complex provisions dealing with overseas earnings – the GILTI provision and the Repatriation provision. 

It was clear that Tyson intended to put the corporate tax revisions into the bill which would further clutter up the package. 

And, that’s when Senate President Susan Wagle (R-Wichita) stepped in. Wagle apparently wanted to go in a slightly different direction and so she formed a new committee to deal specifically with federal tax implications naming herself as Chair – The Senate Select Committee on Federal Tax Implementation.

Speculation is that Wagle wants the decoupling for itemized deductions and the GILTI and Repatriation provisions requested by the Chamber but doesn’t want them jumbled up with a bunch of unrelated provisions. Some say Tyson disagreed, wanting to push her bigger tax bill. 

That’s where things sit right now. And Wagle’s Select Committee will be meeting Tuesday through Thursday this week to hear SB 22, the bill decoupling from the federal tax code. The plan is to have final action by the Committee on Thursday.

The Governor is opposed to the decoupling at this time, urging the Legislature to go slowly on tax issues. No one has yet been able to accurately determine the impact of the decoupling and Kelly is suggesting that until that can be done – possibly this summer – there should be no changes as those changes could have a significantly negative impact on the state budget.

Meanwhile, the House Tax Committee, instead of rushing into the abyss, are engaged in thoughtful discussions about the actual impact of the federal tax changes on Kansas taxpayers, whether or not there is an alternative to decoupling that would accomplish the same thing, and what the fiscal impact of each option might be.

More tax issues being discussed

The House Tax Committee moved on to discussing new options on the collection of internet sales taxes.

This discussion is the result of a recent US Supreme Court decision that changes the standard for collection of sales taxes on internet sales. In the past, under a decision called the “Quill Decision,” sales taxes on internet sales were required only if the the seller had a physical presence in the state. This new decision – the “Wayfair Decision” – overturns the physical requirement and says physical presence or economic presence counts.

States are adopting a minimum sales threshold under which an internet sales provider would be required to collect destination sales taxes. Most states have adopted $100,000 in sales as the threshold; some have an either/or situation – either $100,000 in sales or 200 sales transactions in the state. Also in this discussion is how to handle the sale of digital properties like Netflix, Hulu, iTunes, etc.

The Kansas legislature will likely take this matter up.

Concurrent enrollment discussion in K-12 Budget Committee

A discussion in a meeting of the House K-12 Budget Committee focused primarily on the issue of concurrent enrollment programs for Kansas high school students.  Dr. Blake Flanders, President and CEO of the Kansas Board of Regents, joined Kansas Commissioner of Education, Randy Watson to present a plan to grow the current program.  Both presenters extolled the virtues of attainable post-secondary programs and the impact those graduates have upon the Kansas job market, salary growth and overall growth of economic prosperity.  

By growing the concurrent enrollment program, along with other pathways to post-secondary opportunities, more students in all parts of Kansas can seek certificates, undergraduate and graduate degrees.  Under this program, teachers of concurrent enrollment courses would be employed and paid by the district while the post-secondary partner institution- typically a community college- would receive funding for tuition, books and supplies for each enrolled program student.  The tuition fee- paid through an allocation of state dollars to this program- would be approximately $275 per course.  

Both the committee chairperson, Representative Kristey Williams (R-Augusta) and Vice-Chair Representative Kyle Hoffman (R-Coldwater), had questions regarding the funding amounts, who would be paid (the district or the college) and why this program would- in effect- be akin to double paying for students.  The funding amount- per enrolled student- is the median of a range of tuition amounts from ongoing programs throughout the state.  Dr. Flanders indicated that it would be the institution that would receive the funds under this program but that local agreements with districts could push portions of those funds back to the district. 

Are foreign language studies disappearing?

Last week we were sitting the House K-12 Budget Committee listening to a discussion on school performance and the Kansas school accreditation system. At one point Chairperson Kristey Williams (R-Augusta) commented on the importance of foreign language instruction. As Kansas educators know the value of studying foreign languages, we were pleased and surprised to hear a representative mention a subject other than STEM subjects.

But today we came across an article in the Chronicle of Higher Education reporting that from 2013 to 2016, colleges in the United States lost 651 foreign language programs (among those were 118 Spanish programs, 129 in French, 86 in German, and 56 in Italian). By comparison, only one program was lost between 2009 and 2013.

Given the global world in which we operate and in which today’s young people will compete, we hope this is an anomaly and not a trend but expectations are that the decline will continue into 2020.

You can read the article in the Chronicle by clicking here.

read more

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.

read more