Taxes, Cuts, and Revenue

Feb 8, 2017 by

Post Highlights

  • Senate unveils two-pronged strategy to restore a portion of state revenue.
  • Tax bill SB 147 does not solve shortfall and fails to address long-term problems.
  • SB 27 is a bill to cut funding to K-12 and Regents institutions to grab another chunk of revenue to fill the Governor’s revenue hole.
  • Full senate to convene on Thursday to debate both bills.
  • Rise Up Kansas plan gets committee hearing today.
  • KNEA joined 13 proponents from various organizations to support the bill.
  • 5 groups opposed the bill including Americans for Prosperity, Kansas Policy Institute and Kansas Chamber of Commerce among others.

 

The Senate has crafted a two-pronged plan, approved by Senate President Susan Wagle, that includes a tax bill which seeks to increase revenue (SB 147) and a bill which cuts funding to K-12 education and higher ed Regents institutions (SB 27).

The tax bill (SB 147) would raise approximately $280 million in new revenue. Unfortunately, the Brownback-created revenue hole is so deep, this plan is far short of what is needed to reverse the tax cuts of 2012 and 2013. Additionally, SB 147 is not a comprehensive, long-term solution.

The funding-cut bill would reduce spending in FY 2017 by $154 million. Most of the reduction would come after taking $128 million from K-12 education with another $23 million from Regents institutions. Overall, this plan cuts K-12 education by 5%, higher education by 3%, and the Schools for the Deaf and Blind by 1%.

The leadership of the Senate plans to convene the full Senate at 8:00 am on Thursday and work both bills.

We oppose the tax bill because it does not fully address the disaster brought on by the Brownback cuts. Passing this plan, even coupled with cuts, would require the legislature to address continuing shortfalls going forward with more tax increase votes likely. We support a comprehensive tax plan that restores funding such that vital state services can be adequately funded.

We also oppose the draconian cuts to K-12 education and higher education. When the Governor is challenging higher education institutions to provide a $15,000 undergraduate degree, it is counterproductive to cut state funding for our colleges and universities. As for the K-12 cuts, any cuts run counter to common sense as we await the decision on adequacy by the Kansas Supreme Court.

We are pleased to see that the House Taxation Committee appears to be on a more rational path, examining a proposal to raise enough money to restore fiscal stability to Kansas.

We urge the Senate to amend the tax bill to include a comprehensive solution or send SB147 back to Committee. While the tax bill is a move in the right direction, it falls far short of what is necessary to put Kansas back on sound financial footing. We urge the senate to vote no on SB 27, the “cuts bill.”

We believe that both chambers need to develop comprehensive tax policy bills that provide for the restoration of funding necessary for vital state services. We do not wish to be in a position to consider still more cuts and more tax increases indefinitely into the future.


Rise Up Plan Gets Hearing!

The Rise Up tax reform plan supported by KNEA, Kansas Action for Children (KAC), AFT/KOSE, the Kansas Contractors Association, the Kansas Center for Economic Growth (KCEG) and others got its day in Committee today.

The first proponent of the plan was Duane Goosen, the former budget director for Governors Graves, Sebelius, and Parkinson. Other proponents included KCEG Executive Director Heidi Holliday, Wesley McCain of Healthy Communities Wyandotte, KAC President Annie McKay, Christina Ostmeyer of Kansas Appleseed Center for Law & Justice, Scott Englemeyer of the Kansas Association of Community Action Programs, Rob Gilligan of KASB, Bob Totten of the Kansas Contractors Association, Reverend Sarah Oglesby-Dunegan of the Kansas Interfaith Alliance, KNEA’s Mark Desetti, AFT/KOSE Executive Director Rebecca Proctor, Ashley Jones-Wisner of Healthy Kids Kansas, and Scott Anderson of Hamm Companies (highway construction firm).

Opponents kicked off their arguments with Dave Trabert, anti-government zealot with the Kansas Policy Institute, Jeff Glendening with Americans for Prosperity, Tom Palace with Independent Petroleum Marketers, Tom Whitaker of Kansas Motorcarriers Association (opposing only motor fuel tax increase), Eric Stafford of Kansas Chamber of Commerce.

One neutral conferee from Kansas Association of Counties.

13 proponents to 5 opponents (where 1 opponent only opposes the motor fuel tax).

read more

Brownback’s Proposal and its Impact on KPERS *Spoiler Alert*: It’s not pretty.

Jan 23, 2017 by

Post Highlights

  • KPERS officials explain the “what ifs” of Brownback’s irresponsible budget.  Short version:  DISASTER for KPERS.
  • Brownback’s Budget proposal would reduce KPERS contributions by a total of $600 million, extend the time to pay down KPERS’ existing unfunded actuarial liability by 10 years, and add $6.5 billion to the State’s contributions over the long term to pay for it.
  • The full breakdown of the effects of Brownback’s proposal on KPERS is included in today’s Under the Dome.
  • Brownback’s plan mortgages the future to pay for the $350 million budget hole which remains through the end of this fiscal year.
  • There are solid and sensible solutions which take a comprehensive approach to dealing with the Governor’s failed experiment.
  • It is important that we all educate ourselves on the nature of the problem and the solutions so that we can encourage our legislators to take the bold steps necessary to achieve long-term results (those solutions are outlined in today’s under the dome and in more detail RIGHT HERE).
  • Governor recommends bills for health benefit consolidation.

KPERS explains the disaster in Brownback’s budget recommendation

The best explanation of the mess that would be created if Governor Brownback’s irresponsible budget recommendations on KPERS were to be enacted was presented to the House Pensions Committee today. We can’t explain it better so here is the document given to the committee this morning:

Governor’s Budget Proposal

$600 Million Shortfall Over Next 3 Years

With the start of the new legislative session, the Governor has announced his budget recommendation for Fiscal Year 17 (current revised), 18 and 19. In short, the proposal would reduce KPERS contributions by a total of $600 million, extend the time to pay down KPERS’ existing unfunded actuarial liability by 10 years, and add $6.5 billion to the State’s contributions over the long term to pay for it. What we don’t pay for now costs more later.

The Breakdown

  1. In FY 2016, the Sate delayed its fourth quarter payment for State/School employer contributions with a promise to pay it in FY2018 with interest.

Governor’s Recommendation: do not pay

  1. Governor’s Recommendation: freeze contributions in FY2017, 2018 and 2019 to the reduced amount paid in FY2016.
  2. Governor’s Recommendation: Pay off the existing unfunded actuarial liability over an additional 10 years.

The Result

  • 4 missing State quarterly payments and a total shortfall of $600 million
  • Eventual State/School employer contribution rate of 12% to 13% through FY 2045*
  • Long-term additional cost of $6.5 billion
  • Funded ration stays in the 60% “cautionary” range for an additional eight years or through 2030
  • Unfunded liability increases by about $1.3 billion, and it will take 20 years to get back to where we are now

*Doesn’t affect Local employer contribution rates.

Most Important

It’s most important to remember that this does not affect benefits for current retirees, or even for those thinking about retiring. KPERS has $17 billion in assets to pay benefits for many years. The funding shortfall is a long-term funding issue. However, underfunding continues to add to the unfunded liability and undermines KPERS’ long-term strength.

The State’s recent $1 billion pension obligation bond was a significant step in the right direction. But it’s consistent and full employer contributions over time that will make the most difference in having a sound and sustainable retirement system.

What’s Next?

We are at the beginning of the session. And budget legislation will wind its way through the usual process. The Governor’s proposal is a starting point for discussion.

We’ll keep you posted as things affecting KPERS develop in the months to come.

So far the Governor’s proposal is getting a cold reception under the dome. As we reported last week, the K-12 Education Budget Committee has recommended to the full Appropriations Committee that they reject the Governor’s KPERS proposal.

Mortgaging the Future; Cutting the Present; Solving the Problem

You might be wondering what the H-E-double hockey sticks is going on up here in Topeka. You know that there’s a big problem facing Kansas and that problem has been caused by the reckless and irresponsible tax policy proposed by Governor Sam Brownback and passed with great joy by his legislative allies.

That’s true. And here, after four years, Kansans learned the lessons of trickle down economics/tax policy and have thrown many of those responsible out of office, replacing them with new moderate Republicans and Democrats. So this should be the right time to put the brakes on the Brownback disaster and reverse course. It should be easy, you’re thinking.

Oh, that it were so simple!

Brownback issued his “balanced” budget and it’s a doozy! Essentially, Brownback achieves “balance” by mortgaging the future. He robs from the highway plan, he sells off our tobacco settlement money turning this long-term asset into long-term debt, and he steals from KPERS reversing all the hard work done by previous legislatures to stabilize and secure the system.

That’s one way to take care of the issue but let’s take a look at the deeper problem.

First, we are dealing wth three years. Problem one is to find about $350 million to fill the hole in the last six months of fiscal year 2017. The next problem is to solve the revenue decline so as to fix the holes in future budgets – notably fiscal years 2018 and 2019.

Then there is the problem of a Governor who continues to believe his plan is working despite all the evidence to the contrary.

Next, we have a legislature with an enormous number of freshmen, many of whom are just getting their feet on the ground and beginning to understand the process. Remember, we are only 10 days into the 2017 session!

And finally, we are faced with two separate and individual committees in each chamber tasked with the hard work – House Appropriations and Senate Ways and Means that craft budgets (spending) and House Taxation and Senate Assessment and Taxation that craft tax policy (revenue). Somehow, we need to get a revenue plan that corresponds with our budget or spending plan. Not so easily done!

So far – 10 days in – we have only ideas. Okay, we have one bill, HB 2023 that repeals the LLC tax exemption; but really, that’s it.

One idea is the Governor’s: Let’s just mortgage the future, increase the state’s debt, and click our heals while repeating “His tax plan will work, his tax plan will work.”

Another idea is to fix the revenue by reversing the Governor’s policies. The LLC repeal is part of that. The Rise Up plan is another way to do that.

And a third idea – if you don’t like mortgaging the future or reversing the tax cuts – is to cut spending. There is no bill out there proposing that we cut spending.

But things do need to be talked about. And some ideas can be floated to get people thinking about other ideas.

No legislator likes to cut spending or raise revenue (aka raise taxes). And right now there is little interest in mortgaging the future. In order to get people to think that raising revenue needs to be on the table, we have to get them to see what happens if we do not raise that revenue.

This is why leaders will ask what spending cuts look like. Legislators are always reluctant to raise taxes and you can be sure that those who support the Governor will all any reversal of his tax policies an increase. Understanding what the alternative looks like – ruined highways, compromised public safety, stripping seniors and those with disabilities of service, and even cutting public school funding – will help legislators understand the importance of passing a revenue plan that supports vital government functions.

So, it’s early. The new leaders in the House and Senate are not showing support for cutting services more. But the discussion is important. Unless all legislators understand the depth of the problem and the ramifications of taking one path or another, they won’t be ready to make the hard decisions that are yet to come.

Don’t panic yet. But do continue to communicate with your legislators. Let them know that you expect them to deal responsibly with the failed tax policy of Governor Brownback. Make sure all Kansans expect the legislature to reverse course on revenue and support quality state services across the board.

Health Benefit Consolidation, Procurement Bills Introduced

Two bills recommended by the Governor have been introduced. One would enact the consolidated health insurance plan for all school districts while the other would establish a centralized procurement program for school districts.

Both bills were introduced as committee bills in the House K-12 Budget Committee in order to have the discussion on these issues.

read more

New Bills: medicaid, bathrooms, guns on campus and of course… budget gimmickry

Jan 18, 2017 by

Post Highlights

  • Three bills introduced today: expansion of Medicaid under KanCare, prohibiting transgendered students from using bathrooms corresponding to their gender identity, and repeal of guns on campus law.
  • KNEA President sends letter to Governor and Legislature encouraging fairness and equality for vulnerable students including gay, lesbian, transgender, all faiths, and minority students.
  • Brownback’s budget gimmickry and schemes have failed.
  • A sensible and comprehensive plan exists to put Kansas on the road to recovery, it is called “Rise Up Kansas.”

New Bills of Note

Three bills were introduced this week that should get plenty of press time.

One bill would expand Medicaid under the KanCare program as allowed by the Affordable Care Act. Kansas is one of the states that has refused to expand Medicaid and so given up millions of dollars in federal funding. The purpose of the expansion is to provide health care access to low-income individuals who do not currently have health insurance yet whose income is too high to qualify for subsidies under the ACA. Governor Brownback has steadfastly refused to take advantage of Medicaid expansion effectively denying health care these Kansans. While his allies had strong majorities in both chambers they did not even allow a discussion of the issue. We’ll see how things have changed with the last election. KNEA believes that all Kansans should have access to affordable comprehensive health insurance and supports Medicaid expansion.

Rep. John Whitmer (R-Wichita) has announced plans to introduce yet again a ban to prohibit transgendered individuals from using the bathroom that corresponds to their gender identity. Whitmer would force transgendered individuals to use bathrooms according to their birth certificate. This bill would have an impact in school districts. USDs currently determine the policy on bathroom and locker room use under local control. The 2016 KNEA Representative Assembly took a strong position in opposition to this bill when it was introduced last year.

Read KNEA President’s Letter to Legislature by CLICKING HERE

Rep. Stephanie Clayton (R-Overland Park) has introduced a bill that would repeal the law forcing college campuses to allow the concealed carry of firearms on campus. Kansas colleges, students, and faculty have all come out strongly opposed to allowing guns on campus. KNEA and KNEA’s Higher Education Local Affiliates support the Clayton bill.

The Fate of Brownback’s Budget

Things are not looking too good for Governor Brownback’s budget recommendations. This new legislature appears to have little appetite for the one-time gimmicks and sleight of hand tricks that the Governor and his allies have become dependent upon to save their tax cuts for the wealthiest Kansans.

There has been tremendous pushback against Brownback’s ideas from the moment they were launched. And even earlier!

Once again he calls for the securitization of the tobacco settlement funds. These funds come to Kansas annually as part of the national master settlement agreement with cigarette manufacturers. As long as people smoke, Kansas will get an annual payment. Brownback would essentially sell the rights to our future payments to investors. This gives him a quick influx of cash but turns this long-term asset into long-term debt – Kansas would have to turn over future payments to investors. This money supports the Children’s Initiative Fund which provides quality care for preschoolers in every county in the state. Last year’s legislature – which was packed with Brownback allies – repeatedly rejected securitization.

Brownback’s proposal to renege on promises to KPERS and ignore the required employer investments into KPERS for two years has also drawn sharp criticism. After all, legislators have worked diligently to shore up the system and are rightfully proud of that work. Brownback, you might remember, used the work on shoring up KPERS as a major part of his reelection campaign in 2014. Yet here he is suggesting that work be undone in order to save tax cuts for the wealthiest Kansans.

Finally, the proposal to put all school employees in a single health care plan has also been met with skepticism. There is little confidence that such a plan will save money without major harm being done to employee benefits and most legislators have little interest in harming the state’s teachers. The Legislative Post Audit division has also urged legislators to hold off. They have a report coming out in February that will analyze the many challenges to be faced in making such a move. There are many implications that must be considered before making such a decision.

With so many new legislators who were elected specifically because they opposed the Governor’s agenda and promised voters a reversal of the disastrous Brownback tax plan, we believe that the 2017 Legislature will forge their own plans – plans designed to return Kansas to common sense – as the session moves on.

There is a sensible and comprehensive solution…

CLICK HERE to listen to last night’s episode of Kansas EdTalk which focused on a sensible and comprehensive solution to recover from Brownback’s failed tax experiment.

read more