Talking Taxes and One Senator Wants to Block the Court

Dec 8, 2017 by

Lots to Think About Vis-a-Vis Taxes

The 2017 Joint Committee on Assessment and Taxation met for a day and a half this week to gather information that may guide the work of the 2018 Legislature as they continue to grapple with tax policy.

The Committee members are Rep. Steven Johnson, Chair (R-Assaria), Sen. Caryn Tyson, Vice-chair (R-Lousiburg), Senators Tom Holland (D-Baldwin City) and Dan Kerschen (R-Garden Plain) and Representatives Ken Corbet (R-Topeka), Tom Sawyer (D-Wichita), and Kristey Williams (R-Augusta).

They started by reviewing how tax collections have been going since the passage of SB 30, the bill rescinding the Brownback tax plan. It was noted that while things are looking better – income tax collections are trending upward as are sales tax collections – it was too early to see what the ultimate impact might be. Staff repeatedly told the committee that they would have a much better view once income taxes are filed in April.

Another issue examined was the impact of economic development incentive programs (STAR bonds, PEAK, and HPIP) and how effective Kansas is in analyzing the impact of these credits and incentives. The three eco-devo programs listed above resulted in a diversion of $121 million/year from the state general fund. A study by the Legislative Post Audit Division found that Kansas, unlike our neighbors in Oklahoma, Nebraska, Colorado, and Missouri, has no program in place for measuring the impact of such programs or ensuring that lawmakers understand and act upon the analysis of these programs. Members of the committee expressed interest in improving in this area.

The sales tax was examined for a number of issues. One is the enormous list of sales tax exemptions in state law. Many of those exemptions are required by the federal government or are there to prevent double taxation but it was noted that perhaps Kansas has been too generous in granting additional exemptions. The impact of internet sales on sales tax collections in Kansas was also studied. The US Supreme Court ruled a number of years ago that states could not impose the tax on companies that did not have a physical presence in the state. A number of states, including Kansas, have tried to persuade Congress to take action on this issue to no avail. Currently, there are efforts in other states, notably South Dakota and Massachusetts to find other ways to solve this issue. Technological advances since the initial Supreme Court ruling have made it easy for vendors to charge and remit destination based sales taxes.

The other big issue discussed was the property tax lid passed by the legislature. Under the lid, cities and counties are unable to increase property tax collections beyond the rate of inflation without a vote of the electorate. This has tied the hands of city and county commissioners as they try to deal with local needs and in particular the cost of employee health benefits. Sen. Tyson went on the offense against representatives of cities and counties alleging that they were not following the cap. A Douglas County resident had complained to her that property taxes went up by 10%.

What these legislators fail to understand is that some things are exempt under the lid (public safety) and that the lid does not apply to USD’s. Lawrence USD 497 in Douglas County, for example, passed a large bond issue and had to raise collections under their LOB based on changes in the finance formula. It makes sense that in some places property taxes would still increase overall beyond the CPI limit.

Committee staff will now prepare a report of their findings to go to the Senate and House Tax Committees as the 2018 session starts.

Senator Dennis Pyle Wants to Subvert the Court

Senator Dennis Pyle (R-Hiawatha) who is not known for supporting public education, has proposed a measure to strip the Supreme Court of any authority that would force the legislature to suitably fund public education in Kansas.

The Court, in the Gannon School Finance Decision, said they were no longer going to be party to continuing an unconstitutional system of funding. This has been widely interpreted to mean that if the legislature does not fix the school finance system such that it is both adequately and equitably financed, then the Court would prohibit distribution of funds to schools in an unconstitutional system. Schools would close until the formula was constitutional.

This threat is the only thing that will force the Legislature to move to fix the system. Without the ability to block the funding and close schools, the Legislature can feel free to ignore the Court decision.

Pyle’s proposal would be a constitutional amendment that must get a 2/3 super-majority vote in both the House and Senate and then be approved by the voters. He wants this fast-tracked so it could beat the Supreme Court’s April 30 deadline for briefs on whatever the Legislature passes this year. And if Senator Pyle remains true to form, he won’t support anything that solves the funding issue.

Click here to read the KC Star’s reporting on the Pyle proposal.

 

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No School Finance Bill Yet

May 12, 2017 by

Light at the end of the tunnel, still far away.

Due to a long debate on sales taxes on the House floor, the K-12 Budget Committee did not convene until about 1:30 in the afternoon today.

When they did gather, they went first, back to the Scott Schwab (R-Olathe) proposal to require schools to provide for ABA therapy for any child with autism whose parents requested such therapy. Schwab brought back a new version of his amendment in which he tried to address concerns raised by committee members over the last few days. This time the requirement would only apply if there was an ABA therapist within the district borders. It also spelled out language called for by the KSDE attorney regarding conflicts with the IEP. Schwab also added a state ABA therapy fund that would be filled with $4/pupil. Districts could then apply to the KSDE for reimbursement from the fund.

Questions were raised about the amount of money in the fund and the fact that it could easily be wiped out. The total would not nearly cover the costs to just Kansas City, Kansas schools if all their students requested the therapy. And if it was all taken quickly, the mandate and related costs would still apply to all students.

Eventually, the committee adopted the Schwab amendment but only after delaying its implementation for one year. Education Committee chairman Clay Aurand (R-Belleville) agreed to hold study sessions and hearings on the issue next year with the intent of deciding whether or not to keep the mandate in place, repeal it, or adjust it.

The next amendment was offered by Melissa Rooker (R-Fairway). This amendment would increase at-risk weighting in the bill from .456 to .484 and strike the provision adopted earlier to require all school districts to transfer a certain percentage of their Local Foundation Budget (what we now call LOB) to the at-risk and bilingual funds. That provision equated to a percentage which matched the percentage of at-risk students in the district.

The .484 weighting is what was recommended in an LPA study of school finance.

Aurand had the motion divided because he intended to support the increase in the weighting but oppose the striking of the transfer (that was his amendment in an earlier meeting).

On a voice vote, the Committee approved the increase in the weighting. On a division vote, the Committee approved striking the transfer on a vote of 9 to 7. This action will add an additional $21.8 million to the bill’s total. There was some discussion of making an offsetting reduction in base aid thus keeping the $150 million per year idea intact but no such motion was made.

All of this had taken us to nearly 4:00 this afternoon. There was a lot of debate! Chairman Larry Campbell (R-Olathe) called for a five-minute break but upon return from the break announced they would adjourn for now and meet again on Monday with the hope of passing out a bill.

Word under the dome is that leadership would like to reduce the price tag of the bill so that they do not have to do as much in tax and revenue reform. Of course, Jeff King, the Legislature’s counsel, has told them that the more they put in for schools, the better chance they have before the Court. Additionally, plaintiff’s attorneys suggest that the $750 million over five years in the current bill is too low and the Kansas State Board of Education has suggested an amount over $850 million.

We believe that the Committee and the Legislature as a whole should refuse to lower the amount and perhaps look at increasing it. Additionally, they should reverse the disastrous tax policies put in place by Brownback and his anti-government allies, raising enough new revenue to balance the budget, fund KPERS and highways, and meet the Court ruling in Gannon.

House Votes to Reduce Food Sales Tax in 2020

The long floor debate earlier in the day was about repealing a number of sales tax exemptions in order to pay for a 1% reduction in the food sales tax. There were two tries on the floor today, the second one succeeding. While the repeal of some current exemptions (private detectives, security services, cleaning services, and a few others) goes into effect right away the food sales tax deduction won’t happen until 2020, giving future legislatures plenty of opportunity to repeal the reduction if they don’t actually solve the structural problems with our tax system today.

Rep. Pete DeGraaf (R-Mulvane) to Resign

Conservative Representative Pete DeGraaf announced on the floor today that he will be resigning his seat by the end of the month. DeGraaf revealed that he is suffering from the effects of Parkinson’s Disease and wishes to take care of his health and family at this time. Our best wishes for Rep. DeGraaf and his family as they deal with this disease and its challenges.

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Slow Start to “Veto Session:” A Little Tax Talk; a Little School Finance

May 2, 2017 by

The 2017 Legislative “Veto Session” is off to a slow start (as all veto sessions are). Yesterday was very quiet but things were picking up today.

There was a debate on the House floor on a bill extending the STAR bond economic development program. STAR bonds were utilized most notably in Wyandotte County for the Legends project that includes the Kansas Speedway, the KC Sporting stadium, the T-Bones baseball stadium, lots of restaurants and plenty of shopping including Nebraska Furniture Mart and Cabela’s. The plan was so successful that those bonds were paid off early.

There was no debate on the STAR bonds but the bill did bring out two attempted amendments. The first would have done away with the food sales tax and paid for it by repealing a number of sales tax exemptions including the sale of bingo cards and YMCA memberships. The second amendment would have created a back to school sales tax holiday allowing people to buy clothing and all manner of school supplies tax free once a year.

Both amendments failed with the argument that such ideas were being considered or could be considered as part of a comprehensive revenue/tax reform bill expected later. Most legislators want to make one vote on taxes and make that vote the one to deliver the state from the Brownback tax experiment that has bankrupted Kansas.

Meanwhile the House Tax Committee continues to meet with the hope of hammering out a comprehensive tax bill that will fund state services and increase school funding under the Gannon decision.

The House K-12 Budget Committee met today to review their school finance bill, HB 2410. They will meet again tomorrow and at least Thursday. Chairman Larry Campbell (R-Olathe) announced that the committee will be considering if and how to put the funding directly into the bill rather than in a budget or tax bill. This will be the topic for tomorrow.

On Thursday, the Committee will hear from former Senator Jeff King. King was hired by the legislature to review the bill and give an opinion on the constitutionality of the various provisions and whether or not the Supreme Court would be likely to accept it.

If the Committee meets on Friday, Campbell hopes to finish work and pass the bill out of Committee. And if not Friday, then Monday.

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