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.


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Committees continue to gather information; Governor Kelly gives State of the State Address

Jan 16, 2019 by

Kansas Governor Laura Kelly delivering her first state of the state address.

House Appropriations gets thorough update on revenue resources

Chairman Troy Waymaster opened the appropriations committee with a round-robin introduction of members, legislative staffers and his personal staffers.  Waymaster called his committee the “best committee in the House” because this committee will “have its hand on everything the state government does.”  If introductions by the dedicated staff focusing of fiscal analysts and revisors is any indication, Waymaster is probably right.  

Following introductions, an agent from the Kansas Department of Revenue, gave a summary of Kansas revenue estimates and forecasts.  In summary, while FY 2018 ended better than forecast, several state and national factors could negatively impact FY 2019 estimates.  The revenue official continued to describe the forecast as a “mixed bag” of good and bad indicators as we move into an uncertain economic future.

Chairman Waymaster noted, that agriculture is KS leading economic driver and Pres. Trump’s shutdown is impacting KS agriculture due to frozen stimulus payments to farmers which came as a result of the negative impact from Pres. Trump’s tariffs.  The revenue official agreed that negative impacts upon agriculture could certainly impact the state economy and consequently the revenue estimates.

What remains very clear, is that the FY 2019 approved state budget leaves an ending balance of $905 million.  With this money on hand, the state is in a position to fully fund public schools according to the Kansas Constitution for the first time in almost a decade.  There is also enough to begin to address some of the myriad other budget issues left behind by the Brownback / Colyer administration, like KPERS, highways, and social services. 

Today, many of those reps who supported the Brownback agenda that created the budget holes we’re dealing with now, are pushing not for filling those holes, but instead warning against the threat of a bleak national economy on the horizon and the need to hold onto our reserves.  We call on our representatives to take the final step in fully funding public schools according to the constitution by using the surplus to account for inflation adjustments in the ‘out-years’ of the funding formula.  Doing so now while the money is available would end litigation and more importantly, give our students access to a fully funded and constitutional K-12 experience.  

Tax policy: Understanding GILTI and Repatriation

The Senate Tax Committee met again today to continue discussion of SB 13 with the Kansas Chamber of Commerce bringing in more information and an tax expert from the Seaboard corporation to explain the GILTI and Repatriation provisions of the Trump/Ryan tax reform and their impact on Kansas taxes.

We can assure you that these provisions have no direct impact on individuals but instead impact what corporations pay in income taxes and they both deal with overseas earnings.

It’s best to let the experts explain these provisions to you, so click here to get an understandable explanation of GILTI. Then click here to get an understandable explanation of repatriation. They are both short reads and might be illuminating.

House Ed and House K-12 Budget Committees meet today

The House Education Committee met for the first time today simply to get to know each other and to review their committee rules. There are plenty of new faces this year including many freshman. The new freshmen are Dave Benson (R-Overland Park), Rene Erickson (R-Wichita), Cheryl Helmer (R-Mulvane), Mark Samsel (R-Wellsville), Adam Thomas (R-Olathe), and Rui Xu (D-Westwood). John Toplikar (R-Olathe) is technically a freshman now although he served a number of years ago in the Legislature.

New to the Committee are Stephanie Clayton (D-Overland Park) and Steven Johnson (R-Assaria). Rounding out the committee are Steve Huebert (R-Wichita), Brenda Dietrich (R-Topeka), Jim Ward (D-Wichita), Adam Smith (R-Weskan), Jim Karleskint (R-Tonganoxie), Mark Schreiber (R-El Dorado), Jane Vickrey (R-Lousiburg), and Jerry Stogsdill (D-Prairie Village).

The K-12 Budget Committee today received the same school finance overview that was presented to the Senate Education Committee yesterday.

Governor Laura Kelly gave her first state of the state address: schools, Medicaid expansion, and the Foster Care System

In her first state of the state address, Governor Laura Kelly laid our three priorities for Kansas. We need to fund our schools and end the cycle of litigation; we need to expand Medicaid to help 150,000 Kansans get health insurance, to keep Kansas tax dollars in Kansas, and to preserve our rural communities; we need to overhaul and restore our failing foster care system.

We’ll talk more about her speech after we review it more thoroughly, but in the meantime, you can read it by clicking here or watch it by clicking here.

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How NOT to End the “Cycle of Litigation” and New Democrats in the Senate

Dec 12, 2018 by

Republican Leaders Want to Toss Out the Constitutional School Finance System?

If we had a dollar for every time that Republican leadership in the Kansas House and Senate last year said they want to “end the cycle of litigation over school finance,” we would be retired today.

Of course, back then we thought nothing of these statements because we, too, want to see an end to the cycle of litigation because that means our schools would be both adequately and equitably funded. That’s what everyone wants – or so we thought.

This is why it came as such a surprise when we read in the Wichita Eagle that House Speaker Ron Ryckman (R-Olathe) and Senate Majority Leader Jim Denning (R-Overland Park) told an audience in Johnson County that they were interested in tossing out last year’s school finance plan and starting completely over. Why? According the the Eagle article, it’s because “Republican leaders are skeptical the state could pay for the change and say the funding plan may need to be changed instead.”

In essence, they don’t want to fund schools adequately.

Here’s what we know about last year’s plan and the status of the current school finance litigation:

In response to an earlier Supreme Court ruling that school funding was constitutionally both inadequate and inequitable, the Legislature passed bills in 2017 and 2018 that repealed the unconstitutional Brownback block grant funding scheme.

The Court subsequently ruled that the new formula met the equity test but was still somewhat short of adequacy. The adequacy ruling was based on the fact that the phased-in increases in school funding did not account for inflation. Evidence showed that inflation would eat up about $90 million of increased funding in the out years of the plan. Essentially, a $100 million funding increase next year would only be a $10 million increase in funding after accounting for inflation.

The Court directed the Legislature to return and deal with the inflation issue.

Given that the Wagle/Denning school funding study conducted by Dr. Lori Taylor found the state to be shortchanging schools by as much as $2 billion, the Court’s call for dealing with inflation only after the additional $525 million provided by the Legislature seems modest. But apparently, Republican leaders are not interested in meeting the Court ruling.

There are two ways currently to end the cycle of litigation.

One is to address the inflation issue in the out years of the 2018 legislation and then provide an ongoing mechanism to maintain the funding level so established.

The other is the Ryckman/Denning way which is to ban litigation. They would rather just pass a constitutional amendment prohibiting school finance lawsuits and then not worry whether schools are adequately funded at all.

We believe that the best approach for the Legislature to take in 2019 is to first leave the constitutional school funding formula alone – why mess with the good work done to get a constitutional formula written and passed?

Then, address the inflation issue in last year’s legislation. Thanks to the hard work the Legislature did in reversing the disastrous Brownback tax experiment, revenues are coming in better than expected and adding the inflation increase is affordable.

Finally, resist the temptation of prohibiting the public from going to court. All citizens must have the option to go to court if they feel aggrieved and the court system must not be politicized. We must honor our system of checks and balances under which the Legislature makes the laws but the citizens can ask the court to review whether or not those laws are constitutional. The proposed constitutional amendment is a slippery slope which could result in dismantling the very system our founders envisioned and established.

Click here to read the Wichita Eagle article.

Three New Democrats Coming to the Senate

The Senate Democratic Caucus will welcome three new members when they convene for the 2019 Legislative Session.

Two are replacements for newly elected Governor Laura Kelly and Lt. Governor Lynn Rogers.

Kelly, who is still technically the Kansas State Senator from SD 18 covering parts of Shawnee, Wabaunsee, and Pottawatomie Counties will be replaced by Vic Miller who is currently representing HD 58 in the Kansas House of Representatives. Rogers, currently the Kansas State Senator from SD 25 in Wichita, will be replaced by Mary Ware, a community activist from Wichita.

The third new Democratic Senator is a familiar face to those who watch the Kansas Legislature. Senator Barbara Bollier from Johnson County has switched party affiliations and will join the Democratic caucus. We can now officially say “Barbara Bollier (D-Mission Hills).”

With Bollier’s switch, the Democratic caucus increases by one member for 2019.

In a press release, Bollier had this to say of her decision, “I’ve been a proud Kansas Republican for 43 years. I always embraced the common-sense policies of Governor Bill Graves, US Senator Nancy Kassebaum, and President Eisenhower. But during the last eight years, I’ve grown increasingly uncomfortable with Republican leaders’ hardline rhetoric, contempt for compromise, and obsession with putting political power before children and families. With this recent election, it has become clear that the majority of the Republican Party does not accept moderate Republicans any longer.”

In welcoming Bollier to the Democratic caucus, Senate Minority Leader Anthony Hensley said, “She has been a longtime friend and respected colleague with the best interests of Kansas at heart. Her expertise, pragmatism, and courage enrich the entire Kansas Legislature — regardless of whether she calls herself a Democrat or Republican.”

Bollier has long been an advocate for health care, public schools, and pro-family policies. Bollier came into conflict with Senate President Susan Wagle (R-Wichita) over her endorsement of Laura Kelly for Governor and Democrat Tom Niermann for Congress. (Niermann lost the Democratic Primary to Sharice Davids who was elected to Congress in November.) Wagle stripped Bollier of important positions in the Senate – most notably her leadership position on the Committee on Public Health and Welfare. As the only physician in the Senate, Bollier was a natural fit for such an important committee.

Bollier has also been a staunch supporter and defender of public schools, students, and the educators who staff those schools. Bollier was a member of the Senate Education Committee.

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School Finance Bill Coming Together, Brownback Support Rock-Bottom and Falling, Fighting for Medicaid Expansion

Mar 31, 2017 by

The House K-12 Education Budget Committee worked until nearly 9:00 last night taking up amendments to HB 2410, the school finance bill.

Amendment after amendment, the debate went on through the afternoon and into the night and most of those amendments were adopted. Here are changes made yesterday:

  • The bill changed the LOB into three local levies, the Local Foundation Budget up to 20% a portion of which had to be transferred to bilingual and at-risk programs, the Local Enhancement Budget up to 5% that could be used for anything, and the Local Activities Budget up to 4% that had to be used for non-instructional purposes. A motion by Rep. Fred Patton (R-Topeka) replaced all three with a 33% LOB as in the prior formula. KNEA supports this change.
  • The bill phased in all-day kindergarten over three years. On a motion by Rep. Clay Aurand (R-Belleville), all day kindergarten would become effective next year. KNEA supports this change.
  • A motion by Rep. Melissa Rooker (R-Fairway) added $2 million in 2018 and another $2 million in 2019 for preschool at-risk programs. KNEA supports this change.
  • Two motions by Rep. Jim Karleskint (R-Tonganoxie) added $800,000 for new teacher mentoring and $1.7 million for teacher professional development. KNEA supports both changes.
  • The bill had a five-year limit on bilingual aid for individual students. An amendment by Rep. Larry Campbell (R-Olathe) removed this limit. KNEA supports the change.
  • A motion by Rep. Ed Trimmer (D-Winfield) to return bilingual weighting to the contact hours formula in prior law was changed by a substitute amendment from Rep. Aurand to distribute bilingual aid by FTE with a weighting of 0.185. While this results in no loss of overall bilingual funding, school districts that have successfully recruited bilingually licensed teachers will lose funding while those that have few such teachers will gain. KNEA supports a blended method that both funds students and encourages recruitment and retention of bilingually licensed teachers.
  • Vocational weighting was not included in the bill. Instead, the bill would require districts to transfer $100/FTE to a career and post-secondary education fund to be used for vocational programs and dual credit opportunities. A motion by Aurand to require a $50/FTE transfer in 2018 and a $100/FTE transfer in 2019 with a vocational “hold harmless” provision failed. A subsequent motion by Karleskint to return to the prior vocational weighting and calling on the SBOE to study the cost of vocational programs for future funding considerations was adopted. KNEA supports this change.
  • On capital outlay funding, a motion by Campbell to allow capital outlay funds to be spent on utilities was adopted while a motion by Rooker to exempt capital outlay levies from future TIF (redevelopment) projects failed. KNEA supported both amendments.
  • An amendment by Rep. Brenda Landwehr (R-Wichita) to require a uniform accounting system with more detailed reporting to the state failed. KNEA is neutral on this amendment. KASB and school districts have opposed it.
  • The bill required two student enrollment count dates (9/20 and 2/20) and used the average for determining funding. It also included a complicated three-year formula for examining enrollment going forward. A motion by Rep. Adam Smith (R-Weskan) returned the enrollment count to a single time (9/20) with a second count (2/20) for military dependent children. KNEA supports this change.
  • The bill changed the corporate tuition tax credit (voucher) program by expanding the rules for student eligibility but then limiting the private schools’ families could choose to those accredited by the SBOE and that either exceed the trendline for post-secondary success or have an ACT composite above the state average. An amendment by Trimmer to remove the eligibility expansion and sunset the program in five years was not adopted. Instead, a substitute motion by Aurand that would remove the eligibility expansion and require students to be “direct-certified” by the Department of Children and Families while maintaining the new limits on eligible schools was adopted. KNEA remains opposed to the program but believes these changes are improvements.

There were a few other amendments that failed and resulted in no changes to the underlying bill.

At the conclusion of last night’s work, the committee was recessed – not adjourned – because one amendment was still under discussion and will be taken up again on Monday. That amendment by Rep. Adam Smith would return the transportation formula back to the prior law. Under the bill, the transportation formula was changed to address what is called “the algebra error” identified by the Division of Legislative Post Audit. There has long been a math error in the formula and correcting that error will cause school districts to lose transportation funding. Legislative staffers were directed to find a way to fix the math error and make adjustments so that schools will not lose funding. On Monday they will return to this amendment and see if it’s possible to do so.

Monday may also see some additional amendments specific to funding amounts. The intent of those offering and adopting amendments is to end up with a bill that will provide $150 million in new funding each year for five years for a total of $750 million new dollars.

Monday, then, is the big day. We expect that the Committee will send out their final product at the conclusion of their Monday meeting. At that time, we will examine the bill in its entirety to determine our position. We applaud the Committee for their hard work yesterday. The bill is dramatically better than it was when the committee convened at 1:00.


New Polling Shows Broad Public Support for Increased School Funding

In a press conference today, the Kansas Center for Economic Growth released the results of a new poll gauging public support for Governor Brownback, the Brownback tax policies, and public school funding.

The results back up what we suspected. Governor Brownback remains very unpopular, few Kansans support his 2012 tax plan and want the legislature to reverse it, and a whopping 83% of Kansans want greater funding for public education.  More key findings from the KCEG poll and a full breakdown of the school funding support data follows:

  • Kansans are deeply dissatisfied with both Gov. Brownback and his signature tax plan. Two-thirds of Kansas voters disapprove of the governor’s job performance, with 67 percent who disapprove, and 54 percent who strongly disapprove. Those numbers are nearly identical to discontent with his tax policy (67 percent oppose it and 51 percent strongly oppose it).
  • Nearly all Kansas voters are worried the state is not investing enough in public education. Eighty-five percent of Kansas voters feel concerned about the state’s level of spending on public education. Without comprehensive tax reform, lawmakers cannot restore funding to classrooms.
  • There is broad consensus that the Brownback tax plan harmed the Kansas economy and should be repealed. Seventy-three percent of voters feel the governor’s tax policy hurt the Kansas economy, while 64 percent of Kansans support rolling back the Brownback plan.


More Action Needed to Override the Governor’s VETO of Medicaid Expansion

Several representatives will be holding morning coffee Q&A’s along with town halls this weekend.  Contact your Rep’s office and find out if yours will be holding just such an event.  Regardless, we encourage you to use the following link to the Alliance for a Healthy Kansas website where you can take action to contact your Reps and encourage them to vote YES to override the Governor’s VETO.

CLICK HERE TO TAKE ACTION TO EXPAND MEDICAID

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Due Process, Health Care and EDUCATION CUTS!

Feb 8, 2017 by

Hearing Set on Due Process Bill

Rep. Clay Aurand, Chair of the House Education Committee, has announced that a hearing has been scheduled for HB 2179 which would restore due process protections for Kansas teachers who have completed a probationary period. The bill re-enacts the law as it was prior to repeal in 2014.

Due process was repealed in 2014 without ever having been introduced as a bill and without any public announcement or hearing. The repeal was enacted after midnight as a floor amendment to a must-pass school funding bill. With it attached to the finance bill, the bill was unable to receive the needed 63 votes to pass until House leadership enacted a call of the House under which members are locked in the chamber indefinitely. Eventually – about 4:00 am as we recall – a 63rd vote was gained through pressure and exhaustion.

HB 2179 has 45 legislative co-sponsors from both parties. We look forward to a fair hearing and having a vote on the bill in committee next week.


LPA Study on Health Benefit Consolidation

The Division of Legislative Post Audit today released their study on the feasibility of consolidating school district health benefit plans into one mega-plan similar to the State Employee Health Plan (SEHP). The idea was raised as a possible cost saver in the Alvarez and Marsal efficiency study. They suggested a savings of about $80 million per year. Finding himself short of cash in setting a budget, Governor Brownback leapt on the idea and called for this to happen by January 1, 2018.

Unfortunately for the Governor, the LPA indicates that even if they decided to move forward, it could not be done so as to gain any savings in 2018.

Beyond that, the savings are lower in the LPA study. They suggest perhaps $38 million in efficiency savings and another $25 million by shifting costs onto employees. What they did was look at what happens if you put school employees in a plan modeled on the SEHP. Doing this would significantly reduce benefits for school employees by raising deductibles, increasing co-pays, and increasing the out-of-pocket maximum per year. The state would then “claw back” those savings leaving school districts with less budget authority. The savings garnered by reducing benefits would not go to the employees as pay raises but to the state general fund presumably to shore up Brownback’s reckless tax cut program.

Passage of a plan to make this consolidation happen is basically a cut to school employee compensation across Kansas by $25 million.

There will be a hearing on a bill to enact the consolidation on Monday. KNEA will be there to oppose the bill.

CLICK HERE to read the full LPA report.

CLICK HERE to read the healthcare report highlights.


Senate Voting Tomorrow to Cut Education, Pass Inadequate Tax plan

The full Senate will convene tomorrow to vote on two bills. Senate Bill 27 would cut education funding by $154 million – $128 million from K-12 and another $23 million from higher education.

Their tax bill, SB 147, would raise income tax rates for all Kansans, repeal the low-income tax exemption for those earning less than $12,000/year, and repeal the LLC loophole but does nothing to end the glide path to zero which is the root of future revenue declines. There is much debate about what it would raise – perhaps $280 million in 2018.

The problem with this bill is that it does not go nearly far enough in solving the revenue crisis facing Kansas. The budget holes Kansas now faces in 2017 and beyond are enormous. Most analysts believe the state will need to raise at least $580 million just to break even and not accounting for any pending decision in the Gannon school finance lawsuit.

Kansas NEA has released a statement along with USA/KS, KASB, KSSA, and others calling on the Senate to vote NO on SB 27 and to send SB 147 back to committee for more work.

CLICK HERE to email your Senator.

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