Budget Conference Committee meeting

The House/Senate Budget Conference Committee (House Appropriations and Senate Ways and Means) met twice today to seek agreement on a budget bill.

By the end of the day, they appeared to be at impasse with one of the main sticking points being a school funding fix. Because of reduced property values particularly on oil and gas land, the 20 mill school finance property tax is not producing as much revenue as predicted. To fix this, the Legislature would need to provide about $17.5 million in FY 2016 and another $13 million in FY 2017 to make up the difference in the block grant passed earlier.

The House Appropriations Committee put this money in their budget but the Senate did not. As of now, neither side has given in on that issue.

The Conference Committee will not meet again today. We expect they will meet tomorrow.

House Tax Committee hears another bill

The House Tax Committee met this morning to hold a hearing on HB 2435, a new tax bill that would repeal the sales tax exemption on public construction projects. Currently when the state or a local unit of government (including a school district) have building projects, they do not pay sales tax on the cost of the building materials. It has been the practice in Kansas that government does not tax itself. This bill would make those materials subject to sales tax.

If adopted, the bill would drive the cost of public building projects up, forcing local governments to either scale back the project or increase property taxes in order to pay for the sales tax. It was noted in testimony that 23 states apply the sales tax to these projects, 15 do not, and it is unclear what the remaining states do.

In the case of state government, under this bill the state would have had to pay sales tax on the materials used in the renovation of the statehouse. The cost of the renovation – which was being paid by the state – would have risen substantially so that the state could pay itself the sales tax. A kind of funding loop!

Rep. Mark Rhoades (R-Newton) had proposed this as part of the overall tax package during the committee meeting yesterday.

The only proponent of the bill was Americans for Prosperity, a Koch-founded free market group.

Opposing the bill were the Kansas Association of Contractors, the Kansas Hospital Association, the Kansas Association of Counties, the Kansas League of Municipalities, KASB, the Board of Regents, and Kansas Municipal Utilities.

No action was taken on the bill today.

Is there a plan?

We have often reported rumors under the dome and the air is full of rumors right now about what might happen next.

First, there has been a persistent rumor that the Legislature will break on Thursday and go home until next Tuesday. But a subsequent rumor was that there would be an effort to break the gridlock and work through the weekend.

Part of the second rumor was the idea that both chambers could get a tax bill out of committee and on to the floor for debate by Thursday. If they passed bills, they could get into conference on taxes and might feel close to final resolution, encouraging them to stay in Topeka.

The House Tax Committee was set to reconvene at 2:30 this afternoon but the meeting was cancelled with no further meetings scheduled. That means the House won’t have a tax bill to debate tomorrow. The Senate has Senate Sub for HB 2109, which could be debated tomorrow.

So what happens next, you ask? Almost anything.

The Senate could debate and pass Senate Sub for HB 2109 early tomorrow and send it to the House. The House could concur in the bill and things would be done on taxes. But nobody knows for certain whether or not the Senate has the votes to pass the bill or if the House would concur in it. This scenario seems highly unlikely.

The Senate could debate and vote down the bill tomorrow. That would probably result in the Legislature going home for that four day weekend. No tax bill passed in the House and none in the Senate means many more meetings and there would be little incentive to give up the holiday weekend.

As we’ve been reporting, nothing seems to be securing enough votes to pass the House. One group of Republican legislators oppose all tax increases for any reason, Democrats and Moderate Republicans want to see changes to the 2012-13 tax bills that put businesses back on the tax rolls, Democrats oppose efforts to balance the budget on the backs of the middle class and low income Kansans through sales tax increases.

Politically, everyone is in a tight spot as well. With KPI, the Kansas Chamber, and AFP all opposing tax increases, they are probably worried about the massive amount of money that will be spent against them in their next election. If one supports tax increases to bail the Governor out of his reckless tax plan, and the Governor’s allies then use that vote to throw one out of office, why help?

Yes folks, it’s a mess. We might assemble these reports into a book and sell the movie rights!