State of the State Review:  
Budget, Taxes, Education & More 

Dear , 

 

Our first week is complete!   After being sworn in on Monday, the Kansas Legislature went right back to tackling the very important issues before us, some of which I mentioned in my initial newsletter.


Of course, the main subject of this week was the inauguration of Governor Brownback and both his inaugural address on Monday and then his annual State-of-the-State address on Thursday evening.    

You can read the text of his inaugural remarks here and read the text of his State of the State address here.  I recommend reading the inaugural address.  It's the governor's best speech yet.


Two items the media will be focusing most of their attention on will be the budget situation, including 1) the "march to zero" income tax reduction and 2) funding of education.  The governor has a plan to repeal the current education finance formula and replace it with block grants in the short term while we discuss a longer term solution to the funding of education in Kansas.   I will address each of these items below in a bit more detail.


 Before doing so, I want to remark on a few other issues the governor addressed.  Please remember these are the governor's proposals.  The Legislature will likely make extensive changes.

  

Judicial Selection

 

In his State of the State speech, the governor brought up the need to reform the method of selection for our Kansas Supreme Court.  Currently, justices to the Kansas Supreme Court are selected by a rather unusual method in which the people who control the nomination process have no direct accountability to the people of Kansas.  There is a nine member "Supreme Court Nominating Commission", of which 5 are elected by attorneys in Kansas - the other 4 by the governor.  Because attorneys are always in the majority, attorneys always control the outcome of the selection.

 

The appellate system (Appeals Court) was changed statutorily (through change of a law) by the Legislature to appointment by the governor with Senate approval, but a change for selections to the Supreme Court would require a change to the Kansas Constitution.  The Legislature would need to pass a constitutional amendment with two-thirds vote in each chamber.  It would then be placed on a ballot for a vote of the people.  The two-thirds vote threshold has been achieved in the Senate but not yet in the House. 

 

This is an issue where you can have a direct impact by encouraging your legislator to vote for judicial selection reform.  The exact form the new measure takes will be debated this session, and I will be updating you on this subject as the session moves along.


Local Elections


For the past few sessions there have been proposals to move local elections that are currently held in March and April to August and November of odd years.  Even years would be national and state elections; odd years would be local elections. 

 

If you want a real world example about the problem with the timing of current "spring" elections, the filing deadline for local candidates is January 27th.  If there is a primary, advanced voting begins on February 11th - a mere 15 days later.  A candidate who wants to serve their city or their school district would have two weeks to put together a campaign before people began voting.  This is not realistic and it is a system that gives incumbents a large advantage.  Also, the shorter days and colder weather can make it difficult for candidates to introduce themselves to voters.  There are over 200 local government positions in Johnson County alone, and these positions deserve good candidates and an election cycle that makes sense.

I was pleased to see the governor endorse moving spring elections to the fall, and I look forward to seeing this legislation voted on this session.

 

Constitutional Amendment on Debt
 

To ensure that state debt is a general obligation of the state and paid before other tax dollars are expended, the governor has proposed the Legislature pass a constitutional amendment stating that the priorities for appropriations should first be subject to bond payments and then all additional obligations. The proposal would guarantee the state would make debt payments first before any other appropriations are made. Passage of this amendment should help the state achieve a better credit rating and keep borrowing costs lower.

 

A resolution would have to pass both the House and the Senate with a two-thirds majority and then be approved by Kansas voters for it to be added to the Constitution.

 


Budget & Taxes

 

During his State of the State address, Governor Brownback referenced his desire to continue on the path to a "march to zero" with the goal of eventually eliminating the individual income tax, and while the rate of spending has been reduced in Kansas during the last four years, the spending level is still high enough that we have a budget hole we must fix for both 2015 and 2016 to continue the tax reductions.
 

The Consensus Revenue Estimating Group met in November, revising the FY 2015 estimate to show a $280 million shortfall and made an assessment for FY 2016 that shows a $435 million shortfall. In order to address the projected FY 2015 shortfall, the governor developed an allotment plan. The governor used his statutory authority to cut most state agencies by 4 percent and to make some fund transfers. However, other cuts and fund transfers laid out in the plan, including a transfer of $150.7 million from the State Highway Fund, will require the passage of a rescission bill by the Legislature.

 

In addition to the rescission bill, the House and Senate will have to consider a two-year budget proposal announced by the governor on Friday. The proposed budget takes several significant steps to leave the state with ending balances of $87.5 million in FY 2016 and $252.6 million in FY 2017, including continuing the 4 percent reduction to most state agency budgets and transferring another $200 million from the State Highway Fund.


Alcohol and Cigarette Taxes

 

Of concern to some who want to hold the line on all taxes is the governor's proposal to increase consumption taxes on both tobacco and liquor. The cigarette tax would be increased from its current $0.79 per pack to $2.29 per pack, and the liquor enforcement tax would be increased from the current 8 percent to 12 percent. It is estimated that these tax hikes would generate a little over $100 million each fiscal year in extra revenue.   


Income Tax Cuts Slowed

 

The governor's proposal would stop a number of tax reductions scheduled to go into effect between January 2015 and January 2018, but still continue the march to zero.  In 2013, the Legislature passed a tax package that would drop the bottom rate from 2.7 percent to 2.3 percent in 2018 and the top rate from 4.6 percent to 3.9 percent in 2018. The governor's budget would drop the lower rate from 2.7 percent to 2.66 percent in 2016 and leave it there through 2018. The top rate would remain at its current 4.6 percent through 2018 instead of dropping. 

 

Proposed Income Tax rates - change would start in 2016

 

2015

2016

2017

2018

2019

2020

2021

Lower

2.700%

2.660%

2.660%

2.660%

2.660%

2.660%

2.660%

Upper

4.600%

4.600%

4.600%

4.600%

4.600%

4.600%

4.600%

 

To continue the march to zero instead of scheduled tax reductions, the decrease in taxes would be implemented through a Tax Reduction Fund. When revenues exceed 103 percent in future years, the excess amount would be transferred to the fund. The governor or Legislature may then use the balance to further reduce income tax rates dependent on the growth of the economy.

 

 

 Education 


A very important proposal to emerge from the governor's address and budget was to repeal the K-12 school finance formula on July 1, 2015.   For 23 years, the formula has plagued the Legislature on an annual basis, trapping it in an endless cycle of litigation where there were intense debates over weightings and geography rather than focusing on the best education for our children.  


I agree with the governor that we must create a new formula, and that will take some time.  In order to provide that time, the governor's budget would block grant approximately $3 billion dollars to school districts in FY 2016.  


I look forward to exploring a long-term solution for our schools which rewards innovation, promotes choice, makes budgets transparent and keeps costs low.
 

Medicaid

Funding for Medicaid programs has increased by $182 million over the last three years.  The governor's plan would be a mix of KanCare policy reforms and contractual changes to be implemented by the Kansas Department of Health and Environment and the Kansas Department for Aging and Disability Services that would be a savings of $50.0 million in the State General Fund for Fiscal years 2016 and 2017. More details on this point will be coming in the weeks to come.
 

KPERs


KPERs is the name of the state's pension system. An increase of $45 million has been added due to higher employee contribution rates.  KPERs funding is projected to increase by $107.9 million in Fiscal years 2016 and 2017.  The governor proposes two policy changes, 1) issuing $1.5 billion in bonds, and 2) further reducing employer contribution rates by extending the amortization period another ten years to 2043.


 

 

The governor's budget proposal also includes a 4.0 percent reduction for select agencies. Agencies not affected by the 4.0 percent reduction include K-12 education, Medicaid appropriations to KDADS and KDHE, Department of Corrections, state hospitals, and higher education. The governor also proposes transferring an additional $150.7 million from the state highway fund to the state general fund. Currently the highway fund transfers $262.9 million to other state agencies.

 

This starts the debate about priorities for the state budget.  Please don't hesitate to give me your views!

 
In honor of your liberty,

 
Mary Pilcher-Cook



Mary Pilcher Cook
913-396-9306
mary@pilchercook.com

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