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May 12, 2013 - In This Issue:
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- Chief Executive Magazine ranked Kansas 19th best state in the U.S. to conduct business
- Moved up from 23rd in 2012
- Based on: taxation and regulations, quality of workforce and living conditions
- The Sequestration is not as dire as predicted
- Stock markets at year highs
- 80th legislative day is Monday May 13th
- Last day for legislators administrative staff help. We are solo after Monday
- IRS scrutiny was deeper than thought
- WSJ reports Internal Revenue Service scrutinized conservative groups for raising political concerns over government spending, debt and taxes
- Likely to inflame a widening IRS controversy
- Federal Reserve maps exit from stimulus
- Wind down buying $85 billion per month bond buying program
- Manage highly unpredictable market expectations including high inflation
- Higher state borrowing costs
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On Wednesday, the Legislature returned from a month-long break to begin Veto Session. Veto Session is traditionally used to address bills approved or vetoed by the Governor. In the recent past, this time had grown to become a miniature legislative session of its own. However, this year the Senate operated efficiently, completed its work early, and returns facing only a handful of issues.
When we return on Monday May 13th, our focus will remain on finalization of tax policy. The tax policy will complete the work stated in 2012. Kansas tax policy is shifting away from taxing productivity to taxing consumption. In other words we are working towards lower income tax rates and maintaining the 6.3% sales tax rate.
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State General Fund (SGF) Spending Will Come In Around $6 Billion
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The total Kansas budget will be around $14.5 billion for 2014. This includes State General Fund (SGF) spending as well as federal funds and other tax and revenue sources. The portion of the budget that centers around tax collections is commonly referred to as SGF spending. Next year the SGF spending will be around $6 billion. This will be a decrease of over $100 million from this year's spending levels. This is first time in memory that state spending has decreased in a non-recessionary year. We are attempting to get more and better government while spending less. Very similar environment the private sector expects and achieves.
The graph below demonstrates the major areas of state spending.
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Within .1% of Budget for 10 Months Ending April 30th
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The trends for Kansas tax receipts remain positive through the 10 months ending April 30, 2013. For the 10 month period YTD tax receipts are within .1% of budget and 3.7% above the same period last year. Good news for Kansas economy. Personal income tax collections are higher than initially projected. This is probably the result of business owners deciding to report higher income in 2012, which was due April 15th to avoid higher federal and health care taxes effective January 1, 2013. Will see how May 13 compares to May 12 at end of this month. The large Kansas state income tax cuts effective January 1, 2013 are working to help the economy. Unemployment is down and job creation is up. Lots of head winds coming out of Washington. 2014 will be a challenging year for small businesses.
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Kansas has a 24% personal income tax reduction for 2013. This will result in $800 million tax decrease over the next 12 months.
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Shift From Taxing Productivity To Taxing Consumption
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 The remainder of the session will be dedicated to passing a long term tax policy. We started the work last year with the sharp drop in personal income taxes and removing tax on non-wage income in LLC, Sub Chapter S corporations, and other similar tax styled partnerships. The major issue to reconcile with the House is the 6/10th sales tax. It is set to sunset on July 1, 2013. At that time Kansas sales tax is set to roll back to 5.7% from the current 6.3%. The Senate plan leaves the current sales tax rate at 6.3 percent instead of allowing it to drop back. The Senate plan would then use the additional revenue collected from the higher sales tax rate to pay for the $800 million income tax reductions effective January 1, 2013 as well as buy down income tax rates in future years. Without the sales tax future budgets become unpredictable. For example, allowing the sales tax to roll back to 5.7% would result in 75% of the ending balance being spent over the next 2 years. This would result in the State paying its bills late initially then cuts to essential services or worst case abrupt tax increases. The is not sound policy. The tables below outline the tax cut in 2013 and proposed tax cuts for future years. We know the best policy for Kansas is lower income taxes in order to grow jobs and compete with surrounding states trying to do the same thing. In 2008, the U.S. saw the greatest recession of this century. The housing market plummeted and, through failed stimulus, the country has seen marginal recovery over the past few years. Consistent data illustrates lowering income taxes grows businesses, investments and jobs. The best way for Kansas to engineer our own economic and fiscal recovery from the failed policies of the federal government is to lower our income taxes over the next five years. For Kansas to achieve this goal, we need to remove the sunset on the state's sales tax in order to drive down income tax rates for all Kansans. |
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 The deadline for Kansas insurance companies to submit plans to be sold through the federal exchange was May 1, 2013. Only three (3) Kansas companies submitted plans. It is now widely expected that health care premiums for those under 35 years of age, either in the individual market or employed by businesses with less than 50 employees, will see a significant spike in premiums beginning in 2014. This is the result of the 3:1 age band rating being applied to these groups. The table below shows the expected effects to these groups as a result of the health care law change to the age band. |
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Kansas passed the Mandate Lite bill to allow insurance companies to sell robust plans that cover medical and hospital costs. These plans will not meet the requirements of the new health care law. Therefore, the penalty will have to be paid by individuals and groups who purchase the Mandate Lite health policies. However, the policies will serve a place in the market for at least the next several years as these new price points are digested. It is better to have good medical and hospital coverage, pay the $95.00 penalty, and protect your family and assets. These Mandate Lite plans are projected to cost 1/3 the amount of a policy sold through the exchange. The alternative would be for the young to drop coverage all together because it is too expensive.
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Hospital Cost Transparency
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In an effort to provide cost transparency to health care consumers, the Department of Health and Human Services (HHS) released hospital pricing data from approximately 3,400 hospitals that receive payment from Medicare for inpatient services. The data, which compares charges for services provided during the 100 most common inpatient stays, reveals that hospital charges for similar services can vary significantly -- even within the same geographic area. For example, a fact sheet from the Centers for Medicare and Medicaid Services (CMS) shows that charges to treat heart failure range from $21,000 to $46,000 within the same city. Although Medicare does not actually pay the amount that a hospital charges, this data is likely to reignite the debate over medical costs and hospital pricing methodology. In 2010 I introduced House Bill 2565. It was supported by the Kansas Hospital Association but was killed in committee by the Insurance Lobby. With the latest action from CMS I may introduce HB 2565 again next year. HB 2565 addresses head on the most important part of health care reform. Knowing your out of pocket costs before consuming health care services, in real time. Health care transparency has received very little attention during the health care reform debate. Of all the components of health care reform, determining the out of pocket costs for the patient before non-emergent services are delivered is the most important. It is also the most achievable in the short run. Kansas has the opportunity, through this bill, to advance the transparency of health care expenses to the level patients and medical practices are demanding. Health care plans have transformed into higher deductible, H.S.A designs, and in general larger out of pocket expenses to the patient. Patients and doctors offices need a real time and simple way to determine the out of pocket costs for patients. In the current environment patients may not know their out of pocket costs until they receive a bill from their doctor's office. This is commonly 20 to 30 days after their appointment. The doctor's office billing staff will not know the patients out of pocket cost until the insurance pays what they are responsible for. Not until that occurs will patients know their out of pocket costs. Some practices call the insurance company to attempt to get an estimate of the patients out of pocket costs. Some practices log on to the individual insurance company's web sites to try to determine the estimated costs. Both methods are inefficient and expensive. Most importantly to note both methods take 20 minutes or longer. There is a modern method to obtain this information in real time using available technology. HB 2565 implements the modern real time method.
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PAGES AND VISITORS TO THE CAPITOL
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Pages and Visitors are Always Welcome
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Before the break, Jeff and his son Ethan stopped in for a visit. Ethan is in Boy Scout Troop 91, which is chartered to Village Presbyterian.
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Capitol Office
Overland Park 8416 W. 115th Street Overland Park, KS 66210 913.345.9416
Paid for by "Jim Denning for Kansas Senate" Kathy Vance, Treasurer | |
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