Kansas Lawmakers See $1.4B Tax Plan After Other Budget Fixes

May 16, 2017

Credit Stephen Koranda / KPR/File photo

Republican legislators on Monday saw their most aggressive proposal yet for increasing income taxes to fix Kansas' budget and provide extra money for public schools, even advancing other proposals that would lessen their need to roll back past tax cuts championed by GOP Gov. Sam Brownback.

The new proposal would reinstate the income tax laws that were in place in Kansas in 2012 before Brownback persuaded lawmakers to slash rates and grant an exemption to more than 330,000 farmers and business owners. The plan would raise $1.4 billion over two years.

Kansas faces projected budget shortfalls totaling $887 million through June 2019, and the Kansas Supreme Court ruled in March that the state's education funding is inadequate. While Democrats and GOP moderates have been working together on increasing income taxes, they've yet to come up with a plan with the two-thirds majorities in both chambers necessary to override a Brownback veto.

Republicans pushed a bill through the House on Monday that would raise $110 million over two years by imposing the state's sales tax on some services that are now untaxed, including towing and pet boarding. A GOP-controlled House committee whittled down a school funding plan and approved phasing in a $280 million increase over two years a modest amount that even some backers saw as inadequate.

With those actions as a backdrop, the House and Senate restarted negotiations on tax issues that had stalled. Rep. Steven Johnson, a moderate Assaria Republican and the House's lead negotiator, floated the $1.4 billion income tax plan, stunning senators who'd thought lawmakers' work was headed toward something less aggressive.

"We're looking for a number of plans that different folks are behind," Johnson said later. "This is one that has been talked about."

Monday was the 91st day of an annual session that was scheduled to last 100 days and end May 24.

The state's budget problems arose after the income tax cuts in 2012 and 2013, touted by Brownback as pro-growth policies. They persisted following economic slumps in agriculture and energy production.

Legislators already were looking at big tax increases when the court ruled in an education funding lawsuit filed by four school districts in 2010, directing lawmakers to pass a new school finance law by June 30.

The House's school finance committee on Monday began with a plan phasing in a $783 million increase over five years. But some Republicans doubted that lawmakers would increase taxes enough to pay for it.

The committee has been mired in several weeks of discussions about the details of a new per-student formula for distributing state dollars to Kansas' 286 school districts. It's designed to ensure that enough of the money helps students who are at risk of failing.

Disagreements over the total size of the spending increase threatened to hold up further work, so some moderate Republicans accepted a smaller plan temporarily, they said. The vote was 10-6, sending the measure to the House for debate later this week.

"We were at a brick wall," said Rep. Melissa Rooker, a moderate Fairway Republican. The Supreme Court did not say how much lawmakers must increase state aid to schools, now about $4 billion a year. But John Robb, an attorney representing the districts suing the state, said last week that even the committee's larger plan was inadequate.

Democratic Rep. Tom Sawyer, of Wichita, said with the smaller plan, "We will get laughed out of court."

Meanwhile, in raising revenue, Kansas generally doesn't levy its 6.5 percent sales tax on services. Some lawmakers have talked for several decades about eliminating sales tax exemptions, though without much success.

The bill approved by the House also would impose the tax on storage, security and non-residential cleaning services, as well as services performed by private detectives. The vote was 78-42 and sent the measure to the Senate.

To make those changes go down easier for consumers, the bill would cut the sales tax on groceries to 5.5 percent in July 2020. But some Democrats predicted legislators would renege on the promise if the state faces further budget problems.