Saturday, February 7, 2015

Tax schisms emerge in vote on emergency budget bill

KHI News Service

KANSAS CITY, KAN. ----- As legislators voted this week on a budget bill to keep the state solvent through the current month, Rep. Larry Hibbard laid down a gauntlet.

Hibbard, a rancher, Republican and self-described “common sense conservative” from rural southeast Kansas, said the price of his “yes” vote to keep state government running was an open debate about income tax cuts spearheaded by fellow Republican Gov. Sam Brownback in 2012 — tax cuts he blames for the budget shortfall.

“We have put at risk our state, our security, our children and our future,” Hibbard said. “I will not vote for any other budget bill until the (tax) bill of 2012 is re-examined and fixed.”

A showdown appears to be coming on the governor’s signature tax policy and his quest to eliminate the state income tax.

Revenues are not rebounding the way he envisioned, and Republicans this week voiced reluctance to stay the course if moving only to sales and property taxes means dicing state services. Several other Republicans echoed Hibbard’s words.

Pushed into a tough position between voting for a bill that cut funds for highways or social programs they liked or voting against it and risking the state’s imminent bankruptcy, most reluctantly voted “yes.”

The bill passed the House 88-34.

But a couple Republicans who were against the fee sweeps and budget cuts joined the House’s 28 Democrats in voting against the bill, and a few others — like Rep. Pete DeGraaf and Rep. Marc Rhoades — who thought the spending cuts weren’t deep enough or targeted enough also voted “no.” All of which points to how narrow the path is to a budget bill for the upcoming fiscal year.

The bill that passed this week seeks to close a $300 million gap in the current fiscal year’s budget and yet is projected to fall just short of getting the state through June 30, due to tax revenues that continue to come in below expectations. In part to make up the gap, the governor announced unilateral cuts to education funding this week.

That means unless those revenues suddenly turn around, the state will start the next fiscal year with less than $50 million in the bank and staring at a difference of nearly $600 million between current spending levels and projected income.

Budget holes to fill

Lawmakers will have to fill that hole without the help of many of the fee sweeps it used this week — because most of those funds won’t be available again.

While the state highway fund was the largest source of budget-balancing money in the emergency bill passed this week, legislators also lamented the draining of several health-related funds.

The Kansas Endowment for Youth (KEY) is meant to fund a host of early childhood programs if year-to-year settlement money from a lawsuit against tobacco companies runs out. Annual spending on those 19 programs from the tobacco money is about $55 million.

The KEY fund is down to $2.5 million, and advocates had to fight to keep that much after the governor proposed sweeping all $14.5 million.

Rep. Barbara Ballard, a Democrat from Lawrence, fruitlessly tried to preserve more, arguing that programs like one intended to fight infant mortality could be jeopardized if the tobacco money comes in short and there’s no endowment to backstop it.

“That money has a face,” Ballard said. “It has families, it has children who are depending on it.”

Rep. Jerry Henry, a Democrat from Atchison, questioned the wisdom of taking money from the state’s addiction and problem gambling fund to try to balance the budget.

“Those are funds that will not be available to help citizens in our district that have addictions to gaming, alcohol and those type of issues,” Henry said. “We’re sweeping away all kinds of funds that will be needed for people in our communities, people who have desperate needs.”

Rep. Gail Finney, a Democrat from Wichita, asked whether draining the state’s disaster relief fund would hamper its ability to respond to major events, like the tornado that flattened Greensburg in 2007.

Rep. Don Hill, a Republican from Emporia, pointed to a fee sweep from a Kansas Department of Health and Environment fund meant to help clean up underground petroleum tank spills.

“There should be no mistake that this rescission bill leaves us with less capacity to deliver help with environmental issues,” Hill said.

He faulted the 2012 tax plan for the dire budget situation, and said it was not vetted enough before the House’s 64-59 vote in May of that year.

“It was one of those times when we were on the fly, when we were rushed, when we were pressured, when we were, some of us, bullied,” Hill said.

Some see success story

But the tax cuts still have staunch supporters in the Legislature, especially in the Senate.

That chamber voted 24-13 to pass the emergency budget bill. Before that vote, Ways and Means Committee Chairman Ty Masterson, a Republican senator from Andover, criticized Democrats for focusing on how the tax cuts affected government revenue rather than taxpayers.

“It almost drives me crazy when I hear, ‘Kansas lost $700 million,’” Masterson said. “That money didn’t disappear. I could also say, ‘Kansans find $700 million.’”

He said the tax cuts continue to be a success story.

“We’re the lowest income tax state in our region now,” Masterson said. Rep. Steve Brunk, a Republican from Wichita, said that while “certainly there was pressure” when the 2012 tax bill passed the House, there was no bullying and no surprises.

Brunk said Kansans are happy with the tax plan.

In exit polls following the 2014 election, 53 percent of Kansas voters said they believe the cuts are hurting the state and 41 percent said they have helped.

Masterson said some interpret the state’s budget problems not as an indictment of the tax cuts but as a signal that the Legislature should do more to reduce government spending.

“There’s some people that aren’t going to vote for this bill because it spends too much,” Masterson said. “We’re not shrinking at the rate some would like us to shrink.”

Meanwhile, Rep. Don Hineman, a Republican from Dighton, said reworking the 2012 tax bill should be the Legislature’s top priority.

If a reworked tax plan navigates the various viewpoints in the House and Senate, Brownback would have the option to veto it. Brownback has proposed a 2016 budget bill that would slow the 2012 tax cuts but not walk back on them completely.

His plan includes new revenue from alcohol and tobacco tax increases that are popular with some public health experts but seem to be fizzling with legislators.

Those increases are not projected to make up the revenue lost to the income tax cuts. Brownback has said he’s open to ideas and has invited legislators to bring them.

Though no one has introduced any significant revision to the 2012 tax plan yet, a core group of House Republicans this week said that is a prerequisite for their votes going forward.

“I don’t think there’s any way out of this mess without raising taxes,” said Rep. Don Schroeder, a Republican from Hesston. “So get used to it.”