After a longer than normal break, the Kansas Legislature is back in Topeka for the wrap-up/veto session to finish the work begun in January and going through April.
We have a number of issues that may be taken up, but the only issue requiring action is the 2014 budget. Making adjustments to the tax revenues is actually optional, but the earlier we settle some of those issues the better for the state long-term.
The state budget was nearly finished before the Legislature recessed in April, but finishing touches can now be made as the revenue estimates are in and the Legislature will be deciding what to do regarding sales and income taxes.
Revenue estimates were virtually unchanged from previous estimates, so nothing of note there. Estimates were lowered $10 million, but in the state general fund budget of $6 billion, that amount is considered a rounding error so will have little or no effect on final budget proposals.
The tax issue is a little different story. There are three basic scenarios that the Legislature could act on. The problem is that the tax cuts were implemented last year cut too much too quickly. Now, trying to smooth out the transition is difficult because the solution requires some modest tax increases.
If nothing is done and the sales tax drops to 5.7 percent, the current 2014 budget will work OK by using ending balances, but the balances will be gone for 2015. That makes the 2015 budget, and beyond, look extremely challenging as revenues are forecast to drop off severely.
This would likely cause some serious funding difficulty for basic services in the state and could cause a significant shift from income to property taxes for those basic services, mostly for schools.
The next scenario is to leave the sales tax rate at 6.3 percent. This would certainly alleviate many, but not all, of the difficulties. This is the simplest solution but has some problems in that the Legislature promised the sales tax would remain at 6.3 percent for only three years. This year, 2013, is the year it was promised to be reduced.
Part of keeping sales taxes high is the governor’s desire to reduce income taxes to zero. Sales tax is more regressive than income taxes and the traditional “three-legged stool” of property, sales and income taxes would be upset or changed with this plan.
The third possibility is to allow the sales tax to be reduced as promised, and somehow adjust or continue income taxes as a part of the overall tax mix in Kansas. This would not achieve the governor’s goal of eliminating income taxes, but would keep the more traditional three-legged stool of taxation as it has been for many years.
The main argument for this approach is keeping a broader base and the overall rate lower on all revenue sources.
The Legislature may also take up some conference committee reports on school budgets and alcohol sales, just to mention a couple.
There also is a push to permanently carve out persons with developmental disabilities from the KanCare system. That could be a steep uphill climb as the administration is opposed to it and could line-item veto the carve-out from the budget.
The wrap-up could be long or it could be short. It depends on how the budget and tax issues unfold. It is beginning to look like a longer wrap-up as the House and Senate tax negotiators do not have any meetings scheduled. So, it is a situation of seeing who blinks first.
I plan to keep my calendar clear for several weeks as wrap-up could extend for a while. The most difficult part is figuring out how to spend the long days with little to do. Maybe a good book is in order.
Don Schroeder, R-Hesston, represents the 74th District, which includes Hillsboro and roughly the southern half of Marion County, the southeast corner of McPherson County and all but the southeast corner of Harvey County.