Kansas Week of Feb 17, 2017

3rd Annual MAMA Day on the Hill

The MAMA Day on the Hill was this past Wednesday, February 15th. Attendees got their picture taken with Governor Brownback and visited with several new members of House and Senate leadership. Speakers talked about some of the tax measures that were addressed this week to try to fill the budget gap for this fiscal year and the anticipated shortfall for next fiscal year. The day on the hill is productive because it gets our members more comfortable and knowledgeable on the Legislative process in Kansas. It also raises the profile of our association with the Kansas Legislature. There has been a lot of turnover in the legislature and it’s important to meet the new members and continue building relationships with current members. Thanks to all those that attended this year and helped make it a success.

 

House passes tax bill

The House, 76 to 48, passed its income tax increase bill ,that eliminates the LLC exemption and creates a third tax bracket, to the Senate. Senators killed a Democrat-crafted tax bill yesterday and is working on the House bill today.

Of the 76 yes votes, 40 were Republicans and 36 Democrats; of the 48 no votes, 44 were Republicans and 4 were Democrats. One Republican was absent. This vote is 8 votes less than is needed to override a gubernatorial veto of the measure.

The vote appears to establish a moderate Republican/Democrat consortium that will show the House's willingness to reject Gov. Sam Brownback's tax plan which would allow him to preserve the tax exemption for the LLCs that he campaigned on for re-election in 2014 and has championed with threats to veto its removal.

The bill raises about $590 million in upcoming Fiscal Year 2018 and $453 million the following year. That's less than the Senate bill that was rejected yesterday but more than the governor's budget plan which raises less than $200 million in each of the upcoming years, largely from cigarette and liquor taxes with a dab of filing fee increase and adding rents and royalty receipts to individual income tax liability.

The House now moves to consideration of a relatively Brownback-friendly rescission bill and a measure to borrow idle funds to make it through the current fiscal year's estimated $325 million deficit. 

 

Brownback blasts House tax plan

Gov. Sam Brownback criticized the House's income tax bill but stopped short of threatening to veto the bill should it be passed to him.

Brownback's statement:

"The House moved forward on the Democratic tax bill that would pummel the pocketbook of middle class families. It drastically hikes taxes retroactively on workers making as little as $15,000 annually. While on the campaign trail many of these representatives pledged to raise taxes on the wealthy, but now they are attempting to tax everyday Kansans. It doesn't have to be this way. I will continue the fight to keep your income taxes low.

"This plan also unfairly raises taxes retroactively on Kansas job creators, sending a negative signal to businesses looking to start or relocate in Kansas. There is a better way. My budget solves the challenges of today, has solutions for tomorrow, and avoids punishing tax increases on middle class workers, families, and job creators."

The House plan is retroactive to Jan. 1 of this year (first day of Tax Year 2017) The tax hike for married couples filing jointly with taxable income of $15,000 or less does away with a tax cut that current law provides for- eliminating a drop from 2.7% to 2.6% for those taxpayers-as does the governor's tax proposal which hasn't been OK'd in either chamber's tax committees.

 

Senate kills tax bill

The Senate, 30-10, yesterday afternoon killed not only a revenue-rich Democrat-sponsored income tax plan, but also a smaller Senate Republican-sponsored income tax revision plan, and is working today the House-passed income tax increase measure.

Sen. Tom Holland, D-Baldwin City, offered the Senate GOP plan as a gut-and-go to the Democrat plan and it was rejected with no audible votes.

Holland then returned to the Democrat-sponsored bill, which raises more money for the state than any considered this year. He lauded it as a cure for the state's revenue shortfall and saw it killed, with Sen. Randall Hardy, R-Salina, joining the chamber's 9 Democrats in the 30-10 vote.

The action sets the stage for today’s Senate plan to convene at 8 a.m. to debate the bipartisan tax plan approved 76-48 by the House.

It is widely presumed the Senate will pass the House's bill to Gov. Sam Brownback, who has opposed the bill but hasn't used the "V" (veto) word publically but privately has promised to veto any bill that removes the LLC loophole. His staff had no additional missives today from the governor, just "that he has said he won't sign it." That could mean if he leaves the bill untouched for 10 days after he receives it, it becomes law without his signature.

Brownback consistently opposes elimination of the LLC non-wage tax exemption, which he calls a business-booster for the state, and chides the remainder of the bill for raising the income tax rates of most middle-income Kansans.

Holland, in pushing for the LLC exemption elimination, said that of the roughly $205 million that exemption costs the state in revenues, 2% of top-income filers save $121 million or 65% of the value of the exemption, while LLC owners with non-wage incomes of less than $25,000 save only about $158 each under the plan, which Brownback would erase with his proposal to increase LLC filing fees from $40 to $200 a year.

The Senate Democrat proposal would have returned the state to three tax brackets, eliminated non-wage income exemption for LLCs and restored medical expense deductions. All tax measures considered so far end the "ratchet" provision which aims to reduce individual income tax rates based on increased revenues until there is no individual income tax and then corporate tax rates start being trimmed.

The Democrat bill killed yesterday was projected to raise $702 million in the upcoming fiscal year, $513 million in the next year. The House-passed plan to be debated by the Senate today is projected to raise $590 million in the upcoming fiscal year and $453 million the following year. The first-year revenues from the tax plans being considered are based on them being retroactive to Jan. 1 of this year. That retroactivity bonus fades the second fiscal year income taxes are in place.

 

Resman sworn in

John Resman, Olathe, was sworn in this morning at the opening of the House session to replace former Rep. Mike Kiegerl, R-Olathe, who resigned his District 121 House seat.

Kiegerl has health problems, and Resman, who was selected to replace Kiegerl Monday night, will take office immediately after his swearing-in.

Resman is retired from the Johnson County Sheriff's office, where he worked 28 years. Last fall he lost the GOP primary in the Johnson County Sheriff race.

Kansas Week of Feb 10, 2017

Ways and Means

Rescission bill

The Senate Ways and Means Committee this morning passed out a rescission bill and a companion measure that are projected to virtually eliminate the current fiscal year deficit which is between $330 million and $350 million.

The rescission bill cuts K-12 funding for the current fiscal year by 5%, or about $128 million; higher education by 3%, or about $23 million, and picks up another $3 million in small cuts from a wide variety of agencies. The bill also delays repayment of KPERS for state money borrowed last year, worth maybe $90 million in savings this year.

A companion proposal by Ways and Means Chair Carolyn McGinn, R-Sedgwick, would borrow $100 million this fiscal year in state idle funds managed by the Pooled Money Investment Board for repayment over four years.

The package-which could be debated as early as Thursday-would produce a total of about $343 million for the current fiscal year, enough to meet the projected shortfall and produce an ending balance of as much as $75 million, McGinn said. The numbers aren't yet precise-or computed by the Legislative Research Department.

The votes were 9-4 to move the rescission bill out of committee, with Sens. Anthony Hensley and Laura Kelly, both D-Topeka, Tom Hawk, D-Manhattan, and Vicki Schmidt, R-Topeka, voting against sending the measure to the Senate for debate. Tapping the Pooled Money Investment Board funds was passed on a voice vote.

Senate Majority Leader Jim Denning, R-Overland Park, added a provision to the rescission bill that would create a $15 million "extraordinary needs" supplemental fund to be managed by the State Board of Education that would be available for disbursement to school districts that can't afford the 5% across the board cuts to their block grant funds this year.

That 5% cut is believed to be "absorbable" by most school districts, but Denning said there may be as many as 32 districts that don't have enough idle funds to meet their budgets this fiscal year. The across-the-board cuts are expected to see many districts dip into idle funds which some lawmakers would like to see reduced anyway.

The Ways and Means action follows the Senate Tax Committee's vote earlier today to send a tax package for upcoming fiscal years 2018 and 2019 to full Senate for debate. Assembling the budget-balancing rescission package is expected to reduce the angst in the Senate on the tax-raising bill.

The Senate's rescission package varies dramatically from Gov. Sam Brownback's plan to borrow more than $300 million in state idle funds and repay them over seven years to avoid politically unpopular cuts to spending-such as the Senate's K-12 cut proposal.

The Senate's apparent strategy is to make K-12 and higher education cuts as a demonstration that it will use both cuts and higher taxes to put Kansas back on a more stable budget basis. Brownback Monday railed at the Senate leadership for a bill containing individual income tax increases and eliminating the LLC non-wage income tax exemption; in 2012 he supported implementing the LLC exemption and income tax decreases.

 

Senate: 8 a.m. Thursday

The Senate will debate its tax and rescission bills starting at 8 a.m. Thursday in a package that is designed not only to fix the shortfall in this fiscal year's budget but to consider a tax package leaders hope will resolve the ongoing revenue shortfalls of the past several years.

The early morning start on the package of bills aimed at resolving the current roughly $325 million shortfall for the remaining four-plus months of this fiscal year and raising income taxes for the out-years may stretch through most of the day.

It is both a fiscal fix and a Senate GOP leadership plan to separate the Legislature-or maybe just the Senate-from Gov. Sam Brownback's fiscal management plan which relies on short-term borrowing of state idle funds, taking almost $600 million from KDOT and increasing cigarette and liquor taxes to wrap up the final two years of his last term as governor.

The Senate's plan, which closely resembles Senate President Susan Wagle’s, R-Wichita plan, and probably many of the GOP caucus, is based on Kansans recognizing the need for more revenues and endorsing straightforward tax and spending cuts to balance the budget, and allowing lawmakers the flexibility to pass some unpleasant legislation to align spending and taxes.

The Senate action also is likely to be a test of support in the upper chamber for Wagle's leadership-which stretches three more years.

The Senate is still waiting on fiscal notes on the tax measure, which includes hikes in individual tax rates and eliminating the LLC non-wage income tax provisions, and the total value of the rescission bill for the current fiscal year. Those numbers are expected on today.

***

The House, which has a couple tax bills in its Assessment and Taxation Committee and which hasn't completed work on its version of the rescission bill, at this point is watching the Senate to see what's possible and what isn't. Look for the House to delay action on its package until the Senate has taken a position.

Kansas Week of Feb 3, 2017

Revenues up $24 million

Kansas January tax collections were $23.8 million above estimates, the Kansas Department of Revenue reported this week. The $543 million January receipts were 4.59% above estimates.

The tax collections were led by corporate and sales tax receipts.

January is the third month of receipts exceeding estimates after November's Consensus Revenue Estimating Group's sharp reduction in estimates of state revenues for the remainder of this fiscal year.

The three-month streak of above-projection receipts is likely to spur lawmakers to move the rescission and budget bills now that they have more confidence in revenue estimates.

Big leaders: Corporate income taxes of $18.5 million, 131% above estimates of $8 million, and likely holiday-spurred sales taxes of $216.5 million, $13.5 million or 6.68% above estimates of $203 million.

Overall, January revenues were $8.5 million above last January, and fiscal year-to-date receipts are $14 million less than last year.

 

Senate leadership tax bill

The Senate's GOP leadership this week introduced a tax plan that eliminates the LLC exemption and raises individual income taxes for a total of about $430 million for its first year in effect.

Nearly everyone expected a closure of the four-year-old LLC non-wage income exclusion, but the bill, which Senate President Susan Wagle, R-Wichita, said represents a consensus of the 31-member GOP caucus in the Senate, stretches into individual income taxes, too.

It is believed to be the first bill of the session to propose increases in individual income tax rates-which produced a larger hole in state revenues than did the LLC provisions which were passed in 2012.

The proposed rates for individual income taxes for tax year 2018 would, for married couples filing jointly, boost the rate from 2.7% to 3% for those with taxable income of up to $30,000, and for joint filers with income over $30,000, from $780 plus 4.6% to $900 plus 4.9%.

The new rates are predicted to draw about $54 million in additional income taxes from Kansans with incomes of less than $30,000 and about $150 million more from Kansans with joint incomes of more than $30,000. Best estimates are that a hike of 0.1% in tax rate draws $18 million from the under-$30,000 group, while the same 0.1% increase raises $50 million from the over-$30,000 earners.

Wagle said the bill appears to be about where a majority of the GOP caucus is, but it still has to emerge from the Senate Tax Committee and face debate on the Senate floor.

Adding in individual income tax hikes may be a key to attracting moderate Republicans, but it isn't likely that Senate Democrats, who are on board with the LLC provision, will be interested in a combination measure that includes raising more than $50 million from the state's low-income taxpayers.

The leadership bill sticks with two brackets, not a return to three brackets that were in place before the 2012 tax cut bill.

Generally, the measure marks that "flat and broad-based as possible" provision in the Senate Republican moderate campaign plan last year that has reduced the number of hard-right members in the chamber.

Wagle said she hopes that the Tax Committee can get moving on the bill next week, and get it to the floor for debate in mid-month.

***

Meanwhile, the House Tax Committee wrapped up hearings on a wide range of tax provisions, and Chairman Steven Johnson, R-Assaria, said he wants his panel to start assembling the House version of a tax plan next week.

 

Kiegerl to resign seat

Rep. Mike Kiegerl, R-Olathe, said today he will resign his District 121 House seat on Feb. 15. He has health problems and also is going to have to move, after his home was bought by the city of Olathe recently.

Kiegerl said he is going to have extensive medical treatment and didn't believe he would be able to serve the district as he recovers. Republican precinct committeemen and committeewomen of District 121 will elect a successor to Kiegerl, and he said John Resman, Olathe, who was an unsuccessful GOP primary candidate for Johnson County sheriff, is campaigning for the seat.

Kiegerl has been active for years on child care and child protection issues, and has a bill or two he wants to get to the House floor before his resignation date.

Kiegerl has served in the House since 2005, except for a year when he didn't seek re-election. That was 2012, because he didn't want to run against Rep. Arlen Siegfreid, R-Olathe, in a reapportionment-blended district. Kiegerl was later appointed to the seat in 2013 after Siegfreid was named a hearing officer on the State Board of Tax Appeals by Gov. Sam Brownback and resigned the House seat.

 

 

 

House Tax talks sales

There didn't seem to be much support from many committee members this week as the House Tax Committee heard solid opposition to eliminating several sales tax exemptions to boost state revenues for the two upcoming fiscal years.

The committee last week pared to a handful exemptions to look at, including big-ticket sales tax on labor in most construction projects worth about $280 million. Construction industry officials said the tax would make a $350,000 home, including about $150,000 in labor, cost an additional $15,000, which would put many Kansans out of the possibility of financing that home, and for lower-cost new homes which boost their county's property tax base, the effect would be proportional.

Ag lobbyists said a projected $76 million take from taxing farm machinery and equipment would hurt the farm economy and likely increase food prices. They said the concept behind the exemption is similar to the exemption for manufacturing machinery and equipment-which avoids about $180 million in sales taxes.

Tax Chair Steven Johnson, R-Assaria, has been focusing committee hearings on specific areas of taxation, broadening members' background.

But so far, beside the LLC non-wage income tax exemption, most committee members don't appear to be warming to other revenue-raisers.

 

Cigarette tax cleanup bill

draws queries

A relatively simple bill to streamline enforcement of the state tax on cigarettes necessary for Kansas to continue receiving about $60 million a year in tobacco settlement monies hit a snag in the Senate Tax Committee this week.

The measure, largely technical about where taxes are paid and enforcement demanded by cigarette manufacturers to continue sending money to the state, contained a provision that sets the threshold for illegally bringing non-Kansas taxed cigarettes into the state. That threshold in the bill would go from two cartons of cigarettes to five cartons, at which level the carriers would be subject to fines or prosecution.

Sen. Dan Goddard, R-Parsons, questioned the increase in allowable import of smokes.

He said in border areas-especially near Missouri-that cigarette buyers would save at least $10 per carton of cigarettes taxed at 13 cents a pack in Missouri and $1.25 a pack in Kansas.

The Department of Revenue said the bill was mostly aimed at meeting requirements for the tobacco settlement agreement, and apparently not much thought was given to cross-border cigarette buyers.

Goddard said he's going to be watching for a return to the two-carton limit, because it tends to protect Kansas-based cigarette sales.

 

Tobacco/liquor hearings open

The House Tax Committee opened hearings on Gov. Sam Brownback's plans to double the tax on liquor-worth $52 million next year-and to boost the tax on cigarettes/tobacco products worth an estimated $48 million.

The so-called "sin taxes" brought proponents and opponents for different reasons.

Anti-smoking groups including the American Cancer Society prefer a $1.50 a pack hike in cigarette taxes rather than Brownback's $1 a pack hike, saying that the bigger the increase the more likely that "sticker shock" will discourage young Kansans from starting smoking and older Kansans to quit.

Proponents of the tax also said the 50-cent a pack hike in 2015 probably encouraged many to quit smoking, lowering costs for health care for Kansans.

Opponents of the tax generally talked jobs to Kansas businesses and the stream of Kansans who will drive to Missouri to get cigarettes with just a 17 cent a pack tax, rather than Kansas, which would grow to $2.29 per pack. It was a commerce/border crossing appeal. One witness said that large tax difference would encourage criminals to smuggle cheap smokes to Kansas.

The liquor enforcement tax, now 8%, would go to 16% under the tax plan; again, that was touted as a reason many Kansans may cross state lines to buy their liquor, and restaurant and bar owners said it would drive up the cost of drinks, discouraging going out to eat/drink.

Liquor store owners said it would cost their industry about $95 million in sales across the more than 700 outlets, and committee members were repeatedly told that 47% of the state's take from liquor taxes now comes within 50 miles of the Missouri border.

Kansas Week of Jan 27, 2017

Kansas Day Weekend

Lawmakers got their start on the Kansas Day (Jan. 29) weekend early on Friday, with only a few legislators in town for pro forma sessions in each chamber.

There was Kansas Day birthday cake by the visitors center in the lower level at the State house.

 

Brownback budget plan heard

The House Appropriations Committee had hearings but delayed action on the bill that is the key to Gov. Sam Brownback's plan to balance the budget this fiscal year.

The bill allows jumping some procedural hurdles in state idle funds management to allow $317 million of the state's idle funds investments managed by the Pooled Money Investment Board to be sold--$45 million of capital gains earned by the fund transferred to the SGF and the $317 million amount to be repaid at $45 million a year over the next seven years.

The shuffle is the governor's plan to avoid massive year-end budget cuts to fill the $350 million shortfall in the SGF this fiscal year, which Brownback has been unwilling to make.

"It's the best of alternatives, bad alternatives," State Budget Director Shawn Sullivan told the committee.

Sullivan told the committee that the funds transfer is just part of the plan which would, he estimates, leave the state with a $99 million ending balance in the SGF on June 30.

***

While the budget for the remaining five months of this fiscal year is still uncertain, both House and Senate Republican caucuses are still working out plans for a tax program that will solidify the state's revenues for at least the next two, and likely more, years.

The House has been largely working quietly; the Senate GOP caucus will be offered a tax concept Monday, and see whether the caucus of 31 GOP senators has majority interest in it.

 

Jenkins won't run for any

office in 2018

U.S. Rep. Lynn Jenkins, R-Kan., announced that she won't seek re-election to her Kansas Second District congressional seat in 2018 nor will she run for any other office in 2018.

The five-term congresswoman had been exploring the possibility of running for governor that year. She had started a state-level PAC that was seen as a way for her to garner support for a run for state office.

In her statement, she said, "With the unique opportunity given to us by the American people, with Republican majorities in the House, the Senate, and now a newly inaugurated President, this is a time for action and serious policy making. This is a time for fighting for Kansas and making the tough calls; not fundraising and campaigning. This is a time we can fix the tax code, effectively reform the health-care system and make the federal government as a whole work better for the nearly 720,000 Kansans I serve in Congress. 

"As such, you should know that I will not be running for any office in 2018. In two years, at the conclusion of this Congress, I plan to retire and explore opportunities to return to the private sector, allowing a new citizen legislator to step up and serve Kansans...To those who have encouraged me along the way, who have worked for me, who have campaigned for me, or who have stood by me, I am forever grateful."

 

House Tax looks at sales taxes

The House Tax Committee is looking at eliminating sales tax exemptions or possibly imposing a less-than 6.5% state sales tax on a number of industries in a first look at the issue while committee members are learning more about sales tax exemptions and what they encourage.

Suggestions for a closer look include construction labor, in the $200 million-plus range, the exemption for farm machinery and equipment worth maybe $76 million, some Lottery tickets sold in Kansas and even computer software and advertising agency services.

Tax Chair Steven Johnson, R-Assaria, said the committee wanted to take a quick look to find several sales tax issues that committee members might want to further explore, and said he's going to have more information on the several tax policy changes that drew at least some interest in committee.

 

GOP sets 4th District convention

Republicans from the Wichita-dominated 4th Congressional District will meet at 7 p.m. Feb. 9 to select their candidate for the April 11 election to replace former four-term U.S. Rep. Mike Pompeo, R-Kan., who has resigned his congressional seat.

The convention will be in the Davis Administration Building auditorium, at Friends University, 2100 W. University, Wichita.

Republicans have 126 delegates in the 17-county congressional district, and a majority of those will select the GOP candidate for the Pompeo seat. Pompeo resigned after being confirmed by the U.S. Senate on Monday as director of the Central Intelligence Agency, appointed to the post by President Donald Trump.

 

Democrats set

4th District convention

Fourth District Kansas Democrats will meet at 1 p.m. Feb. 11 to elect a nominee for the 4th Congressional District seat resigned by Mike Pompeo after he was confirmed for the post of Director of the Central Intelligence Agency on Monday.

The convention will be in the Sedgwick County Courthouse jury room at 525 N. Main, Wichita.

Republicans will select their nominee for the April 11 congressional district election in a convention at 7 p.m. Feb. 9 at the Davis Administration Building auditorium at Friends University, 2100 W. University, Wichita.

That gives the GOP candidate two extra days to campaign in the 17-county, Wichita-dominated district

Kansas Week of Jan 20, 2017

House, Senate quiet

There were bill introductions, but it was quiet in both chambers as work focused on committee action, where in both chambers budget and tax committees were working to deal with the $350 million budget deficit this fiscal year and plan for the upcoming biennial budget.

In both chambers, committees are still hearing explanations of Gov. Sam Brownback'srescission bill to finish the current fiscal year in the black and the biennial budget for the last two years of Brownback's governorship.

 

LLC tax hearing

Controversy over the fiscal note on reimposing state income tax on earnings of LLCs, farms, the self-employed and some specific corporations colored the Legislature's first hearings on an LLC tax exemption "fix" bill in the House Tax Committee.

The bill would make non-wage income taxable again after it was exempted from state income taxes in 2012. This issue has been a powerful political/state revenue issue, and this appears to be the first session since its passage that there is a reasonable chance the exemption will be removed.

But the fiscal note problem-how much money reimposing taxes on that money will raise for the state-becomes serious as a way for lawmakers to use it as a revenue shortfall stopper in the coming two fiscal years.

Gov. Sam Brownback opposes reimposing state income tax on so-called "non-wage" income.

The fiscal note controversy began weeks ago, when preliminary estimates of reimposing the tax were generally in the $260 million to $280 million a year range. The fiscal note presented to the House Tax Committee this week from the Division of Budget, an arm of the Brownback administration headed by Director of the Budget Shawn Sullivan, estimated lower proceeds from reimposing the tax.

The official fiscal note signed by Sullivan projected Fiscal Year 2018 revenues of $178 million and FY 2019 revenues of $139 million if the tax is reimposed.

***

The fiscal note problem instantly raised questions among observers, whether the administration low-balled the fiscal note to make the proposal less of a solution for the state's revenue shortage. That would have the effect of requiring lawmakers to vote for other tax increases that are politically less attractive, which works in the governor's favor.

Key to the bill's passage is whether it fixes the projected shortfalls in revenues in the coming two years, and the fiscal note is the focus. 

Hearing will continue next week in House Tax on the bill.

 

Pompeo bill signed

Gov. Sam Brownback signed the congressional replacement bill, clearing the way for an expedited procedure to elect a successor to U.S. Rep. Mike Pompeo, R-Kan., if he is confirmed as Central Intelligence Agency director in the administration of President-elect Donald Trump.

The measure moved quickly from the House to the Senate and the governor's office. 

Key is that with the governor's signature, it's the law that will apply to a vacancy in the congressional seat, not only speeding the replacement election process but getting the 4th Congressional District a congressman quickly.

Brownback said he was glad the bill-first of the 2017 session-was handled so quickly. 

The measure speeds the time Brownback will have to call a special election if Pompeo resigns his seat to run the CIA, speeds nomination of candidates for the office and reduces to 3,000 the number of petition signatures needed by independent candidates to get on the ballot.

Kansas Week of Jan 13, 2017

Kansas Legislature Opening Day

Kansas House and Senate members were sworn into office quickly Monday afternoon, House members 10 at a time, senators 5 at a time, in their respective chambers, and the interest quickly turned to Tuesday's 5 p.m. State of the State message and Wednesday's briefing on the governor's plan to balance the budget for the remaining six months of this fiscal year.

Kansas Supreme Court Chief Justice Lawton Nuss swore in House members, Supreme Court Justice Marla Lukert swore in senators. The House gallery was tightly packed with friends and family of lawmakers; the smaller Senate chamber was so packed visitors were probably afraid to scratch.

The Senate was in session for 52 minutes, the House 72 minutes on opening day.

No real business, just introducing pre-filed bills and approving unanimously the party caucus votes that saw Rep. Ron Ryckman, R-Olathe, become Speaker of the House and similar unanimous votes that put Sen. Susan Wagle, R-Wichita, into her second term as president.

Five-term Rep. Marvin Kleeb, R-Overland Park, resigned his seat effective Tuesday to be succeeded by Abraham Rafie, R-Overland Park, bid farewell to the House, introduced his new bride, and received a standing ovation for his service.

In the Senate, Wagle and Minority Leader Anthony Hensley, D-Topeka, both spoke specifically about the $350 million budget shortfall for the current fiscal year, Hensley saying his caucus is willing to work toward tax fairness, Wagle saying that the Senate can find common ground for a solution and "if we work together, history will be kind to us."

 

House Tax starts

Less than an hour after taking their oaths of office, members of the House Tax Committee were sketching hazy outlines of major tax changes for the upcoming year and introduced a bill that would eliminate the four-year-old income tax exemption for Limited Liability Corporations, sole proprietorships and others.

It was the fastest first-day committee action in recent memory and Tax Chair Steven Johnson, R-Assaria, was looking for broad outlines of legislation the committee will pursue to boost state revenues.

 

Governor’s State of State

The reaction by legislative leaders to Gov. Sam Brownback's 32-minute State of the State Address Tuesday evening was predictable, and the speech itself provided some hints to what Brownback is looking for in a budget-fix bill and a new K-12 school finance plan.

Brownback stayed firmly supportive of the 2012 income tax bill which has helped create a budget shortfall and let more than 300,000 Kansans escape income taxes, saying that the effort is spurring economic development and bringing jobs to the state.

The governor also said he opposes expansion of the Affordable Care Act and Medicaid (KanCare here) because more Kansans are receiving health care than in the past, asserting that "It would be foolish to endorse the ObamaCare expansion of Medicaid. Kansas was right (in rejecting Medicaid expansion). Kansas should stay the course," Brownback said. 

Brownback said after his speech that he wants merit pay for schoolteachers, and that it should be part of a new K-12 school finance formula he wants passed this session, but that it probably isn't worth vetoing a finance bill that meets his other requirements of rewarding school districts which produce high-quality graduates.

 

 

 

Short-term borrowing

is current budget fix

Gov. Sam Brownback's proposal for fixing the $350 million budget shortfall this fiscal year is largely internal borrowing of state idle funds, to be paid back to agencies over seven years.

That's about $317 million of the shortfall, including tapping unclaimed property and other small funds for $45 million and taking about $27 million or more from the folding of the Kansas Bioscience Authority and cuts in KPERS payments worth about $86 million, while extending by 10 years to 2043 the actuarial balance target for the retirement account.

The cuts in current year spending are designed to yield a theoretical ending balance of $99 million which includes delaying a school finance payment into the next fiscal year rather than making an $86 million payment in the current fiscal year which 

For the biennial budget for Fiscal Years 2018 and 2019, which starts July 1, Brownback is proposing a handful of spending increases-including restoring the 4% cut to KanCare providers of health care to the poor.

Sullivan said the plan includes securitizing tobacco settlement payments-typically about $55 million to $60 million a year from cigarette manufacturers, which should net the state about $530 million-which depending on the financial markets could yield as much as $775 million. Essentially, the state sells the next 30 years of those expected tobacco payments for cash-in-hand and spends the proceeds. Sullivan said the tobacco money has traditionally been spent on programs to aid children but those programs now would be paid for from the State General Fund.

The governor proposes a tax plan expected to yield $180 million in the upcoming fiscal year and $198 million the following year. He carefully avoids tax rate increases on hisLLC tax plan.

Those increases are restoring the income tax on passive income, generally rents and royalties, worth about $40 million a year and freezing the bottom Kansas income tax bracket at 2.7%, which eliminates a planned reduction to a 2.6% rate worth $4.8 million in FY 2018 and $16 million in FY 2019.

For those LLCs, he proposes increasing the annual filing fee for owners from $40 to $200 for currently tax-exempt LLCs and similar businesses. That 500% increase in filing fees-not actual taxes-is expected to raise about $33.6 million each year for the next two fiscal years. 

Brownback-who last year proposed a $1.50 a pack cigarette tax increase and was handed just 50 cents by the Legislature-is going back for the other $1, which would put cigarette taxes at $2.29 a pack starting July 1 and which would raise about $41 million next fiscal year and $46 million in the following year.

He would also double from 10% to 20% the tax on other tobacco products-snuff, chewing tobacco, cigars and such-to raise $6.2 million next year and $7.8 million the following year.

He's also proposing doubling the tax on liquor, from 8% to 16%, which should net $52 million next year and $54 million the following year. That liquor tax boost would occur on July 1, giving folks time to stock up for 4th of July parties...

 

On the spending side, for the final two years of his administration, the governor is proposing legislation to force all 286 Kansas school districts to join a single health insurance program tied to the state employee health insurance plan, saving districts some $47 million in the upcoming fiscal year and about $90 million the year after. That boosting of the state insurance plan numbers might mean lower, or at least stabilized, rates.

He's also proposing moving all Medicaid (KanCare) management to the Kansas Department of Health and Environment as an overhead savings, extending the contract with the state's three managed care providers for another year and increasing fees of those providers from 3.31% to 5.77%, to create a fund to increase reimbursement rates to health care providers, targeting $20 million of that boost to rural hospitals.

The two-year budget proposes continuing to strip the sales tax transfers from the Kansas Department of Transportation, which would boost the SGF by $288 million in the next fiscal year and $293 million in Fiscal Year 2019.

For higher education, Brownback plans to spend $3 million in FY 2018 and $6 million the following year for scholarships for teachers who teach in rural areas and flat operating grants for the state's higher education system for the next two years. 

The budget plan debut was to the House Appropriations and Tax committees, followed by the Senate Ways and Means Committee midweek.

 

 

First debate Thursday

The House had its first debate of the session Thursday when it considered a bill aimed at updating the specific election laws that apply to filling a vacancy in a congressional seat, a fairly complex and different set of laws than for conventional elections.

The bill comes to focus as the U.S. Senate is considering the appointment by President-elect Donald Trump of 4th District U.S. Rep. Mike Pompeo, R-Kan., to be director of the Central Intelligence Agency. Pompeo hasn't stood for a confirmation hearing yet or resigned his House seat.

Key to the new bill is changing from 17,000 to 3,000 the number of signatures on a petition to put a non-party candidate on the ballot, delay the election for a replacement member of Congress from the current 60 days to 90 days and allow for quicker calling of conventions to select a candidate for the vacant seat.

 

 

House passes Pompeo replacement bill

The House, while a U.S. Senate committee in Washington, D.C., was interviewing U.S. Rep. Mike Pompeo, R-Kan., who has been nominated by President-Elect Donald Trump to lead the Central Intelligence Agency, passed 122-1 a bill to update Kansas election law allowing a successor to be elected should Pompeo get the job and resign his District 4 congressional seat.

The bill, first of the session passed by one house to the other, takes the selection process for a replacement member of Congress from 65 days to 95 days and will require just 3,000 signatures on a petition to put a non-major party candidate on the ballot for that election. 

 

 

 

Four Day Weeked begins

 

The House debated and passed measures Thursday as the opening week of the 2017 session got started and headed into what for most can be a four-day weekend.

Both the Senate at 8 a.m. and House at 9 a.m. will be pro forma Today, just introducing bills and getting out of town ahead of a forecast weekend ice storm and Monday which is Martin Luther King Day.

House and Senate leadership apparently by today hadn't huddled to see which chamber will take first action on the governor's rescission bill and his biennial budget bills.