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.

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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.