Kansas Health Institute | Information For Policy Makers. Health for Kansans.

TOPEKA — There are enough votes to pass a $300 million to $400 million tax increase, the governor told KHI News Service.

But still uncertain, he said, is the specific mix of taxes legislators will settle on. They currently have before them proposals to increase the general sales tax but also tobacco and alcohol. The Senate also is considering a measure that for the first time tax the sugar in soft drinks and other sugary beverages. The Senate and House this week also are looking at bills that would repeal sales tax exemptions.

“I think they (legislators) are slowly coming around to the notion that not only can we not cut any more, we’re going to have to raise taxes. I think they are just now coming to accept that,” Gov. Mark Parkinson told KHI News Service and State of the State KS in a videotaped interview last week.

Parkinson said his assessment came from public statements by Senate Republican leaders and private conversations with legislators of both parties.

The worst economic decline since the Great Depression and the most sustained decline in revenues in state history have forced Parkinson and the Legislature to cut approximately $1.3 billion in spending over the past two budget years, including a 10 percent reduction in Medicaid reimbursement rates. But to keep from cutting more from education, social and public safety programs in the budget year that starts July 1, they must come up with approximately $450 million in new taxes, spending cuts or some combination of both.

Some legislators, particularly House Republicans, continue to say that they prefer deeper cuts to raising taxes.

The House on Tuesday is scheduled to debate House Bill 2549, which would repeal a variety of sales tax exemptions, including those for residential utilities and non-profit organizations except for purposes of fundraising. The measure is projected to add about $127 million to state coffers in fiscal 2011.

“The governor, his administration, and the House Democrats have been demanding a tax increase from day one. They refuse to look for waste or for ways to curb the 33.5 percent growth we’ve had in state expenditures in the last 10 years, even through this recession,” said House Majority Leader Ray Merrick, R-Stillwell. “Now is their chance. If they want to call for us to raise taxes, it’s time for the Democrats to put the taxpayers’ money where their mouths are. Let’s have a full and open debate on the merits of taxing our citizens during this recession.”

The Senate Ways and Means Committee started hearings Monday on Senate Bill 476, which would close sales tax exemptions to the tune of about $168 million.

If lawmakers chose to eliminate all sales tax exemptions it would raise $1.3 billion and the tax base would be broad enough to allow the state’s general sales tax to be reduced from 5.3 cents to 2.3 cents, said Revenue Secretary Joan Wagnon.

No more cuts

Parkinson has made clear he believes more cuts would do lasting damage to programs people depend upon.

“My principal objective is to not cut anymore,” he said. I define victory as funding our programs. How we get there, I’m very open to (different options).”

Parkinson said he thought the proposed increase in the tobacco tax – taking the per-pack levy on cigarettes from 79 cents to the national average of $1.34 – would be easiest for legislators to support.

“I can tell you that an overwhelming majority of the public supports raising tobacco taxes,” Parkinson said. “So, that tells me there is a pretty good chance that it will be included in the final mix.”

In addition to generating an estimated $51.9 million a year for the state, an increase in cigarette and tobacco taxes would help curb smoking and use of other tobacco products. Tobacco-related illnesses cost Kansans nearly $1 billion a year in health care costs.

Health advocates say a tax on sugary drinks would, in addition to generating about $90 million a year for the treasury, also help combat obesity and related problems such as diabetes.

Roderick Bremby, secretary of the Kansas Department of Health and Environment, told members of the Senate Taxation Committee last week that obesity-related illnesses were costing government health programs in Kansas at least $280 million a year.

Even so, Parkinson said he isn’t expecting the tax on high-sugar drinks to end up in the revenue-raising package that lawmakers send to him.

“I suspect that is going to be a pretty difficult sell to the public,” he said.

Sen. Les Donovan, chair of the Senate Assessment and Taxation Committee, proposed a mix of tax increases for tobacco, alcohol, soda pop and general sales. His plan would generate about $350 million a year. But response from fellow committee members was less than enthusiastic.

Maybe more Medicaid help

Parkinson was one of more than 40 governors who recently signed a letter to congressional leaders urging speedy passage of federal legislation that among other things would provide the states with another six months of increased Medicaid funding.

The U.S. Senate passed the bill last week. It isn’t known yet whether the House will ask for a conference committee to negotiate differences between its measure and the one approved by the Senate. In addition to the Medicaid money, the bill contains one-year extensions of unemployment benefits and COBRA health insurance for people who have lost their jobs.

Parkinson said that extra funding could be critical to resolving the state’s budget problem.

“What it would mean to Kansas is about $125 million that we could directly use for fiscal year 2011,” he said. “If the budget hole is $500 million, it significantly lowers that number.”

If the federal aid is extended it would help take care of the state’s second largest general fund expenditure – Medicaid.

Thanks to the economic stimulus package approved in February 2009, the state already is expected to receive $440 million in the form of a higher federal Medicaid assistance. The additional money, if it comes, would push that total to approximately $565 million.

“Kansas needs this help,” Parkinson, a Democrat, said. “Forty-five governors, Republicans and Democrats, are encouraging Congress to do this. I would hope that our delegation would help us out.”

So far, only 3rd District Congressman Dennis Moore, a Democrat, has voted for the bill. U.S. Reps. Lynn Jenkins, Jerry Moran and Todd Tiahrt, all Republicans, voted against it.

U.S. Sens. Sam Brownback and Pat Roberts, both Republicans, voted against the Senate version March 10.