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Jan. 15, 2013
TOPEKA Without revealing much in the way of detail, Gov. Sam Brownback in the annual state-of-the-state speech to the Kansas Legislature outlined a two-year budget plan that among other things would continue his push to eliminate the state income tax.
"Look out Texas, here comes Kansas," he said to applause from Republican legislators who jumped from their seats in approval. Texas doesn't have state income tax.
The governor proposed foregoing the scheduled decrease in the state sales tax in exchange for additional reductions in the income tax. The 6.3 percent sales tax is scheduled to drop back to 5.7 percent on July 1. It was temporarily increased in 2010 to help make up for the loss of state revenues caused by the slump in the economy.
Last year, Brownback signed into law the biggest tax cut package in state history. The major components included reducing the top income tax rate on high-wage earners from 6.45 percent to 4.9 percent and the bottom rate from 3.5 percent to 3 percent. It also eliminated the income tax for about 190,000 businesses.
His new plan would shrink the top personal income tax rate to 3.5 percent and the bottom rate to 1.9 percent.
Brownback described the reductions as the "glide path" to zero income tax and said it could happen "without cutting funding for schools, higher education or essential safety net programs."
The tax cut proposal probably was the most far-reaching initiative proposed by the governor in a six-page speech given to both chambers of the Legislature, tribal leaders, members of the state education boards, Kansas Supreme Court justices, members of his cabinet and various other spectators. The message also was broadcast live on some radio and television networks.
He did not get specific about how his proposal for a two-year budget cycle would work but more details about that are expected Wednesday when administration officials are scheduled to meet with members of the House and Senate budget committees.
The state abandoned two-year budgeting in 1956, so his plan could substantially change the current budget process, if adopted.
The governor said his two-year budget would have "substantial focus on efficiency and effectiveness" and would include 7.5 percent reserve funds (roughly $400 million) intact at the end of each year in the cycle without cutting funds to public schools or universities.
He also said it would include money to train 50 new doctors a year at a new medical school facility at the University of Kansas Medical Center in Kansas City.
The governor called for consolidating the Kansas Turnpike Authority with the Kansas Department of Transportation. The turnpike authority, created by the Legislature in 1953, oversees the toll road that runs between the Oklahoma border near Wellington and metropolitan Kansas City. It has been governed independently by its own board of directors since the road was built more than 50 years ago.
"We don't need two highway departments in Kansas," Brownback said to applause from Republican lawmakers. "By bringing these two large organizations together under the direction of the secretary of transportation, we will serve the public better and more efficiently and will have more money to put into our roads."
“Merging the KTA and KDOT is certainly an option we’ll examine in committee," House Transportation Committee Chairman Richard Proehl, R-Parsons, said in a prepared statement after the speech.
Brownback said his budget plan earmarked $12 million aimed at boosting fourth grade reading proficiency by providing incentives to schools that boost reading scores. But he spent as much time in the speech urging the Legislature to assert its primacy over the courts when it comes to school funding.
A state appellate court recently ruled that Kansas needed to boost its spending on K-12 schools by $400 million a year in order to comply with the state Constitution.
The governor used his speech to take swipes at the decision.
"The power of the purse is the primary power of the legislative body, not the executive or the judiciary," he said to a standing ovation from Republican legislators.
He asked lawmakers to write a new law defining what is "suitable provision" for public education.
He also said he would support returning to a system in which Kansas Supreme Court justices were elected by voters instead of appointed by the governor from a slate of recommendations submitted by a nominating panel of nine people that includes five attorneys.
He did not call for additional spending in base state aid, as called for in the court ruling. But he said his budget would increase overall state spending on K-12 schools. He did not say how much.
Nor did the governor talk about KanCare, the possibility of expanding Medicaid eligibility or his recently announced mental health initiative, all of which are topics expected to get some attention from the Legislature this year.
The speech was lauded by the governor's Republican allies in the Legislature but panned by Democrats. Republicans control both chambers by wide margins.
“The governor has put forth a good plan, however we may need to alter it some to make it feasible for some House members to pass,” said Rep. Richard Carlson of St. Marys, chairman of the House Tax Committee, referring to the income tax reductions.
Sen. Ty Masterson, the Andover Republican who heads the Senate Ways and Means Committee, said he favored a two-year budget process and was pleased the governor proposed it.
He said he thought it would be easier to build and balance the budget over two years rather than one because lawmakers could better adjust for "troughs" in the economy and because over two years the benefits of last year's tax cuts on job and revenue growth would become more apparent.
He also said he appreciated the governor's comments about the Legislature's primacy in setting spending priorities versus the courts.
"I was glad to see him address the recent court decision," Masterson said. "It's not just an education funding issue, it's a separation-of-powers issue. It's no different than if we passed a law prohibiting the judiciary from issuing some decision."
Senate President Susan Wagle, a Wichita Republican said she thought it would "be a good trade to keep the sales tax, if we can get to zero on the income tax.”
But some Democrats said they were flabbergasted that the governor would propose more tax cuts even as the appeals court was ordering more school spending. That decision will be reviewed by the Kansas Supreme Court
"I'm amazed," said Rep. Tom Sawyer, a Wichita Democrat. "School districts are closing schools, the court ordered us to fund schools, and the guy ignores all that and says 'I'm going ahead and cutting taxes.'"
“Gov. Brownback has brought us to the edge of our own fiscal cliff, right here in Kansas,” said Senate Democratic Leader Anthony Hensley of Topeka, noting that legislative analysts have projected a $270 million shortfall in revenues for the fiscal year that begins July 1.
House Democratic Leader Paul Davis, of Lawrence, said he found himself scratching his head when the governor characterized the state’s economy as being in “a strong fiscal position.”
“I don’t know how anyone with a negative balance in their bank account could say they’re in a strong fiscal position,” Davis said. “We have a budget deficit of $270 million-plus, and after that we’re looking at a deficit that’s close to $2.5 billion over the next five years – that’s out of a $6 billion State General Fund. I don’t see how you can say we’re in a strong fiscal condition when, in fact, we’re in a very weak fiscal condition.”
The KHI News Service is an editorially independent initiative of the Kansas Health Institute and is committed to timely, objective and in-depth coverage of health issues and the policy making environment. Find more about the News Service at khi.org/newsservice or contact us at (785) 783-2529.