KHI News Service

Details of Brownback budget plan released

Tax increases and fee shifts proposed as means to close $503 million budget gap

By Mike Shields | January 16, 2013

The details of Gov. Sam Brownback's budget plan for the next two fiscal years were made public today by administration officials during a series of meetings with legislative budget writers and news reporters.

"Everyone will find something to not like in this budget," said Budget Director Steve Anderson during a presentation to members of the House Appropriations Committee.

For example, "the continuation of the sales tax is something some members will have problems with," Anderson predicted.


Governor's Budget Report, FY 2014 (Vol. 1)

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Governor's Budget Report 2014 (Vol.2)

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Tax increases and shifts

In his state-of-the-state speech on Tuesday night, the governor emphasized cutting income taxes. But the details of his budget plan showed that the governor's proposal would increase taxes more than it would cut them and shift money from the highway department and other programs in order to close an anticipated $503 million budget gap.

The tax increases would come from repealing the drop in the state sales tax now scheduled for July and from elimination of the income tax deduction for home mortgage interest. Administration officials said only about 30 percent of the state's income taxpayers claim itemized deductions. They also said that eliminating the mortgage deduction would fall mostly on those who are relatively affluent.

Together, the two proposed tax increases would generate about $424 million for fiscal 2014 with about $262.2 million of that coming from keeping the sales tax at 6.3 percent instead of letting it drop to 5.7 percent.

That would be partially offset by the income tax cuts, which would be phased in starting in tax year 2014 when the bottom rate would drop to 2.5 percent from the current 3 percent and then shrink to 1.9 percent in tax year 2016. The top rate would drop to 3.5 percent in tax year 2017. The current top rate is 4.9 percent.

According to administration projections, the tax increases over the proposed, two-year budget cycle would bring a total of about $853 million additional dollars to the treasury. The tax cuts over the same period would cost the treasury about $166 million.

The governor in his Tuesday speech described the proposed income tax cuts as way stations on the path to full elimination of the state income tax, but it remains to be seen whether lawmakers will be willing to trade a larger set of tax increases for a smaller set of cuts over the next two years.

In keeping with the requirement of the Kansas Constitution that the state budget be balanced, the governor also proposed that about $116 million be taken from other programs in order to close the revenue gap, including diverting $27 million from a fund that ships dollars to local governments to help contain property taxes.

'Underground economy'

Anderson told the budget committees that one of the advantages of increasing the sales tax was that it would capture tax dollars from drug dealers and others in the "underground economy" who don't pay income tax but spend money on consumable goods and services.

Generally speaking, the governor's spending recommendations, if approved by the Legislature, would not mean major cuts or increases in state outlays, according to the budget documents and statements from administration officials.

Overall state spending would rise from the current $14.4 billion to about $14.5 billion for fiscal 2014 before rolling back to about $14.4 billion in fiscal 2015. State general fund spending would drop from about $6.7 billion to about $6.5 billion in fiscal 2014, but those numbers disguise shifts from other funds that actually would hold spending steady on most programs. The general fund spending would come in about $6.6 billion in fiscal 2015.

Administration officials have said the past two years that the governor would allow no more "raids" on earmarked state highway funding in order to keep the budget in balance. But the new plan also includes shifting about $91 million from the Kansas Department of Transportation to the education department to help pay for school bus costs.

Anderson said the highway department also would make available to school districts that want it the agency's expertise in charting efficient bus travel routes and tips on cost-effective vehicle fleet procurement.

KU Medical Center

The governor's plan included $3 million in fiscal 2014 and $7 million in fiscal 2015 for the University of Kansas Medical Center's effort to build a new $75 million medical education building on its campus in Kansas City, Kan. The governor also endorsed giving the medical center $35 million in bonding authority for the project.

"We are heartened by the recognition of the vital role the University of Kansas Medical Center plays in training doctors and other health professionals throughout Kansas," KU Chancellor Bernadette Gray-Little said in a prepared statement. "The recommendation in (the governor's) budget allowing us to train additional physicians for Kansas is of critical importance to all Kansans. And the state budget funds identified for this project will be matched with private sector dollars and university investments."

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