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Jittery lawmakers slash millions from catch-all bill

BY JIM SULLINGER

Eagle Topeka bureau

As Kansas lawmakers work toward final adjournment, Senate leaders are getting nervous about the economy and the current level of state spending.

Those jitters swept through that chamber early Friday when a slim majority voted to remove $34.5 million from the catch-all appropriations bill and bolster the state's sagging financial cushion.

Senate leaders said they also wanted to rein in more than $65 million in business tax cuts being considered by a six-member House and Senate negotiating committee.

Negotiations on that issue will continue today.

Sen. Barbara Allen, an Overland Park Republican and committee chairwoman, told the House members that senators wanted to draw up a new tax package that didn't reduce revenue over the next five years.

"We're going to look at all the issues," she said.

Those included a $93 million reduction in the corporate income tax rate, a refund on sales tax paid by telecommunications companies on machinery they buy and property tax relief for seniors 65 and older.

But Rep. Kenny Wilk, a Lansing Republican and leader of the House negotiators, said the Senate needed to remember that previous business tax breaks were helping the Kansas economy.

"We have a very healthy economy, unlike the national economy," he told Allen.

During debate, senators worried that the state's budget might slip into the red later this year gutted the bill.

The six-hour debate began with a bill that increased the state's $6.4 billion budget by $34.1 million.

Shortly before midnight Thursday, a slim majority of senators approved an amendment that cut $34.5 million out of the bill. Early Friday, the bill was approved 21-18.

The reduction was authored by Sen. David Wysong, a Mission Hills Republican who had been warning lawmakers all session that the Legislature was spending too much money as the national economy was sliding toward recession.

Wysong pointed out that the bill in its original form resulted in a projected $109 million reserve at the end of fiscal year 2009, or 1.7 percent of estimated general fund spending.

He said that if state revenue declined over the next several months, that reserve level could trigger emergency across-the-board budget cuts by the governor and State Finance Council. The last time that occurred was during a recession in 2002.

"We can't afford the current omnibus (catch-all) bill," Wysong told his colleagues.

Sen. Phil Journey, a Haysville Republican, said the Legislature needed to act responsibly.

"This will allow the state to make ends meet," he said.

Democrats, however, noted that the state would have had an additional $87 million next year if not for the federal economic stimulus package, which gave a tax break for business expansions.

Sen. Laura Kelly, a Topeka Democrat, noted that the Legislature has approved hundreds of millions of dollars in business tax breaks over the past several years.

Items cut by the Wysong amendment included about $27 million in disaster relief funds, $10 million for state universities, $4.7 million in child protective services, and $5.6 million for home- and community-based services for low-income people.

The House approved a catch-all spending bill earlier in the day that added more than $50 million in state spending.

Spending negotiations will continue today, while the other panel tries to settle on a tax package. The main disagreement centered on the proposed reduction in the corporate income tax from 7.35 percent to 7 percent, which costs the state $93 million over five years.

The members did agree to phase in, over five years starting in 2011, the refund of sales tax paid by telecommunications companies on machinery and equipment. The revenue loss over that period was estimated at $19.6 million.

Senators wanted to balance those cuts with $117.5 million over five years in revenue increases. Those would result from changing the way out-of-state companies are taxed.

Reach Jim Sullinger at 785-354-1388 or jsullinger@kcstar.com