TOPEKA — Income tax cuts, school funding and the state budget all hang in limbo today as lawmakers spin out new deals aimed at locking in conservative or moderate Republican ideals and bringing the grueling legislative session to an end.
Gov. Sam Brownback wields one of the most powerful bargaining chips – a sweeping income tax cut plan that some conservatives see as the zenith of tax relief and economic growth, but that moderates and Democrats say could devastate schools and state services Kansans rely on.
After the Senate and its moderate Republican leaders bounced a milder tax-cut plan back to a committee Friday as the legislative clock ran down, Brownback reaffirmed that he will sign the big tax-cut bill and find ways to cut the budget and rein in spending to afford it.
“I look forward to signing the bill on my desk and I call on legislators to finalize their work on the budget based on the enactment of Senate Sub. for HB 2117 (the big tax-cut bill) ,” he said. “The legislative session needs to conclude.”
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But House Speaker Mike O’Neal crafted three alternative proposals late Friday that could dramatically reshape the outcome of the session.
He and other House Republicans offered a deal that would give senators the strong boost to education funding they seek in exchange for approval of the milder tax-cut plan and a raft of education policy changes sought by Brownback.
The House initially gave Senate budget negotiators two hours to decide whether to accept one of the deals Friday evening, but the Senate balked and the House agreed to a new deadline of noon today.
Sedgwick Republican Sen. Carolyn McGinn, the Senate’s chief budget negotiator, said education policy changes and tax reform shouldn’t be decided by an appropriations, or budget, panel. And she said she, along with Senate President Steve Morris, want to negotiate a new tax-reform package.
Earlier, the Senate voted 21-18 to push back the milder alternative to the deficit-inducing tax-cut bill on Brownback’s desk.
“I’m really left scratching my head over what their thinking is because I think Kansans want tax reform,” O’Neal said. “It’s just a matter of how much tax reform we can get this year.”
The bill on Brownback’s desk cuts individual income tax rates and eliminates the tax on profits earned by about 191,000 companies in the state. Meanwhile, it would capture more taxes from oil drillers drawing from new oil fields, such as those in south-central Kansas.
The bill would force the state to make hundreds of millions of dollars in cuts to services in coming years if it doesn’t generate enough economic growth to replace the lost income tax revenue with sales and property tax money generated by new jobs and new residents.
Democrats and moderate Republicans doubt that’s possible, and they have called the bill irresponsible.
Wichita Republican Sen. Les Donovan, who has been at the center of the tax debate for months, said he felt the alternative plan was responsible and would benefit all Kansans. He also said he thinks Brownback should not sign the other bill because of the impact on the state budget.
“This is a sad day in the history of this chamber and this state,” he said when the Senate rejected the milder alternative.
Senate President Steve Morris, R-Hugoton, was among 21 moderate Republicans and Democrats to vote in favor of reopening negotiations.
“We are asking for a responsible tax package that addresses the concerns of a large majority of Kansans while leaving room in the budget to restore cuts to classrooms and public safety,” he said in a statement. “If we do not show good faith and restore cuts to education, the courts may certainly require us to add money to education this summer.”
Topeka Democrat Sen. Laura Kelly referenced projections that show even the alternative tax plan could cause deficits, despite initial projections that showed it would leave the state with a surplus through 2018. New projections produced for lawmakers exclude about $350 million in projected savings as a result of Medicaid reform and add money for increased education funding.
With those factors combined, the alternative plan would force hundreds of millions in cuts to government services starting in 2016.
Conservative Republicans tout projections produced with specialized software that predicts economic growth based on tax cuts.
That shows that the milder tax plan could generate 21,000 or so new jobs on top of natural growth by 2020. It shows the massive tax-cut plan Brownback said he will sign could result in 23,000 new jobs in that time frame while drawing a lot of new residents to the state.
The Senate approved the massive tax-cut plan in a 29-11 vote in March after initially voting 20-20 to kill it. Several senators said they changed their votes only after Brownback’s administration pleaded with them to approve the bill so that the Senate would have a position to negotiate from in a committee with House members who had approved their own tax-cutting plan.
But the House, concerned the Senate would kill a negotiated plan that had emerged, quickly approved the bigger tax-cut plan last week and sent it to Brownback.
A group of former Republican lawmakers, called Traditional Republicans for Common Sense, immediately urged Brownback to veto the bill.
“The governor has taken us to the financial cliff, and only he has the ability to stop us from going over,” said Rochelle Chronister, former assistant majority leader and former chairwoman of the Republican Party. “This is not a game. The magnitude of this bill cannot be overstated and the impact that it will have on our communities and schools will be real and unforgiving.”