Backed by a like-minded Legislature, Gov. Sam Brownback laid out an aggressive agenda in his State of the State speech Tuesday, asking lawmakers to shift the tax burden from income tax to sales taxes.
The governor also proposed changing the way Kansas selects its Supreme Court and appellate judges — and stripping the courts of authority to tell the Legislature to spend more on schools.
He also wants to merge the state Highway Department and the Kansas Turnpike Authority into a single transportation agency.
“In an era where many believe America has lost its way, Kansas knows the difficult path that our nation must take,” Brownback said. “It is the well-worn sod tracks of hard work, thrift, patience, perseverance, faith, sacrifice and family that will get us to where we want our country to go. And as has been our tradition since before statehood, our place, Kansas, will not be timid in doing what is right, even if much of the nation takes another way.”
The vastly outnumbered Democrats in the Legislature accused Brownback of pushing for irresponsible tax and education cuts that will harm the state for years to come.
“Two years of failed policies, internal Republican Party bickering and misguided values have left our state nearly bankrupt,” said Sen. Anthony Hensley, D-Topeka, in the Democratic response to the governor’s speech. “The state of Kansas stands with its toes hanging over its own fiscal cliff. The decisions we make in the next five months will determine whether Kansas steps forward onto sturdier ground, or crashes into a financial abyss.”
Brownback didn’t unveil many specifics of the bills and fiscal impacts tied to his vision, saving those details for the unveiling of his recommended budget Wednesday morning.
The key points in the governor’s plan:
After lowering the state’s top income tax rate from 6.45 to 4.9 percent last year, Brownback now proposes lowering it again, to 3.5 percent. The trade-off is that an emergency increase in the state sales tax, passed three years ago and due to partially expire this year, will become a permanent feature of the tax landscape.
Facing a recent court ruling that says Kansas education funding is unconstitutionally low, Brownback asked lawmakers to define suitable funding, a move that may require a public vote as early as this spring. And he said he’d back a plan to hold back third-graders who can’t demonstrate an ability to read.
Even while cutting taxes, Brownback pledged to increase overall school funding – though not necessarily schools’ operating funds – and provide essential services for the neediest. He said he would leave the state with a 7.5 percent ending balance, although he did not say how he would do that with deep reductions in revenues caused by tax cuts.
Brownback said he wants to merge the Kansas Department of Transportation and the Kansas Turnpike Authority because they are an example of duplication in government. Historically, most state roads have been funded from tax monies, while the turnpike has been supported by tolls. The two agencies’ funding sources would be combined.
Brownback assailed the current “merit-based” process for selecting appeals and Supreme Court judges. He called on lawmakers to approve a plan to have judges for high-level courts either elected directly by the people or appointed by the governor with Senate confirmation. “Either (system) passes the democracy test that the current system fails,” he said.
At present, high-level judges are nominated by a committee made up of five lawyers elected by the state bar and four non-lawyers appointed by the governor.
The system was instituted in 1958 after an outgoing governor engineered his own appointment to the Supreme Court.
Changing the system of selecting the Supreme Court would require a constitutional amendment and public vote. The appellate court selection process could be changed by an act of the Legislature.
House Minority Leader Paul Davis, D-Lawrence, said Brownback already controls two of the three branches of government and the courts are the only check on that control.
“He is now engineering a far-right takeover of the judicial branch in an effort to solidify his absolute unfettered control of Kansas government,” Davis said.
Brownback called on lawmakers to define what “suitable provision” for funding education means in the state’s constitution, a move aimed at thwarting court rulings that call for lawmakers to increase education funding.
Last week, a district court declared the state’s current funding unconstitutional and chastised the Brownback administration for approving big tax cuts when it wasn’t spending enough on schools to comply with state law.
With Supreme Court judges just feet away, Brownback suggested education funding is up to the Legislature.
“Kansans expect and are entitled to a government that is not beholden to any special interest group,” he said.
Wichita school board member Barb Fuller said the three branches of government provide checks and balances.
“They’ve been checked,” she said, noting her approval of the recent district court ruling. “They didn’t follow the rules, and they’ve been caught. They’ve been caught with their underwear down.”
Some conservative lawmakers have suggested letting voters decide whether to change the constitution in an attempt to block courts from ruling on education funding levels, but the move would need approval by Feb. 8 to get on April ballots.
Several lawmakers said that is too ambitious, likely pushing the issue to a ballot next August or November – if not a special election.
‘Glide path to zero’
Brownback said he would create a “glide path to zero” on income taxes without cutting funding for education and public safety.
“This will create jobs and opportunities in our state that the current generation has left for Texas or Florida to find,” he said.
The Kansas Chamber of Commerce, whose political action committee gave financial support to the campaigns of new conservative leaders in concert with Brownback’s support, applauded the governor’s efforts to reduce state government.
But it continued to oppose the increased sales tax rate, as it did three years ago. It says the rate should decrease as planned.
“We will oppose any effort to break that promise to Kansas taxpayers to justify the government spending status quo,” said chamber President Mike O’Neal, who retired from the Legislature last year.
The Legislature increased the sales tax to 6.3 percent in 2010 to help close a budget shortfall during the recession. Lawmakers at the time said the rate would drop to 5.7 percent after three years.
Sedgwick Republican Sen. Carolyn McGinn, who led the Senate Ways and Means Committee until more conservative leaders took over, said the Legislature should keep its promise to reduce the sales tax.
“It’s important to keep the trust of our constituency,” she said.
Keeping sales taxes at the higher rate also may tie the hands of local governments that may want to use a temporary sales tax to pay for special projects, she said.
Senate President Susan Wagle, R-Wichita, said lawmakers may be reluctant to keep sales taxes high, but she said the governor’s pledge to drive income tax rates to zero changes the political landscape.
“I think that’s a good trade,” she said.
House Speaker Ray Merrick, R-Olathe, called Brownback’s plan on the sales tax “a tough sell” to Republicans who campaigned against the tax or promised to let it expire.
“A lot of people say a promise is a promise, and I don’t know how you change that thinking,” he said.
Tax cut fallout
The push for even lower income tax rates comes as the state is trying to figure out how to accommodate the tax cuts approved last year, which included a full exemption from state income tax for farms, sole proprietorships, limited liability companies and corporations organized under Subchapter S of the federal tax code.
Lawmakers face a $267 million gap between the cost of paying for current services and reduced revenues, and that’s assuming the state spends down its reserves. Extending the sales tax hike, as Brownback proposed last year, could generate $262 million per year.
Skeptics, including Democrats and some moderate Republicans, say Brownback’s expectations for big-time economic growth and smaller government gloss over the fact that reckless income tax cuts last year created a self-inflicted budget crisis that may force the state to leave its neediest behind.
And they say Brownback is putting the state on course for more deterioration after years of recession-spurred cutbacks and conservative reforms that have booted poor Kansans off the welfare rolls and violated the state constitution by leaving schools underfunded.
Tax cuts Brownback already signed into law eliminated food sales tax rebates that give 380,000 qualified elderly, disabled and single-parent Kansans an average of a $156 rebate for taxes paid on food; homestead property tax refunds that give some renters an average refund of $302; and child care tax credits that gave an average of $132 refund to help care for kids.
Under existing tax cuts, someone making $250,000 a year will see a significant tax break, Hensley said, but someone making less than $20,000 could lose hundreds of dollars because of elimination of those tax deductions and credits.
“The governor is fond of saying that our state’s tax policy shouldn’t pick winners and losers,” he said. “But that’s exactly what his tax plan does.”
Contributing: Rick Plumlee of The Eagle