Kansas would likely be forced to lay off prison guards, cut aid to public schools and reduce payments to health care providers and nursing homes if legislators don’t increase taxes, Gov. Sam Brownback’s budget director told GOP lawmakers Monday.
Without tax increases, the most likely option to avoid a deficit is for Brownback to cut $400 million from a budget approved by legislators for the fiscal year beginning July 1, budget director Shawn Sullivan said.
The cuts would most likely be a 6.2 percent across-the-board reduction in state funds, taking effect in late July or early August, he said.
Sullivan talked about possible cuts during a meeting of 27 House Republicans after the chamber postponed a debate on a bill approved by the Senate that raises sales and income taxes. The meeting was private, but an Associated Press reporter who wandered in was allowed to stay after declining to leave.
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The Legislature has struggled to fill a $400 million deficit caused in large part by income tax cuts. Lawmakers will head into their 110th day in the session on Tuesday.
HB 2109, the bill passed by the Senate, would increase sales taxes from 6.15 percent to 6.55 percent beginning July 1 and drop the sales tax on food to 4.95 percent in July 2016. It would eliminate most itemized deductions and raise the cigarette tax by 50 cents a pack to $1.29.
Overall, the bill is projected to generate more than $420 million in revenue.
Brownback said Monday morning that he would sign the bill if the House passed it. But House members said they did not want to rush to approve a massive tax bill without studying it, and representatives from across the political spectrum have expressed objections.
Rep. Dan Hawkins, R-Wichita, called it a “piece of garbage.”
“It’s not worth the paper it’s written on,” he added.
Asked whether there’s a plan B if House members vote down the bill, Senate President Susan Wagle, R-Wichita, said the governor might have to make automatic budget cuts called allotments. She said the House needs to pass the Senate’s plan or offer an alternative.
Under the budget-cutting scenario that Sullivan presented to House GOP members, schools would lose $197 million of the more than $4 billion in state aid they were set to receive during the next fiscal year, he said. Such a reduction would wipe out increased funds lawmakers allocated last year to meet a Kansas Supreme Court directive to provide extra aid to poor districts.
He also said health care providers who serve poor and needy Kansas residents covered by the Medicaid program would see payments from the state drop from 7.5 percent to 8.5 percent.
Sullivan also said the prison system’s operations would be affected because it has already reduced administrative expenses.
“You’d have to cut back on your corrections officers and your front-line staffing,” he said.
Governor: It’s time
Earlier in the day, Brownback urged passage of the bill.
“People have looked at 40, 50 iterations of a tax bill. … It’s time to get this done. It’s past time,” he said. “This is a good plan, and it’s been thoroughly discussed. And it’s time to move it forward, because I will sign it.”
Brownback continued to push back against the notion that the state’s budget problems have been caused by tax cuts he ushered into law in 2012. He blamed spending instead.
“I don’t think it’s fair to discount the cost side,” he said, pointing to the costs of shoring up the state’s pension system.
The bill largely protects an income tax exemption for business owners established in 2012. That’s a sticking point for some House members, said Rep. Marvin Kleeb, R-Overland Park.
Other major policy changes – ones that would require local governments to seek voter approval to increase property taxes and put public dollars toward scholarships for children attending private schools – have also drawn scrutiny.
Senators voted on the bill Sunday evening before it was available to read, relying instead on an explainer prepared by legislative staff members. The House took Sunday off. When they returned Monday, House leaders indicated they wanted time to vet some of the policies before bringing the bill to the floor.
“There’s some policy here that needs to be discussed,” Kleeb said. “Our leadership is not interested in this work-all-night, let’s-wear-people-down sort of approach to getting policy passed.”
The bill passed with 21 votes in the Senate – the minimum. The minimum needed for passage in the 125-member House is 63 votes, which could be tough to get.
Democrats, who hold 28 seats, are universally opposed to the bill, while Republican factions remain split.
“I don’t know if we have 63,” said House Majority Leader Jene Vickrey, R-Louisburg. “I do know that we need to make sure that we understand a bill that has this many different components, some of which are new and we have not discussed.”
Rep. Kristey Williams, R-Augusta, who previously served as mayor, said she doesn’t like how the bill affects local governments. She plans to oppose it.
Some GOP lawmakers oppose any tax increase. “Any day I can vote against a tax increase is a good day for me,” said Rep. Pete DeGraaf, R-Mulvane.
Senate Majority Leader Terry Bruce, R-Hutchinson, said the bill was the best plan the House was going to get.
House passage uncertain
Some Republican senators were not confident the bill would succeed in the House.
Sen. Les Donovan, R-Wichita, who as tax committee chairman carried the bill on the Senate floor, said he expects it to fail.
“I tell people it’s like herding chickens, except now it’s like herding free-range chickens,” he said. “These chickens are running.”
Sen. Michael O’Donnell, R-Wichita, voted for the bill. But he has met with House members and encouraged them to vote against it.
“I reluctantly supported the bill to get something out of our chamber over to the House chamber. Because I don’t support the majority of things in that bill, but I also don’t want to just tell people that we’re not going to try and find a solution and just rely on allotments,” O’Donnell said.
“So I think this starts the discussion,” he said. “I don’t want the House to pass that bill, because I don’t want my fingerprints being on raising the sales tax.”
He contended that passing it on the Senate side helps move the process forward.
“We assume it’s going to, you know, go down. But they can cobble together a plan … to negotiate something in the middle,” O’Donnell said. “I would not have supported that had I believed it would pass over here.”
House and Senate negotiators are set to discuss tax policy Tuesday morning.
Contributing: Associated Press and Bryan Lowry of The Eagle
Key points in the tax bill
Here are the major provisions of the tax plan the Senate passed. It generates about $471 million, leaving the state with an ending balance of about $75 million.
▪ Raise sales tax from 6.15 percent to 6.55 percent; $187.7 million. Sales tax on food to drop to 4.95 percent in July 2016.
▪ Eliminate most itemized deductions, reduce taxpayers’ deductions for mortgage interest and property taxes paid; $97 million.
▪ Eliminate food sales tax credit for poor families, seniors and people with disabilities; $15 million.
▪ Increase cigarette tax by 50 cents a pack to $1.29; $40.4 million.
▪ Provide amnesty on penalties to people who agree to pay back taxes owed; $30 million.
▪ Postpone scheduled decrease in income tax rates on wage earnings; hold rates at 2.7 percent in low bracket and 4.6 in upper bracket; $26.4 million.
▪ Tax guaranteed payments to owners of pass-through businesses who currently pay no state income tax; $23.7 million.
▪ Require Social Security number for tax credits; $15 million.
▪ A separate bill increased the “privilege fee” tax on managed-care health plans; $47.8 million.
▪ Sets Dec. 31, 2019, as an automatic expiration date for virtually all sales and property tax exemptions, except those for churches, agriculture, business-to-business transactions and select health-care-related purchases.
▪ Establishes a tax study commission to determine whether any exemptions eliminated by the automatic expiration should be retained.
▪ Requires cities and counties to hold a public election to raise property tax income by more than the rate of inflation.
▪ Allows private schools to directly receive money from a tax-credit funded scholarship program, to accommodate students whose parents pay for schooling by tithing to their church.
▪ Starting in 2019, requires automatic tax cuts if state income grows more than 3 percent in a year, adjusted for required spending on pensions and Medicaid.