Understanding the property-tax lid controversy in Kansas

In the coming days, legislators and lobbyists will do battle at the state Capitol over a “tax-lid” measure that could mean significant changes in property tax bills.

Under a state law passed last year, city and county governments will have to hold a public vote if they want to raise spending by more than an adjusted Consumer Price Index rate to be set by the state of Kansas.

If voters don’t approve spending increases, cities and counties will have to cut their property tax rates to adjust to the spending level allowed by the state.

Right now, that’s due to start in January 2018, but Gov. Sam Brownback wants that date moved up to this July.

Even supporters say that the law, passed in the dead of night at the end of the previous session, has flaws that need fixing.

And opponents will try to use the reopened debate to kill it.

The case for the tax lid

▪ Voter empowerment: The tax lid increases the voters’ authority to say “yes” or “no” to municipal spending increases. Supporters say it’s closer to the kind of New England town hall governance the country was founded on, in which communities would come together to discuss and decide their future policies.

▪ Accountability: Local government spending increases would be automatically capped near the CPI. That forces local governments to carefully evaluate their budgets each year to try to trim any fat and not just rubber-stamp increases.

▪ Transparency: Local governments would have to share more information with the public on income and spending to convince voters to approve tax increases.

▪ Lower property tax bills: Property tax consistently polls as the least popular form of taxation in Kansas, so supporters say they’re doing the will of the people in trying to bring them down.

The case against the tax lid

▪ It reduces “home rule”: County and city officials say they were elected to do their jobs and voters already can vote them out of office if they don’t like the decisions they make on taxes.

▪ Potential service cuts: Costs of providing public services rise every year, often by more than the CPI. Local officials may cut important services for poorer and less-influential constituents instead of taking the political risk of advocating for a tax increase and putting it before voters.

▪ Cost and confusion: If a local government calls for a tax election, it will have to pay for it. And, with conflict between deadlines for appraisals, budgets, tax notices, collections and elections, it would be virtually impossible to combine a tax election with scheduled municipal elections in August and November. That means tax elections would almost certainly have to be special elections conducted by mail, a more expensive way of doing things.

▪ State government is exempt: Tax lid opponents say it’s hypocritical for state lawmakers to mandate tax elections for local governments but not the state Legislature.

How we got here

For years, counties and cities have been able to reap the benefits of rising property valuations in their jurisdictions. When property values rise (which has usually been the case, though not always), local governments automatically get more money, allowing city and county officials to cover increased costs but still go to meetings and say they didn’t raise the mill-levy tax rates.

Last year, as lawmakers struggled to come up with a tax and budget plan during a historically lengthy 113-day legislative session, a coalition of anti-tax Republicans and progressive Democrats formed an uneasy alliance.

The Republican faction of the coalition didn’t want to increase any tax, while the Democrats opposed a sales tax increase in the plan, arguing that it was unfair to increase a tax paid by poor and middle-class Kansans while exempting more than 300,000 business owners from state income taxes.

During lengthy Capitol debates, the property tax lid was added as an amendment in a bid to sway conservative Republicans who wouldn’t vote for a tax increase without an offsetting cut somewhere else.

The plan passed after a marathon debate stretching over two days.

What’s ahead?

In his State of the State speech this year, Brownback asked the Legislature to move up the start date on the tax lid from January 2018 to July of this year. A bill to do that, Senate Bill 316, is currently before the Senate Tax Committee. The bill also would eliminate some exemptions from the calculation, which cities and counties could now use to squeeze out a little more revenue without going to the voters.

Opponents of the tax lid, led by city councils and county commissions from across the state, want to kill what they consider an ill-considered idea that was passed without proper scrutiny during a high-pressure period in the Legislature. They object that a landmark piece of legislation went through in the middle of the night without any hearings or chance for formal input from the local governments affected by it. They’re in favor of a repeal bill, House Bill 2493.

Supporters, including the Kansas Association of Realtors and Americans for Prosperity, say limits on property taxes can’t come soon enough, and they want to pass SB 316 pretty much as it is.

Then there are those who like the concept of sending tax increases to voters but who say the legislation passed last year needs to be fixed. They’re trying to figure out how to conduct tax votes without violating numerous other deadlines the state imposes for preparing tax bills and setting local government budgets. Sedgwick County, one of only two Kansas counties to break ranks and support the tax lid, sent proposed amendments on SB 316 to Topeka to try to fix that problem.

The House Republican Caucus is scheduled to get the debate rolling on Wednesday, when it will hear presentations on SB 316 from Luke Bell, a lobbyist for the Realtors association, and Eric Sartorius, executive director of the Kansas League of Municipalities.

This story was originally published February 9, 2016 at 6:55 PM with the headline "Understanding the property-tax lid controversy in Kansas."