House OKs expansion of tax cut

TOPEKA — The Kansas House gave its final approval Monday to a proposal to expand a business tax break that aims to create new jobs, while an ongoing cash crunch forced a delay in aid payments to public schools for the fifth consecutive month.

The House's 84-34 vote sends the tax bill to the Senate. Supporters say it will stimulate the economy, but critics have questioned whether Kansas can afford incentives for businesses when legislators and Gov. Mark Parkinson must close a budget shortfall.

The shortfall is projected at $416 million for the fiscal year that begins July 1 but is likely to grow past $500 million. Tax collections in February were $71 million short of expectations, and Parkinson has conceded he may have to consider a new round of spending cuts before the end of June.

Also, State Budget Director Duane Goossen confirmed that the state didn't make $200 million in aid payments due Monday to the state's 293 school districts. He said half of the payments probably will be made later this week, but the other half could wait until the end of the month.

With the state facing such problems, critics of the tax bill said the measure is irresponsible. But supporters argued that the only real solution to Kansas' budget problems is economic growth.

"There's a correlation between economic growth and state spending," said House Appropriations Committee Chairman Kevin Yoder, R-Overland Park. "If we do not have one, we cannot have the other."

The tax bill rewrites the rules for an incentive program created last year to encourage companies to move jobs from other states to Kansas. The program allows firms to keep 95 percent of the income taxes withheld from workers' paychecks for at least five years if they move at least five jobs to Kansas.

Under the bill, nonprofit groups and even some federal government agencies would be eligible. Also, out-of-state companies would qualify if they bought Kansas companies and kept jobs in Kansas. The wages employers would have to pay to qualify also would be lower than is required now.

The Department of Revenue estimated expanding the tax break would lower state revenues by $6 million during the next fiscal year, with the figure growing to $33 million in five years. Many opponents of the tax bill also oppose further cuts to schools and social services.

"We're spending money that now can't be spent to keep from cutting these programs," said Rep. Julie Menghini, D-Pittsburg.

Supporters said any revenues lost by the state will be offset by taxes collected on consumer goods purchased by newly employed workers. About 95,000 Kansans were unemployed in December, the most recent month for which figures are available.

"We need to bring new jobs to Kansas," said House Taxation Committee Chairman Richard Carlson, R-St. Marys.

Meanwhile, the delay in aid payments to schools came as little surprise to educators and other officials.

It's happened every month, starting with November, and Goossen said he expects the cash crunch to last until the state starts collecting the bulk of its individual income tax revenues in April.

The state still hasn't made a quarterly $70 million contribution to teachers' pensions, which was due Jan. 15.

"I'm quite confident there will be many more delays," said Mark Tallman, a lobbyist for the Kansas Association of School Boards.