Kansas, grappling with economic challenges, introduced the Local Ad Valorem Tax Reduction (LAVTR) in 1937 to alleviate the burdens on local governments during the Great Depression. For the last 20 years, the state has withheld that funding.
Today, a measure to reinstate the funding is gaining traction.
During the economic turmoil of the 1930s, the state faced a dire situation, with Kansas being hit especially hard by the Dust Bowl. LAVTR was conceived to stabilize and reduce local property taxes by channeling surplus state sales tax revenue to struggling counties.
By its design, the funds paid for such services as police and fire protection, parks, streets, jails, elections, and many other services county governments are required to provide. Allen County would have received $529,100 in LAVTR funds in the most recent payout, had LAVTR been in effect.
In 1965, the funding became law. Considered a demand transfer, two payments were made – Jan. 15 and July 15 – based on the formula set in statute: 65% is distributed based on population, while 35% is distributed based on property tax valuations.
The 1990s brought changes, with amendments allowing reductions in transfers if the state’s ending balance fell below a certain threshold. The early 2000s saw the end of increased distributions, setting the stage for a steady decline in LAVTR funding. In 2001, the amount for distribution in fiscal year 2002 was set at $27,340,335.50. In 2002, the amount for distribution in fiscal year 2003 was set at $26,246,722. Less than half of what it was supposed to be.
Between 2001 and 2022, Kansas counties have lost over $1.7 billion in revenue from LAVTR alone. “While LAVTR is the focus, we’ve also lost out on billions in County and City Revenue Sharing funds and Special City-County Highway Fund (SCCHF),” noted Allen County Commissioner Bruce Symes. “All three lost amounts total $3.5 billion to counties and cities.”
THE INTENT behind LAVTR was not to eliminate local property taxes entirely, but to provide stability and potential reductions during economically favorable periods. However, the lack of funding over the years has shifted the burden back onto property taxpayers.
Fast forward to 2023, and there is a glimmer of hope for LAVTR. On March 28, 2023, the Kansas House debated LAVTR funding as a potential budget amendment for the 2024 fiscal year. The proposed amendment, introduced by the House Minority Leader Vic Miller, aimed to fully fund LAVTR for the first time since 2000. Despite passing decisively with an 83-40 vote, the lack of support from the House majority party leadership and little momentum in the Senate has left the future of LAVTR uncertain.
The debate revolves around conflicting perspectives on the purpose and sustainability of LAVTR. Some argue that restoring LAVTR payments is essential to fulfill a longstanding commitment to local governments, preventing the double taxation of citizens who end up paying both at the point of sale and through property taxes. Others, however, express concerns about the potential misuse of funds and the stability of relying on surplus state revenue to fund local services.
“I’m not really strong on funding the ad valorem tax fund unless there’s some mechanism that we can use to make sure that it is always funded,” said Rep. Fred Gardner (R-District 9). “If it’s a fund that we just fund when we have surplus money, then we take it away when we are broke… it’s not really stabilized.”
Gardner empathizes with local governments, but maintains his stance on doing away with LAVTR.
“I hear what the county commissioners are saying — that they are faced with a lot of increased costs and in our rural areas, that’s a big problem,” he said.
“My opinion is if we’ve got a statute in place we need to follow that. If you look at the history of that fund, it was established in 1937. We were in a horrible drought and people were leaving western Kansas by the droves. There was property being abandoned all over the place and there weren’t quite enough people. There was a problem with counties being able to collect enough taxes just to operate well and so the state stepped in with the LAVTR which gave some tax money back to the counties so they could keep the lights on in the courthouse and keep the roads up.
“If you look at all property tax collected today, that fund amounts to about 1% of the taxes collected. We’re not talking about 10% or 20%. What happens when the state runs out of money again? When it happens again, are we going to defund it again?”
