State struggles to fill budget gaps

Kent Thompson, and 124 other members of the Kansas House, are in the midst of a waiting game to see what bundle of taxes will be proposed to deal with Fiscal Year 2016’s massive budget revenue shortfall.
“Leadership is polling House members,” trying to identify a plan that will get 63 votes on the floor, Thompson told the Register Saturday afternoon. “Right now I don’t know where we are on a tax plan,” although he has no doubt one will surface soon.
Thompson anticipates that when it comes to a vote the proposal will be a package of sorts. “I think leadership will bundle several taxes.” Having all in one bill likely would attract more support, while one tax or another might find disfavor with legislators, and make it difficult to raise sufficient revenue.
Income tax cuts probably will remain in place, he said, although freezing another projected decline might occur. That would preclude yet another cut scheduled to take effect on Jan. 1, 2016.
Some tweaking of income tax exemptions may draw support. “When the cuts were proposed, (in 2013) they said it would affect 191,000 small businesses,” he said. Instead, the number quickly grew to 330,000. Reconfiguring exemptions would reduce those who qualify and increase revenue.
A property tax increase was targeted in a Senate bill last week.
Thompson doesn’t think the Senate proposal has generated much momentum. It would remove the $20,000 exemption on residential property — put in place to make statewide school funding more palatable — for the state’s 2.3-mill property tax, which would cost each homeowner $46 a year. The change would not affect locally assessed property taxes, Thompson said, “as I understand the proposal.”        
An offset, which publicly hasn’t been fleshed out, would reconfigure property tax rates for vehicles to the favor of owners.
Thompson understands the implications better than most legislators, having spent 12 years as an Allen County commissioner. If vehicle taxes were lowered to offset higher state property tax collections, it would mean local taxing units would relinquish revenue while the state’s would increase, although impact remains an unknown.
“It’s kind of like the loss of LAVTR (local ad valorem tax relief) payments that were taken away when the state faced revenue problems,” he said. “We had  to make up the loss of state money at the local level,” which in many cases resulted in higher property taxes.
A statewide increase of the sales tax — no specific amount has been mentioned publicly — and a bump in fuel taxes — 3 cents a gallon has been bantered about — are in the mix, Thompson said. “If the sales tax went up 1 percent, it would raise about $400 million,” he said, however such an increase “isn’t likely to happen,” with a fraction of a percent more likely.
The long-suffering proposal to increase taxes on tobacco and alcohol, proposed by Gov. Brownback early in the session, is all but out of the picture, he said. Also increased taxing of agricultural land doesn’t seem to be finding any traction. When Sen. Jeff Melcher, R-Leawood, proposed a $3 an acre surcharge, he couldn’t get a second in committee, Thompson said, showing that while the Legislature has become more urban, rural interests still carry a big stick.
“There are a number of small tax increases that have been talked about,” which could make up the aforementioned bundle, but none has leaped to the foreground, Thompson said. When it finally settles out, Thompson thinks, “we’ll be looking at sales and fuel tax increases and a third approach of one of more of several others.
“This week, as leadership identifies support, the revenue picture should become clearer,” he said.

MEANWHILE, Thompson doesn’t foresee any cuts of substance in projected expenditures, although, he noted, representatives of Americans for Prosperity and the Kansas Chamber of Commerce continue to harp that “Kansas has a spending problem rather than a revenue problem.”
His analysis is based on pragmatism.
“About 67 percent of the budget goes to education,” with funding for public schools now locked in through the Legislature’s block grant funding the next two fiscal years. That might change — and increase revenue shortages — if a court case finds in favor of schools that challenged moving from the early 1990s school funding formula, part and parcel to block grant funding.
Beyond education, another 20 percent is tied up in KanCare, the administration of Medicaid in the state, Thompson pointed out, leaving 13 percent for the remainder of the $6.5 billion general fund budget.

Thompson represents the 9th District, which contains most of Allen and much of Neosho counties, including Iola, Humboldt and Chanute.