Sometimes what is obvious and draws public attention doesn’t tell the full story. So it is with the state budget for fiscal 2018, starting July 1.
In his budget proposal Gov. Sam Brownback recommended once again transferring from the Kansas Department of Transportation funding to help shore up shortfalls of $342 million, as of Jan. 1, in the general fund.
Several other transfers, of a similarly hurtful nature, were proposed, as well as designs on selling off tobacco settlement proceeds, to the detriment of children’s programs, and scaling back contributions to the Kansas Public Retirement System.
His only thoughts on changing what economists of every stripe have called “ill-advised” income tax cuts were to remove tax protection for rental income and to increase state filing fees from $40 to $200 for 330,000 business and farm owners.
Meanwhile, statutory requirements legislators sent to the state aid graveyard, before Brownback was elected, that were meant to help local taxpayers are a stealthily intriguing means governors past and present have used to help meet financial obligations. Gone so long from public notice, in fact, their absence hardly gets acknowledged nowadays.
A bit of history:
Three funds were intended to help local governing bodies that often found themselves in need of revenue for worthwhile projects, or just to get by with necessities without strapping taxpayers.
One was the Local Ad Valorem (property) Tax Reduction fund (LAVTR). Revenue made available to cities and counties came from sales and use taxes and were supposed to be returned at a 3.63 percent rate. Such revenue sharing first surfaced in Kansas in the 1930s, an effort to counter effects of the Great Depression when many cities and counties were on the verge of imploding. The LAVTR became law in its present form in 1965.
The revenue was taken away from local governments in 2004. The previous year Allen County received $258,000. The object by the 1990s was to buffer local property taxes. At the last distribution, with a valuation of $71 million, the funding was equal to what a levy of 3.5 mills would have raised.
Meanwhile, revenue cities and counties have lost through discontinuation of LAVTR since 2004 totals more than $1 billion. In 2016 the suspended funding was $96.5 million, or a good chunk of mostly overlooked support for the governor’s reckless “march to zero” for income taxes. It was, as has been said and written ad infinitum, a misguided effort to prove the theory of surplus-side economics, an exercise in futility.
Two other programs meant to give financial support to local governments also have fallen off the local revenue wagon.
County City Revenue Sharing suspension has permitted the state to retain $800 million since 2004. According to the League of Kansas Municipalities, CCRS was “supposed to transfer 2.83 percent of state sales and use taxes to cities and counties. … (it) was established in 1978 as part of an agreement between the state and local governments regarding a number of different taxes.” The sin taxes, liquor and cigarettes, were at the forefront.
The third cooperative effort for local tax relief is the Special City-County Highway Fund. Since it was removed from support for local coffers in 2009, the loss has been $175 million, not a paltry amount but much more manageable than loss of LAVTR and CCRS support.
IN HIS budget message, Brownback alluded to the three funds as being ones that are “routinely suspended.”
Local bodies, such as Allen County commissioners and council members in Iola and area cities, have thought little of the suspensions in recent years, fact being few if any were on their respective boards when the suspensions occurred. Time has a way of dulling memories.
At the time more than a few legislators bragged about “holding the line on taxes,” while in reality it was little more than a campaign slogan. State tax rates may not have risen, but those at the local level did to make up for revenue, expected and statutorily required, which was withheld in Topeka. During the distribution vacation, the state now and again passed laws, with mandates that required local revenue to meet financial obligations. Thus, state revenue not only was lost, but also exacerbated by more demands on counties and cities.
Consequently, when revenue shortfalls at the state level are mentioned, the numbers are not accurate when only those to do with current taxes — income, sales and property — are estimates used to illustrate concern.
Likely well into the future, revenue lost through suspension of demand transfers will continue to haunt the Allen counties and Iolas of the state, even if they are mentioned only in passing on page 35 of the governor’s budget proposal.
— Bob Johnson
