School Finance Adequacy Hearing
The 3-judge panel tasked with determining educational adequacy in Kansas began hearings on May 7. Plaintiffs in the case (Gannon et. al.) seek to block implementation of the new block grant bill and by declaring it unconstitutional.
- While I wasn’t able to attend the hearings, the Topeka Capital-Journal did an excellent job of describing the play-by-play on May 7 and May 8.
- The USD 383 Board recommended a number of teacher and administrative cuts at a recent board meeting. The cuts facing the school district are due to many factors, but passage of the new block grant bill created another budget hole for our school board.
- Click here for a fascinating KCUR piece which provides history and context to the importance of high quality education in Kansas.
Taxes
As I’ve studied the budget, the revenue estimates, and the fiscal outlook for our state, one thing remains clear – the 2012 tax cuts went to far to fast, so we are looking at a significant revenue shortfall. I believe these tax cuts should be reversed in part. Until this happens, no other “fix” makes any fiscal or common sense. These cuts are the source, the virus if you will, and anything else we try to do is simply a Band-Aid that will need to be replaced every year. Those discussions finally began this week in the House and Senate Tax Committees, but with very little forward momentum.
The House Tax Committee considered sales and gas tax increases in HB 2429 and HB 2427, and changes to the LLC income tax exemption in HB 2430:
- HB 2429 would raise the state sales tax from 6.15 to 6.5%, generating $164 million. This tax increase would be permanent and does not have a sunset date.
- HB 2427 would raise the gas tax by $0.05 for three years, generating nearly $100 million. Historically, revenue from gas taxes has been used for roads, but 83% of this revenue would go straight to the State General Fund to cover the budget hole.
- HB 2430 would narrow the income tax exemption for companies classified as LLCs, S-Corps, and sole proprietorships. The 2012 law completely exempted these organizations from any and all state income taxes. The exemptions were passed with the intent to provide small businesses extra income to grow their companies and create jobs. When sweeping changes like this are made with no other state to model or follow best practices, loopholes are inevitable. For example, I could form an LLC, buy a bunch of rental properties and my income from those properties would be tax-exempt. This doesn’t pass the smell test of fair taxation.
- The irony here is that when you don’t pay state income taxes, you don’t get credit for them on your federal taxes, which raises your Adjusted Gross Income (AGI) and therefore your taxable income, so you send more money to Washington.
Uber
The legislature passed a bill to provide protection for users of Transportation Network Companies (TNC) like Uber and Lyft. The bill (House Substitute for SB 117) required drivers carry insurance to cover riders and to have a background check. Governor Brownback vetoed the bill and the legislature brought the bill up for discussion to override the veto on Monday, May 4. The veto override passed the House 96-25 and the Senate 34-5 in quick succession. Overriding a gubernatorial veto is no easy task and it was not a vote anyone made lightly. Uber turned off Kansas service to its app on Monday – BEFORE either chamber debated or voted on the bill. The negotiations with Uber to find a solution continue, and I remain confident a solution can be found to enable Uber and other TNC companies to operate in Kansas.
This may not have been a popular vote, but it was the right one to fulfill my duty to protect Kansans. If this were any other business seeking to limit their customer liability, most would be up in arms.
Marijuana in Kansas
In April, Wichita voters overwhelmingly supported significantly reduced penalties for first-time marijuana possession offenses. In a similar way, HB 2049 would reduce first and second offenses to misdemeanors, with a third or subsequent offense classified as a felony. Current law issues a felony on a second and subsequent offense. Long before the state’s budget issue began, we faced a constant need for space in our corrections facilities. Reducing penalties for these non-violent offenders is a simple way to reduce those expenses as well.
The bill was amended to include two major provisions for medical care and agriculture in Kansas.
- “Otis’ Law” would allow use of medical hemp oil for treatment of seizure disorders, and
- The Alternative Crop Research Act would allow the state grow and research industrial hemp through one of the state universities – likely the agricultural research center at K-State.
I remain cautious about the legal use of medicinal marijuana, but hemp oil is produced with less than 3 percent THC (the hallucinate found in marijuana). This means there is no way for people to seek hemp oil with the intent of getting a high. Further more, a patient has to receive a prescription from a doctor indicating the patient has a seizure disorder. I believe this bill was so narrowly written it was worthy of my vote in order to help patients in need.
It passed the House 81-36 and is headed to the Senate for consideration. I voted YES.
RPS
The constant attempts to repeal the state’s Renewable Portfolio Standards (RPS) – which require 20% of energy companies’ production to be from renewable sources by 2020 – has impacted the state’s ability to attract new alternative energy companies. A compromise was struck to end the battle by allowing the requirement (which most energy companies have already achieved) to be a voluntary goal, in exchange for a 10-year property tax exemption for new facilities and tax assessment at the commercial rate of 25% versus the public utility rate of 33% after the 10 years. This was a reasonable compromise supported by the wind industry and a number of alternative energy companies, as well as other utilities. This editorial from the Topeka Capital-Journal provides an excellent overview. House Substitute for SB 91 passed the House 107-11 (I voted YES) and the Senate will have the opportunity to concur on House changes this week.
Coming Next Week
SB 34 would give the Secretary of State power to prosecute election crimes. This is a significant departure from the Secretary’s scope of responsibility as the election and business filings commissioner for the state, and dilutes the authority of the Attorney General, who is tasked with prosecution of crimes against the state. The only proponent of the bill was Kansas Secretary of State Kris Kobach. The Kansas County and District Attorneys’ Association testified against the bill even though it expands their ability to prosecute election crimes at the local level.
