Archive for Saturday, April 1, 2006

Lawmakers pass $11.7 billion budget

April 1, 2006


— An $11.7 billion budget went Friday to Gov. Kathleen Sebelius, but legislators haven't determined how much they want to cut taxes or how many additional dollars they'll pour into public schools.

Though incomplete, the spending plan appropriates enough money to keep state government running during the budget year starting July 1, while giving many state workers pay raises of 4 percent.

Total state spending would decline about 1.2 percent, or $142 million, but those savings are likely to disappear once legislators decide how much to increase aid to schools in hopes of meeting Kansas Supreme Court mandates.

Complicating budget discussions is Sebelius' proposal to phase out property taxes on new business machinery and equipment that is in a Senate committee. Some legislators also want to cut other taxes to stimulate the economy.

Action on the budget this week came after legislators received rosier financial projections for the next several years and as they tried to determine how passing a big school finance plan would affect the state's future fiscal health.

House and Senate negotiators drafted the budget, reconciling dozens of differences between their chambers. The House approved the compromise Thursday, 106-17, while the Senate passed it Friday, 30-10, sending it to Sebelius.

Legislators on break

Legislators will attempt to wrap up loose budget issues when they return April 26 from their annual spring break. With tax and school finance issues still unresolved, the debate could become difficult.

"We put off a lot of heavy lifting and a lot of contentious issues," said Sen. Jim Barone, D-Frontenac, one of his chamber's negotiators.

The incomplete budget approved by legislators largely follows a spending plan Sebelius outlined in January.

The bill includes an additional $75 million in state aid to public schools, promised by laws enacted last year to deal with Supreme Court orders. But legislators are looking to phase in between $420 million and $650 million more in additional aid over the next three or four years.

Proposals for large increases in education spending sparked fears that legislators would create big budget shortfalls within two years. Even a week ago, some legislative projections showed a potential shortfall of more than $600 million by 2009.

Economy improving

However, Senate Majority Leader Derek Schmidt distributed projections Thursday showing a deficit of less than $33 million for fiscal 2009, even with passage of a big school finance plan. His projections took into account that revenue collections for the current budget year have exceeded expectations by about $130 million.

"The improving economy bodes well for some targeted tax relief," said Schmidt, R-Independence.

In February, the House approved a bill exempting business machinery and equipment from property taxes if purchased after Jan. 1, 2007. Because most property taxes are collected locally, cities and counties stand to be the biggest revenue losers. To appease local governments that see tax collections decline, House members guaranteed them payments worth a total of $158 million over five years.

Two weeks ago, the House approved a bill phasing out the state's corporate franchise tax over three years, eventually costing the state $44 million a year. Firms pay the tax for the privilege of doing business in Kansas.

Senate interested in cuts

The Senate hasn't debated either measure, but Schmidt said his chamber remains interested in tax cuts.

Some legislators believe tax cuts will stimulate economic activity, generating enough tax revenue to make up what state or local governments would otherwise lose.

"Until we get something firmed up on schools, it's going to be hard to say what all you can do, but there certainly is room for tax policy to be passed," said House Taxation Committee Chairman Kenny Wilk, R-Lansing.


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