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Archive for Tuesday, March 21, 2006

Sebelius sees another special session ahead

March 21, 2006

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— Gov. Kathleen Sebelius on Monday told lawmakers to increase school funding and pay for it with expansion of gambling or face a possible special legislative session.

"Passing an inadequate school finance plan is the fastest way to guarantee another special session," Sebelius said as the Legislature appeared deadlocked two weeks before the end of the regular session.

But House Speaker Doug Mays, R-Topeka, said it was Sebelius who had wasted a lot of legislative time by pushing for what turned out to be a failed gambling bill.

"If they hadn't put all their eggs in one basket on gambling, we would be a lot further along right now," Mays said.

A proposal to establish casinos and slots at tracks died in the Senate last week, and bipartisan school funding plans endorsed by Sebelius and key leaders appear on the rocks.

Last year, the Kansas Supreme Court ruled the school finance system unconstitutional because it shortchanged all students, especially minorities. The ruling forced a special session and led to a $290 million, or 10 percent, increase in school funding.

The court also told the state to do a study on the actual costs of education. That cost study has called for another $400 million increase.

Gov. Kathleen Sebelius urges lawmakers to pass a school finance bill during a news conference Monday in her office at the Statehouse in Topeka. The governor has called for expanded gambling to pay for the school funding increases.

Gov. Kathleen Sebelius urges lawmakers to pass a school finance bill during a news conference Monday in her office at the Statehouse in Topeka. The governor has called for expanded gambling to pay for the school funding increases.

Sebelius and some legislative leaders have endorsed plans that follow the cost study's guidelines but phase in the increase over three years.

Sebelius has called for expanded gambling to pay for the school funding increases.

But Mays said school funding could be paid for by tax reductions to expand the economy.

"Are we trying to pass gambling to fund education, or are we trying to fund education to get gambling?" he asked.

Sebelius accused some in the Legislature of "foot-dragging" and said a one-year school funding plan to be debated by the House this week would fall short of what the court wanted.

She also chided lawmakers who blamed the court for the school funding dispute.

"Too many legislators want to blame somebody else," she said. "This has nothing to do with anybody but inaction here in the Statehouse. They've abdicated their authority from the Statehouse to the courthouse."

But Mays said, "It would be helpful if the governor would be a little bit more positive in her remarks."

Comments

Porter 8 years, 9 months ago

"It would help if the governor would be a little more positive in her remarks." says House Speaker Mays. Sounds like his wittle feewings got hurt.

"But Mays said school funding could be paid for by tax reductions to expand the economy"
Tax REDUCTIONS?? I'm no economic/finance expert, but tax reductions to increase current funding???

maybebaby 8 years, 9 months ago

Even if no one is willing to admit it, the under-current at the state-house is buzzing with the fact (?) that the lobbiests for the gambling industry have all made (or promise to make) such huge-large contributions to legislators (and Governors) who favor the bill. It might make a nice news story for some enterprising reporter to follow-up on..... Is the real concern funding education, or with making sure those campaign coffers are full?

Godot 8 years, 9 months ago

Porter, tax reductions historically have resulted in a more robust economy, more business investment and job growth, resulting in the generation of more dollars on which to levy tax.

Godot 8 years, 9 months ago

maybebaby, that goes along with my post yesterday when I wondered if the gambling lobby had provided financial support to the people behind the school funding lawsuit.

I'd certainly like to know how much money the gaming industry has contributed to Seblius, as she has been pushing gambling from the beginning. It was as though gambling was a solution looking for a problem. And then, voila, school funding magically appeared and Sebelius says gambling is the only solution.

I'd also like to know if there are financial and/or operational connections between the KNEA and the gambling lobby on the school funding issue.

Jamesaust 8 years, 9 months ago

"But Mays said school funding could be paid for by tax reductions to expand the economy."

There are no tax reductions that can expand the economy to the tune of adding hundreds of millions of dollars in additional tax revenue collected within the timeframe being discussed here (1-3 years).

Even assuming a very (very!) optimistic return of 60 cents for every dollar of tax cut, the tax cut would have to approach $1 billion dollars. Even with that, no supply side theory theorizes a response to such a cut in the short run. Nor does any reputable economist believe that tax cut stimulus ever makes up lost tax revenue dollar-for-dollar. The best tax cuts can do is (a) provide temporary economic stimulus (much like the Bush 2001 tax cuts), and (b) allocate resources away from an inefficient government to more efficient taxpayers (FEMA is less an aberration than a typical government agency).

Unlike the folks in D.C., Topeka does not have the option of 'borrow and spend'. Unless a tax revenue miracle occurs, Mays is going to have to bite the bullet and raise taxes. And Mays apparently doesn't have the stomach to take on the type of radical reform necessary to make education delivery more efficient. (But that's okay Doug - you can run for Governor in 2010 promising to cut taxes, which is something that can't be done unless you've raised the taxes first.)

Godot 8 years, 9 months ago

Jamesaust, I admire your economic acumen. One question from your statement, "The best tax cuts can do is (a) provide temporary economic stimulus (much like the Bush 2001 tax cuts"

We are in the sixth year of the tax cuts, and the economy is in very good shape, with low inflation, unemployment is at 4.8%, interest rates still near record lows, and the Dow is over 11,000.

What will it take for the tax cuts to be labelled as the sound basis for a strong economy rather than as a temporary economic stimulus?

bankboy119 8 years, 9 months ago

James,

While your rhetoric sounds great, by continuing with that then you're saying more taxes will not hurt the economy. Any reputable economist will also tell you that more taxes hurt the economy in the long run.

usaschools 8 years, 9 months ago

There are NO connections between KNEA and the gaming industry. The implied allegation by godot is ridiculous.

As for tax cuts stimulating the economy historically, that is a bit of an exaggeration. Alan Greenspan commented on the Bush tax cuts saying (I am paraphrasing accurately) that they could not be viewed as an economic stimulus package, that they were purely political/symbolic. I think he knows better than any poster here.

Basically, what we have here is the same old song and dance by both political parties. The Republicansin Topeka, who have never had the SLIGHTEST interest in solving the school funding problems and do not care at all about our schools, are avoiding their responsibility as the majority party to solve this problem. They just want to sit back and wait for Gov. Sebelius to make another proposal so they can shoot it down. Their dream is that she will propose the obvious need to raise taxes, so they can keep their promise to NON KANSANS and not propose tax increases. The Democrats in Topeka are next to useless in that they don't come up with any real proposals. I think they should do so, even though Doug Mays and the idiot brigade will never let them see the light of day. That leaves Governor Sebelius, who has also engaged in a game of chicken with the House leadership by not mentioning the "T" word, even though she knows damn well that a tax increase is needed to solve this problem. In other words, no one is putting the kids of KS first, no one is making education their priority. Re-election is the priority. Doug Mays has no priority other than to see his name in print.

It's a bad situation and both sides are to blame. Sebelius, like her predecessor Graves, lacks the courage to really get out front of this issue and lead. The Democrats seem to think their lack of a majority lets them off the hook. The Republicans, who got us in this mess to start with, are looking for a scapegoat.

Godot 8 years, 9 months ago

USAschools, I did not make an allegation, I simply posed a question, one about which you are apparently quite sensitive.

Jamesaust 8 years, 9 months ago

"What will it take for the tax cuts to be labelled as the sound basis for a strong economy rather than as a temporary economic stimulus?"

The facts cited are all quite true and a testimony to the correct economic decisions having been made in 2001. It is nothing short of a miracle that the economy has managed to not only survive but prosper as well as it has with the disruptions and threats it has faced (personally, I would never have predicted that it could survive $60/barrel oil).

That said, there are very serious problems with the economy. Actually, that doesn't sound sufficiently serious. Our economy is in much worse shape today than it was 5 or 10 years ago. RECOGNIZED financial liabilities of just the federal government have doubled in 5 years. UNRECOGNIZED liabilities probably exceed $75 trillion dollars. (For those not paying attention, that's $75 trillion we don't have nor have any prospect of acquiring.) Face it: W is the biggest liberal Washington has seen in decades. He's reckless and irresponsible. He's precisely what Margaret Thatcher had in mind when she defined a socialist as someone good at spending someone else's money (here, someone else = future generations).

Just as tax cuts saved the economy from falling into recession (at the expense of loads of debt), economic growth provides the opportunity to begin paying off that debt. Look, I don't have a beef with most of these tax cuts - I'd cut taxes on capital and on equipment more but would restore the estate tax and probably double energy taxes. All in all, it'd still be about the same tax burden but be structured differently because, believe it or not, not all taxes are created equally. Some are disruptive of economic production much more than others, and as I often lecture Bozo: growth pays for a lot; no growth pays for nothing.

Some new thinking might be useful. See this soon to be released book from a famous libertarian (I'm not endorsing, just throwing it out there): http://www.amazon.com/gp/product/0844742236/ref=ase_httpwwwandrec-20/103-6367247-6329460?n=283155&tagActionCode=httpwwwandrec-20

You can't cut taxes forever, at least without cutting spending. What matters more is how disruptive your revenue collection is and how efficient and effective your spending of that revenue is.

Jamesaust 8 years, 9 months ago

"Any reputable economist will also tell you that more taxes hurt the economy in the long run."

I'm not certain who this reputable economist is. Perhaps Nobel laureate "deficits don't matter" Cheney? I do know that despite Mr. Mays' implication that there is no reputable economist who claims that every dollar of taxes cut results in a dollar of tax revenues increased - not even the "father of supply-side" Laffer. That's not an argument against lower taxes, just against fiscal irresponsibility. I believe it was Justice Holmes who once said that 'taxes are the price we pay for civilization.'

Certainly, running up massive debts hurt the economy in the long run. So does not educating your (or others') children.

As an economist might say - ceteris paribus ("all things equal") - higher taxes lead to slower economic growth. Fortunately, most of us are not economists and rarely (if ever) are "all things equal."

Do the taxes in question create more jobs than they destroy? Is the money being used for more efficient ends in the government's hands or in remaining in the hands of those who created the wealth in the first instance? While recognizing that education is one of the most inefficient sectors of government (probably behind defense spending, health care, and business/ag subsidies), I believe that the efficiencies gained by a well educated future generation most certainly outweigh the economic burdens of the dollar figures we are discussing here. Can we have a more effective educational system? Sure. But that's a long term process. Children live in the short term.

Godot 8 years, 9 months ago

In his news conference today, the President pointed to social security, medicare, medicaid and some entrenched entitlement programs as being largely responsible for the inability to reduce spending. He said that in his proposed budget, except for security-related expenditures, and the social programs I just mentioned, spending had been cut. He said that the explosive growth in the retirement programs threatens to bring the government to its knees if changes are not made to those programs in the near future.

What do you think?

MyName 8 years, 9 months ago

I've looked at the CBO numbers, and the problem is serious, but not as serious as the President's rhetoric is making it out to be. Social Security won't hit the break even point, in terms of spending more revenue than it takes in, for another 15 years. It won't even become a real budget item for another 25-30 years. Even then, Social Security is fixable with changes to the tax rate, or changes to the benefit structure, or both.

Medicare is on a much shorter time table and was only made worse by the prescription drug plan. Even if the Bush tax cuts were allowed to expire, we still couldn't pay for it indefinitely. Oh well, I guess people should enjoy it while it lasts.

Also, everything Bush has ever said about his tax cuts for the rich is complete bunk. He was lobbying for them when we had a good economy with a surplus, because "it's the right thing to do" and then he was lobbying for them after the slump started because they will "stimulate the economy". It's a load of BS. His cuts were mainly in capital gains, and the majority of our growth has been in the housing sector which has nothing to do with capital gains but has everything to do with the Fed's cuts in interest rates. He's just out there giving tax cuts to the rich at the expense of students and poor people.

And what a load of crap about how we're doing okay "aside from security related expenses". I hate how he keeps reminding us how "we're in a war" but somehow we're not expected to pay for that war, but rather our grandkids are. I wonder how much economic stimulus Haliburton has gotten because of Iraq? And you can bet their CEOs are still benefiting from the Tax Cuts as well. I'm not a class warrior, but what the Repubs are doing is really un-American.

Godot 8 years, 9 months ago

I disagree that the housing sector has nothing to do with capital gains. You make the assumption that the hot housing sector includes only homeowners. To the contrary, many investors benefit from the reduction in the capital gains tax, and a lot of property has turned over because of it. And that money has been reinvested in the economy.

usaschools 8 years, 9 months ago

Godot, your allegation was clearly implied. Why else raise the question other than to make the implied smear. Don't pretend you were just making a query for information.

Godot 8 years, 9 months ago

Questions are only questions, and they should be given due respect in a situation as complicated, and as cloudy, as this one.

Godot 8 years, 9 months ago

Usaschools, pardon me for suggesting this, but you seem to have a lot more at stake in this than I do. I am just a casual observer, and a Kansas voter. Who are you?

Jamesaust 8 years, 9 months ago

Godot - No doubt, mandatory spending requirements are not sustainable without reform. However, that's like saying you can't control your weight because you have to entertain clients and eat out at restaurants all the time - it does not explain why you ate 6 mega sized cinnamon rolls for breakfast.

Re Bush, I can only guess that he's confused (a frequent state). Here he is discussing budget issues two years ago on "Meet the Press":

'BUSH: We've got to deal with Social Security as well. As you know, I mean, these entitlement programs need to be dealt with. We are dealing with some entitlement programs right now in the Congress. The highway bill, it's going to be an interesting test of fiscal discipline on both sides of the aisle. '

Okay. Highway spending is NOT an entitlement (unless you mean a prerequisite to politicians getting re-elected). Least anyone think I'm nit-picking the entire interview was full of such howlers.

I believe the President misspoke. The 'talking point' was that the growth of discretionary spending had been cut. In other words, it was increased at a rate less than the rate increase the prior year. The WHITE HOUSE figures show discretionary spending climbed from $644 billion in 2001 to $840 billion this year. For those not quick with math that's an increase of more than 30 percent.

For those who hate numbers totally, just think of it as your children's future up in smoke (and a GUARANTEED tax increase whoever is elected in 2008).

Jamesaust 8 years, 9 months ago

At least on the narrow issue of housing, it is certainly true that a lowering of interest rates has lead to massive refinancing of mortgages and as a result additional cash to be spent. Two things have to be kept in perspective, however: 1. Is the freed up money being deployed productively? Is it paying for college educations? being invested for retirement? Or is it being sucking into a consumption binge? Anecdotal evidence says consumption but then most people don't conspicuously display their savings statements. 2. Housing is not a productive asset. Frankly, as long as you have a habitable roof over your head it doesn't matter if you live in a shack or a mansion. Housing value is a zero sum game. For every extra dollar a housing seller gets the housing buyer must forego one dollar in other spending. In short, the books, in the long run, must balance. And since, housing has a long run age demographic, in essence, money is just being recycled from the young to the old (and then eventually back to the young) - no 'growth' (a/k/a, wealth creation) occurs, which is quite unlike true 'investment.'

MyName 8 years, 9 months ago

I disagree that the housing sector has nothing to do with capital gains. You make the assumption that the hot housing sector includes only homeowners. To the contrary, many investors benefit from the reduction in the capital gains tax, and a lot of property has turned over because of it. And that money has been reinvested in the economy.

The vast majority of the activity in this sector has been with homeowners, and I have yet to hear any expert say differently. While the reduction in capital gains may have allowed some investors to have more money to put into housing, the reason why they are also putting their money there is because of the low interest rates, not because of the capital gains tax. A tax which they would only have to pay after they resold the property a few years down the line.

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