Democrats, moderate Republicans' response
The proposed tax-cutting bill rejected by a coalition of Democrats and moderate Republicans would have led to budget shortfalls under certain scenarios, according to a state projection obtained by the Lawrence Journal-World.
Up until now, Gov. Sam Brownback’s administration and supporters of the latest tax cut proposal have said that even with the tax cuts, the state budget would maintain positive balances in future years. The proposed tax package would reduce personal income tax rates and phase out taxes on non-wage income of businesses.
But if the tax cuts were enacted, and legislators wanted to restore a small portion of recent cuts to schools, that would produce a negative ending balance of $408 million by 2018, according to the projection put together by the Kansas Legislative Research Department. The projection was composed at the request of legislators.
In another area of the budget, Brownback has proposed an overhaul of Medicaid, called KanCare, which he said will produce significant savings. But some legislators have doubted that assertion.
If the state fails to realize savings from implementation of KanCare, the state would have a negative ending balance of $895 million in less than six years.
Recently, the federal government has indicated it may take action against the state because of lengthy waiting lists for services for the physically disabled. If the state were to eliminate those waiting lists, the negative ending balance under the tax cut proposal would be $256 million in 2018.
Combining those three scenarios — an increase in school funding, the failure to realize savings from KanCare and eliminating the waiting lists — would result in a negative ending balance of more than $1.5 billion by 2018, the projection indicated.
Brownback and his team have said the tax cuts will increase economic activity. The plan is “a compromise that gets Kansas on the path to a pro-growth tax policy that will grow the economy and create jobs,” Brownback said.
Opponents say they are concerned the plan will leave the state without the necessary revenue to meet critical services.
“The tax bill is way too large,” said Sen. Tom Holland, D-Baldwin City, and the lead Democrat on tax issues. “This leaves no money for additional services. We’re just locking ourselves into major structural deficits.”
Brownback has said if the Legislature fails to approve the proposal, he will sign a larger tax cut bill that was sent to him earlier. That bill will produce deficits in the $2.5 billion to $3 billion range by 2018.
Topeka The Kansas Senate blocked debate Friday on a compromise plan for cutting income taxes, leaving in doubt the future of efforts to back away from more aggressive cuts that many legislators fear could create massive budget problems.
The Senate voted 21-18 against removing a procedural hurdle to debate the proposal drafted earlier this week by House and Senate negotiators. It would gradually lower individual income tax rates and eliminate income taxes for 191,000 businesses over six years.
A separate bill making the same cuts in one year has already gone to Gov. Sam Brownback, a conservative Republican who's pushed the GOP-controlled Legislature to reduce income taxes to stimulate economic growth. Brownback has said he'll sign the measure, although he's encouraged lawmakers to work on a less aggressive alternative.
Supporters of the less aggressive proposal were armed with projections from the Legislature's research staff, showing that even with the income tax cuts and a reduction in the state's sales tax already scheduled for next year, the state would have budget surpluses at least into 2018. But moderate Republicans and Democrats remained skeptical.
Senate President Steve Morris, a moderate Hugoton Republican who voted to block debate on the compromise, said he's hoping House and Senate negotiators can reopen their talks and draft a new plan that's even less aggressive.
"I want a tax structure for Kansas that is responsible, pro-growth and competitive," Morris said.
But House Speaker Mike O'Neal, a conservative Hutchinson Republican, has already said there will be no further talks with the Senate on tax issues. He and the House's negotiators faced grumbling from the right who said the compromise drafted earlier this week wasn't aggressive enough.
Supporters of the compromise had hoped that prospects of Brownback signing the more aggressive package would push skeptical senators past their misgivings. Legislative researchers projected that the more aggressive cuts would create a budget shortfall by July 2014, with the gap growing to nearly $2.5 billion by July 2018.
House Speaker Pro Tem Jene Vickrey, a conservative Louisburg Republican, said he's hoping the Senate will reconsider its action and allow the debate on the compromise to go forward.
"It's somewhat of a surprise because it's a good compromise," he said.
The issue before the Senate was suspending a legislative rule that requires all three senators and all three House members to sign off on a compromise before both chambers can debate it. The House had voted 66-49 on Thursday to suspend the rule.
The two Democrats involved in the tax talks refused to sign this week's deal because of concerns about future budget problems and because they believe all income tax cuts considered so far will shift part of the state's tax burden to poor and working-class families from the wealthy. Supporters dispute the latter contention.