Long week ahead for Kansas Senate as Republicans pull tax plan

Senate Republican Leader Jim Denning of Olathe and Senate President Susan Wagle of Wichita say they plan to work through the weekend until the Legislature makes progress on a tax plan to close the state's looming revenue shortfall.

? Republican leaders in the Kansas Senate on Tuesday canceled plans to vote on the latest version of a tax bill after support for the plan among moderate Republicans and Democrats appeared to evaporate late Monday.

“At the beginning of the day we thought we had consensus, and at the end of the day we didn’t,” Senate Majority Leader Jim Denning, R-Overland Park, said during a GOP caucus meeting Tuesday morning.

The decision to cancel Tuesday’s vote sent House and Senate tax negotiators back to the bargaining table where they came up with a slightly different version of the bill that could go to the House for a vote as early as Wednesday morning. The House, however, has already shown it can pass a tax bill with a veto-proof margin, and the question hanging over the Legislature is whether the Senate will ever be able to do the same.

Senate Republican Leader Jim Denning of Olathe and Senate President Susan Wagle of Wichita say they plan to work through the weekend until the Legislature makes progress on a tax plan to close the state's looming revenue shortfall.

The bill that was supposed to be voted on Tuesday had come out of a tax conference committee Monday evening after a long day of behind-the-scenes negotiations between Republican and Democratic leaders in both chambers. It was changed only slightly from a bill that lawmakers very nearly passed in February over Gov. Sam Brownback’s veto.

Denning said during the caucus meeting that he now plans to remove himself from negotiations over tax bills in order to focus on a school finance plan. Senate Vice President Jeff Longbine, R-Emporia, said he would take over the tax negotiations.

Republican leaders said that on Monday they believed they had lined up the required 27 senators who would vote to override a threatened veto from the governor. But that was contingent on the bill passing in the first place, and they didn’t have the required 21 votes to do that because Democrats and moderate Republicans began pushing for a different deal.

Unlike with the previous tax bill that Brownback vetoed, which passed in February with broad bipartisan support, Democrats in both the House and Senate began pulling away from the new version of the bill, arguing that it did not raise enough money to fix the state’s basic budget shortfall, let alone leave anything left over to fund a new school finance plan.

Since the failed override attempt in February, Democrats said, the Kansas Supreme Court issued its ruling in the Gannon school finance case, saying current levels of K-12 education funding are inadequate and unconstitutional.

Senate Democratic Leader Anthony Hensley, of Topeka, said that means the Legislature should tackle the school finance question first, then work on a comprehensive tax bill to fund both the budget shortfall and a new education plan.

“We ought to be able to put a revenue package together that will solve the self-inflicted budget crisis that we’ve had as a result of the (2012) income tax cuts while at the same time appropriating enough money to comply with the court order in the Gannon case,” he said.

Denning, however, said he wants to keep the issues of closing the budget gap and funding an education plan separate from one another.

The modified tax bill would have raised an estimated $425 million in the upcoming fiscal year that begins July 1, far short of the estimated $580 million or so that the state needs to fund that budget without making significant cuts or delaying payments into the state pension system.

The bill called for reversing course on many of the tax cuts Brownback championed in 2012. That included repealing the so-called “LLC loophole” that allows more than 330,000 farmers and business owners to pay no income taxes on their business income.

It also would have reinstated a third, upper income bracket and raised individual tax rates on the top two brackets. But even with that, supporters of the bill noted, the new tax rates would still be lower than they were before the sweeping tax cuts of 2012 were enacted.

With the setback on the tax plan, Senate President Susan Wagle, R-Wichita, said the Senate will work through the weekend, including all day on Saturday and the afternoon on Sunday.

That announcement rankled some members of the caucus who said it would interfere with many traditional spring events such as graduations, church confirmations and weddings. But Wagle was not sympathetic.

“Working through the weekends is not about what we want,” she said. “The public is not going to be happy if we have a long, drawn-out session and can’t come to consensus.”

Wagle said the next step will be to figure out which of two pathways toward balancing the budget is more feasible: negotiating a large tax bill that Democrats will support, which will require 27 votes to overcome a veto; or a smaller tax bill that Brownback will sign and which only requires 21 Republican votes.

Late Tuesday evening, House negotiators offered yet another version of an income tax plan that would actually raise more money than the one Brownback vetoed in February.

Like each of the previous bills, it would establish three tax brackets, but with rates set at 3 percent, 5.25 percent and 5.6 percent respectively. That would represent an increase over current rates for all tax filers, even those near the very bottom of the income scale.

The new rates would take effect July 1, 2017. The plan would raise an estimated $500 million in new revenue for the upcoming fiscal year, and $550 million for the year after that.

Democrats on the negotiating team acknowledged that would be enough to solve the basic budget deficit for the next two years, but said they still would prefer to address the school finance issue first, or do both simultaneously.

Rep. Steve Johnson, R-Assaria, the lead negotiator for the House, said the latest plan may be ready for a vote as early as Wednesday, but that it may take until Thursday for it to be formally drafted in bill form.

Rep. Tom Sawyer, D-Wichita, who represents House Democrats on the conference committee, said there are members of his caucus who might not go along with the plan on the initial vote.