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House to move forward on taxes, spending cuts, while Senate regroups

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Following a near-meltdown in the Senate last week, Republican leaders in the Kansas House plan to move forward with their own plans for balancing this year's budget and raising taxes to balance the next two years' budgets.

On Thursday last week, the Senate abruptly called off debate on its own tax and spending plan after support for the spending cuts collapsed over the previous 24 hours. Among other things, that bill would have slashed $198 million in general fund spending out of the last four or five months of the fiscal year. The bulk of that, $129 million, would have come out of K-12 education.

The Senate tax plan, which was more or less paired with the spending cuts, would have raised about $660 million for the next two years by repealing the so-called LLC exemption that was part of the 2012 tax cuts that Gov. Sam Brownback championed, and by raising individual tax rates on everyone.

House Speaker Ron Ryckman Jr., R-Olathe, told reporters Friday that he planned to meet over the weekend with GOP leaders and other members to decide how they want to proceed on the budget and taxes.

On the table is a House tax bill that would raise just more than $1 billion in new revenue for the next two fiscal years by eliminating the LLC exemption, raising individual rates and reinstating a third tax bracket for individuals earning more than $50,000 a year, or couples filing jointly earning more than $100,000 a year.

The House hasn't yet produced a spending-cut bill — formally known as a "rescission" bill because it would rescind spending authority previously approved — but Ryckman said the Appropriations Committee planned to work on that Monday and Tuesday.

During an informal Q & A with reporters after the House adjourned Friday, Ryckman was asked where the line is, if there is one, between an acceptable and unacceptable cut to public schools.

"We’re still having talks and conversations about where that is," he said. "We’re trying to balance any decision with what it will look like to each individual district based on their individual data so there’s not disruption in services."

One interesting difference between the House and Senate approaches is how willing GOP leaders are in each chamber to work with Brownback.

When Brownback rolled out his plan in January — which called for delaying payments to public schools and KPERS, and borrowing $317 million from an idle funds investment account — Senate President Susan Wagle was quick to criticize it for relying too heavily on one-time money and failing to address the "structural deficit" in the state's budget: the gap between regular, recurring revenues coming in and regular recurring expenses being paid out.

Likewise, Brownback wasted little time lashing out at the Senate's tax plan, saying the higher rates would "punish the middle class," while repeal of the LLC exemption "needlessly harms the real people that serve as the lifeblood of Kansas."

Since then, some in the Senate have said leaders need to stop thinking about a plan that can get the minimum 21 votes needed for passage, but instead finding a plan that can get the 27 needed to override an almost certain governor's veto.

Ryckman, by contrast, said that probably is not a workable strategy in the 125-member House, where it takes 63 votes to pass a bill and 84 to override a veto.

"What we’ve talked about all session is, it’s not just about finding 63 (yes votes)," he said. "It’s also about finding something the governor will sign. This is part of the process.

"Anytime you’re talking about revenue enhancements, to get to 63 votes, it's very problematic. To get to 84, it’s almost impossible," Ryckman said.

Meanwhile in the Senate, GOP leaders have said they will not let any bills move forward until the chamber comes to a consensus about how to balance this year's budget and how to move forward on taxes. And as far as taxes are concerned, Wagle said, the only element that seems to have 21 votes so far is repeal of the LLC exemption, which would only raise about $230 million a year, far less than what's needed to close the projected $582 million budget gap for the next fiscal year that begins July 1.

Given that, she said, she has instructed the Ways and Means Committee to start putting together a budget for the next two fiscal years that would make enough cuts to close that gap.

Senate Democrats, on the other hand, have said they are working with a group of moderate Republicans on an alternative plan that could be discussed in committees sometime this week. Democrats say it would raise about $1.2 billion over the next two years through a combination of repealing the LLC exemption, raising rates, and establishing a third tax bracket that would kick in at $35,000 a year for individuals, or $70,000 a year for married couples filing jointly.

It's worth noting, though, that both the Senate Democrats' plan and the House proposal go much further in raising taxes than the original Senate plan that Brownback criticized so harshly when it first came out of committee.

Ryckman said he has been meeting with Brownback, most recently on Tuesday of last week, to discuss tax policy. So far, he said, the governor has not drawn any lines in the sand about what he absolutely will not accept.

"We're just talking about finding things we can agree on," Ryckman said.

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