Balanced Budget, K-12 Funded…..

Wow, what an introduction to government and politics for me as a Freshman Legislator in the Kansas House of Representatives. I have experienced, along with a number of fellow colleagues, the power and necessity of prayer, as we acknowleged that God is the source of wisdom. It was evident that through prayer, we “used God’s mighty weapons, not worldly weapons, to knock down the strongholds of human reasoning and to destroy false arguments.” (II Cor. 10:4)  In the end, we passed legistlation that will benefit Kansans, creating an environment that will foster health and growth for families and businesses alike!

So, here’s a summary of the final days of our time together at the Capitol in Topeka.

Adjournment

The Kansas legislature adjourned Friday, having fulfilled its constitutional responsibility of passing a balanced budget. 

The approved budget and revenue will fund K-12 schools, public safety, Regents institutions, transportation, and state services. Despite significant revenue shortfalls, Republicans kept their promise to fund the K-12 block grant, providing certainty and stability for public education. 

Despite their claims to put education first, Democrats refused to be part of the solution and voted no, risking hundreds of millions of dollars of cuts to K-12 to score political points.

The fact that 2015 was the longest session in state history is a reflection of the complex issues facing state government. The wide-ranging insights, perspectives and backgrounds of the Republicans who voted for the end package made it the strongest possible solution.

There was an array of ideas about how to fill the budget gap. The negotiations that resulted in the final compromise, reflects the strong independence and diverse nature of our party. Each legislator was fighting to represent their constituents well.

Overall, the package was a tax shift that improves the overall competitiveness of Kansas to attract and grow jobs. Today the Kansas unemployment rate is 4.2% – over a point lower than the national rate. More Kansans are working today than ever before and the Secretary of State reports record business filings. While there is always more to be done, Kansas is moving in the right direction.

Budget

The budget gap originally stood at approximately $800 million. The Appropriations Committee reduced that to approximately $400 million through banking efficiencies and revenue transfers.

Over the last four years, the legislature has reduced the increase in state government growth. From 1966-2010 State General Fund spending increased 9.1 percent per year. From Fiscal Year 2011 to the proposed Fiscal year 2017, the growth rate per year is 1.8 percent.

The 1.8 percent growth is caused by the increase in expenditures from the three main cost drivers in the budget—public education, the public pension system (KPERS), and Medicaid. Significant efforts have been made to reform each of these areas to increase the value for each taxpayer dollar.

K-12 education grew by $312 million from FYs 12-15

Medicaid grew by $182 million during the same time period

Republicans also put an additional $445 million into KPERS compared to the contributions made at the pre-recession levels, ensuring the program’s solvency.

There has been significant progress this session to reform the three cost drivers. At the same time, all other state government expenditures have decreased.

The last act of the legislature this session was to give the governor the authority to find an additional $50 million in cuts from his administration, excluding K-12, KPERS pension payments, and debt service. The legislature gave the governor the tools he needed to cut with precision, instead of across the board cuts as normally afforded in law.

Additionally, the state will soon be issuing a request for proposal (RFP) for an efficiency study to do an in-depth analysis and review across state government. The goal is to find ways to improve the effectiveness of state government by eliminating unnecessary functions and removing duplication of efforts. The efficiency study will empower legislators to examine agency functions beyond the traditional budget process.

Republicans know that each state dollar comes from a taxpayer’s pocket and must be used as effectively and efficiently as possible.

Revenue

We have seen time and time again that private sector innovation and investment is the key to economic growth. Government must be as efficient as possible to allow individuals to invest their money for maximum economic growth while providing the revenue necessary to fund state services. There are many ways to address this goal and they were all on the table this session. The diversity of opinion that developed the solution to the budget deficit included compromise from everyone while still achieving limited government principles.

The overall tax burden on Kansans has decreased significantly in recent years.  In 2012 major tax cuts were enacted. Approximately 71 percent of that tax relief went to individual taxpayers. Meanwhile, 29 percent went to small businesses, spurring economic growth and investment in the state.

This fiscal year, Kansans will see net tax savings of $951.9 million, from the 2012 tax cuts and their preservation in this year’s revenue package. Additional income tax savings will come in 2018, with provisions for further cuts should revenue exceed 2.5 percent of the previous year’s collections. (Not including mandatory contributions to KPERS).

Included in the revenue package is a mechanism for restraining property taxes that the Kansas Realtors Association estimates could have saved taxpayers $1.b billion since 1998. The new policy prevents local units of government from raising property taxes higher than the rate of inflation. However, the law grants flexibility by allowing increases for certain projects, like new infrastructure, some types of road construction, and costs associated with state or federal mandates. Cities and counties can also increase property taxes by holding an election. At the high end, this policy would have saved taxpayers $5.9 million if voters had not voted to increase property taxes over inflation during the same time period.

The plan completely eliminates incomes taxes for single filers with less than $5,000 in income, or joint filers with less than $12,500 in income. This will benefit approximately 388,000 low-income, working Kansans, who might have owed previously even after various tax credits such as the Earned Income Tax Credit (EITC).

Beginning July 1, the state sales tax rate will increase to 6.5 percent. This translates to an additional 35 cents on a $100 purchase. A household making $35,775 will see an approximate annual sales tax increase of $56.35. (A family of four, making 150 percent of federal low income guidelines.) Meanwhile, that same family of four saves $107 on their income taxes because of the 2012 tax cuts.

Although discussed, the final version of the plan did not include a reduction on the food sales tax. The food sales tax credit as it exists in current law, however, will remain intact for the benefit of low-income Kansans. This provision allows for a tax credit of $125 for every federal tax exemption claimed, if the filer has an income of less than approximately $30,000. 

The revenue package increases taxes on cigarettes by 50 cents, which brings the total up to $1.29 per pack. Additionally it will help the University of Kansas Medical Center become a National Cancer Institute comprehensive cancer center.  If the KU Cancer Center receives this designation it could mean significant economic benefits to the Kansas City region through jobs, grant funding, and investments.

The bill will tax guaranteed payments made to business owners and principles, regardless of whether or not the business makes a profit. That income will now be taxed as adjusted gross income in the owner’s personal tax return.

The tax package fights fraud and abuse by requiring any individual claiming a tax credit to have a valid Social Security number for the entire taxable year for which the tax credit is claimed. This will ensure that only taxpayers legally entitled to a credit receive it, thereby cutting down on those scamming the system. This does not affect the ability of parents to claim tax credits for new dependents on their tax return.

Overall, the package was a tax shift that improves the overall competitiveness of Kansas to attract and grow jobs. Today the Kansas unemployment rate is 4.2% – over a point lower than the national rate. More Kansans are working today than ever before and the Secretary of State reports record business filings. While there is always more to be done, Kansas is moving in the right direction.

I can say in closing that it’s truly an honor to serve. As always, please don’t hesitate to contact me with your questions and concerns.

May God be with us as we govern!

Randy