Tax battle in the 2010 legislative session

Here is a good summary of the recent legislative session written by Mark Tallman with the Kansas Association of School Boards.

May 18, 2010

Tax increase battle defines 2010 legislative session


Long before the start of the 2010 session, it was clear legislators would face a fundamental choice: whether or not to raise state tax revenue to avoid further deep cuts in state programs such as education, social services, public safety and highways.

In 2009, with the worst economic crisis facing the state since the Great Depression, tax revenues fell sharply and the Legislature reduced general state aid for school districts by nearly $100 million and eliminated $30 million in capital outlay state aid, professional development and special education aid. As revenue continued to fall, Governor Mark Parkinson ordered another $39 million reduction in June, followed by a $37 million cut in November, reducing base state aid to the 2006 level. The state failed to fund $100 million in costs under the school finance formula due to higher enrollment and weightings, and lower revenue from the statewide mill levy; as well as $13 million to keep special education aid at 92 percent of the excess cost formula. The base budget per pupil fell from a statutory commitment of $4,492 to $4,012.

When new revenue estimates were released in November, the state general fund faced a deficit of nearly $400 million for the upcoming Fiscal Year 2010-11, despite cutting almost $1 billion from the budget that was approved for FY 2009. In his message on January 11, the first day of the 2010 session, the Governor told legislators that spending cuts had gone as far as possible without doing permanent damage to state programs and interests. He proposed a one-cent increase in the state sales tax for three years, and increasing the cigarette tax to the national average.

Exactly four months later, early in the morning of May 11, the Kansas House voted 64-61 to concur in a one cent sales tax increase that was expected to raise over $300 million. The bill had been approved five days earlier by the Kansas Senate on a vote of 23-17. Supporters of the tax were generally the same legislators who also passed a budget designed to keep funding for K-12 education at the same level next year as in the current year, restore or minimize cuts to a range of social service programs, and boost funding for the state's transportation system.

Although tax increases are always controversial, this may have been the most contested in recent history. Opposition was led by activists in the state's dominant Republican Party; the State Chamber of Commerce, which threatened political retribution against legislators voting for tax increases; and groups calling for limited government that paid for newspaper, radio and televisions spots denouncing higher taxes and spending. Support for more revenue came from a new coalition of education and social service interests (including KASB) called Kansans for Quality Communities; a group of local chambers of commerce that broke from the state organization over differences in the impact a sales tax increase would have; and Governor Parkinson, a former state Republican chairman who switched parties and inherited the office when Governor Sebelius left to join President Obama's cabinet. (Two other past state G.O.P. chairs, Rochelle Chronister of Neodesha, and Dennis Jones of Lakin, pushed the 2010 Commission to call for a tax increase to maintain K-12 education funding.)

Tax increase opponents first argued cuts to school districts had been minimal and additional cuts could be absorbed by using cash balances or finding greater efficiencies. Then, some legislators proposed allowing school districts to make up for any cuts through higher local taxes, as long as state taxes weren't raised. Finally, proposals were made to avoid cutting school funding by selling off state property. But in both the House and Senate, a coalition of generally more moderate Republicans and most Democrats rejected these options and passed a budget maintaining school funding at current levels, backed by state tax revenue.

The political verdict on the choice for taxes will be made in the August 3 primary and November 3 general elections. For school districts, it means deeper cuts are not inevitable, but they are also not impossible. Even with the tax increase, the Fiscal Year 2011 budget assumes increased federal funding that has not yet passed Congress. With no projected ending balance, further shortfall in state revenues in the next year could force delays in aid payments and more spending cuts to avoid a deficit. The precarious budget situation suggests districts may well want to preserve reasonable cash reserves, despite criticism from some organizations and legislators.

Nor is the picture likely to change in the near future. Current projections show the state will face a budget deficit in FY 2012 even with higher revenues, in part due to expiring federal stimulus funding, and the boost in the state sales tax for the state general fund will expire in FY 2014. School district costs and requirements are projected to increase more rapidly than revenues.

With the battle over the budget and taxes overshadowing most other issues, an unusually small number of education bills were passed. The Legislature made a permanent change in the notice day for teacher and administrator contracts; made some changes in special education funding; extended the potential life of school buses; and removed required State Board of Education approval of school building construction plans. A number of other bills, however, fell by the wayside.

KASB is preparing a complete report on education issues in the 2010 Legislature, which will be released by the end of the month.

Mark Tallman
Assistant Executive Director/Advocacy
Kansas Association of School Boards
mtallman@kasb.org