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Debate over taxes remains volatile

5/6/2013

By JOHN HANNA

Associated Press

TOPEKA -- Kansas legislators reconvene this week facing a decision about Gov. Sam Brownback's plan to stabilize the budget by canceling a scheduled sales tax decrease, and the political climate appears to be as volatile as the state's recent weather.

The Republican governor wants the GOP-dominated Legislature to avoid cuts in higher education and follow up massive personal income tax cuts enacted last year with another round of rate reductions. The key to his plan for accomplishing both goals -- and preventing budget shortfalls during the next five years -- is keeping the sales tax at 6.3 percent, rather than letting it drop to 5.7 percent July 1 as planned.

The Senate has embraced Brownback's proposals on the sales tax and income tax cuts. The House approved legislation letting the sales tax drop, with less aggressive income tax cuts. Legislative negotiators had made little progress toward resolving either issue when lawmakers started their break last month.

Republican legislators involved in budget and tax issues believe a compromise is possible, but such an agreement would move away from the governor's positions. Several key legislators also said GOP legislators could remain at odds and the Legislature could adjourn without passing a tax bill, leaving a big budget mess for next year.

"We're willing to negotiate, but we're just not going to capitulate," said lead House negotiator Richard Carlson, a St. Marys Republican. "Both sides have to look for compromise, but I don't know what that position is."

Legislators end their spring break Wednesday, returning to the Statehouse to finish a state budget of roughly $14.5 billion for the fiscal year beginning July 1 and to complete other business for the year. Republican leaders hope their wrap-up lasts no more than six days, so the annual session ends in 80 days, 10 fewer than typically scheduled.

Lawmakers also are likely to consider changing education policy, rewriting state liquor laws, granting Secretary of State Kris Kobach new power to prosecute election fraud cases and authorizing $202 million in bonds to help finance a new, national biosecurity lab in Manhattan.

But settling tax issues for the year -- even if legislators walk away -- is crucial. House and Senate budget negotiators concede they can't finish a spending plan for the next fiscal year without knowing how much revenue the state is expected to collect.

Brownback pushed for income tax cuts last year and wants to eventually phase out personal income taxes in the future to stimulate the economy. But he's conceded the state must backfill its budget if it wants to avoid significant cuts to education funding and programs. Keeping the sales tax at its current rate would provide $258 million in additional revenues during the next fiscal year.

During the past three weeks, Brownback has toured state university, community college and technical college campuses to build public support for his budget recommendations keeping higher education funding flat in the face of proposals from lawmakers to cut it. Democrats, though supportive of higher education, have criticized the tour as a bait-and-switch campaign to boost support for canceling the sales tax decrease.

"I just don't think anybody has a handle on where this ship is headed," said House Minority Leader Paul Davis, a Lawrence Democrat.

With GOP supermajorities, there's no chance the Legislature seriously will entertain Democrats' argument the state ought to rethink last year's income tax cuts.

Senate Majority Leader Terry Bruce, a Hutchinson Republican, said canceling the sales tax decrease remains the cleanest solution. He expects pressure to build on House Republicans reluctant to accept Brownback's sales tax plan each day of the wrap-up session.

During the past 25 years, lawmakers have felt squeezed at the beginning of each wrap-up to finish their business quickly, sensing their constituents are frustrated with an inability to finish the work within 90 days.

"At some point, everybody wants to go home and end the session. That's the biggest motivator," Bruce said. "At some point, you run out of options."

Carlson said he expects negotiations over the sales tax rate. GOP legislators have suggested phasing down the rate or letting the tax drop some in July but not as much as planned, perhaps to 6 percent.

But the plan to drop the tax to 5.7 percent resulted from a budget-balancing agreement three years ago that temporarily boosted the tax under Democrat Gov. Mark Parkinson. Democrats have said consistently they won't break the promise, and House tax negotiator Scott Schwab, an Olathe Republican, said the idea remains a hard sell among GOP representatives.

Budget projections from legislative researchers suggest that with no changes in tax laws, the state budget still would be balanced for the next fiscal year, even though future problems would loom. Schwab said the projections would allow legislators to walk away from tax negotiations if they don't appear to be making any progress.

"I don't think it's responsible, but it's possible," he said. "We could end up saying, 'OK, we're just going to go home' and punt it."