Veto Session Heads into Week Four
The Kansas Legislature headed home for the weekend last Friday guaranteeing at least a month-long veto session. There have been several warnings of a 7-day work week to finish off the year but those threats have gone unfulfilled. We first had Mother’s Day and this past weekend may high schools were celebrating graduation. We can expect to hear a similar threat this week by leadership but with Memorial Day coming up fast those threats may again be idle.
After three weeks, nothing has really changed. The politics remain the same as do the fiscal issues. The state is still in the hole $450 million on July 1 and another $450 million for FY19. K12 plan may run an extra $150 million for FY18/FY19. Those floor debates are still on the horizon.
The issue remains how to pay for these shortfalls and school finance. Earlier this session, the legislature passed a bill that would have funded state government with $590 million but Gov. Brownback vetoed that measure, and the Kansas Senate was unable to override the veto (the vote was 24-16; they needed 27). Thus, far the options are poor: pass a plan similar to the one Gov. Brownback vetoed and hope to override it, or pass a plan that doesn’t cover the hole and make cuts.
Timing is also significant since the Kansas Supreme Court has set a June 30th deadline to come up with a new school finance plan. This deadline has given Democrats and some Moderates leverage over the debate, but leadership would prefer to pass a tax plan prior to the school finance formula to limit Supreme Court review options.
Some hope to create a new money tree by removing the sales tax exemption on a few professional services. Rep. Kristy Williams (R-Augusta) is pushing to restore a sales tax on the following:
- Mini Warehouse/Self-Storage;
- Collection Agencies;
- Investigative Services;
- Security Guards/Patrol;
- Security Systems/Monitoring;
- Janitorial Services; and;
- Pet Care Services (Not Veterinarians)
These could bring in $55-$60 million, but proponents are planning to add to this list by including dating services, lawn care, tattoo parlors and residential utilities. These could bring in an additional $100 million. See HB 2428 - http://www.kslegislature.org/li/b2017_18/measures/documents/hb2428_00_0000.pdf
The KBA has concerns regarding sales tax on collection agencies. Several law firms engage in debt collection activities as do some doctors' offices, or CPA’s for that matter. Removing the sales tax exemption on collection agencies may prove to be a trickier option than initially envisioned. Debt collection is a volume business that relies upon phone banks, email and snail mail contact. Very little is done face-to-face which means the production can be moved out-of-state or internationally to avoid the sales tax. This would leave in-state entities that cannot move as easily at an economic disadvantage. The KBA is engaged on this topic and has expressed our concerns to the pertinent parties.
Articles of note:
http://realprosperityks.com/time-build-path-forward-now/ - Ks Center of Economic Growth
https://www.apnews.com/b57c8531183c4af88d76700dce1f077d/Kansas-lawmakers-to-resume-talks-on-tax-hikes-to-fix-budget - AP NEWS
http://kmuw.org/post/tax-plan-school-funding-challenges-could-mean-marathon-session-kansas-lawmakers - KMWU.org
http://kcur.org/post/kansas-house-rejects-12b-plan-repeal-most-brownback-tax-cuts#stream/0 - KCUR.org
http://www.kctv5.com/story/35491488/kansas-house-rejects-plan-to-hike-taxes-12b#.WSOWvZ_UB84.twitter – KCTV5.com