Kansas Legislature to open session facing decision on raising new revenues to plug budget gap

Kansas legislators face decision on raising taxes

TOPEKA, Kan. — Do you smoke? Made a trip to the laundromat lately? Craving those thin mint or shortbread cookies sold by the Girl Scouts? Run a business?

Then you ought to be watching the Kansas Legislature over the next few months. There’s going to be plenty of talk about having residents open their wallets a little more to help the state out of its budget mess.

Legislators open their annual, 90-day session Monday, and they’re facing a projected budget shortfall approaching $400 million. The biggest issue is whether they’re willing to raise taxes to protect schools, social services and other programs from more cuts — and, if so, who gets to pick up the tab.

Many members of the Republican-controlled Legislature don’t see enough support yet for higher taxes, even if Gov. Mark Parkinson and fellow Democrats are talking up the idea. But pressure is likely to build as legislators weigh potential cuts.

“Anytime a governor is interested in something, it becomes a real issue,” said Senate Majority Leader Derek Schmidt, an Independence Republican. “The case is going to have to be made that there aren’t more savings to be had before there’s going to be a serious discussion.”

Parkinson said he’s not planning to propose deep cuts to eliminate the shortfall projected for the fiscal year that begins July 1. He’s also promised to seek an increase in tobacco taxes.

The governor, some Democratic legislators and advocates for schools and the needy contend state government has done enough serious cutting. The state expects to spend $651 million less in general tax revenues in its current budget than in it did two years ago, a drop of nearly 11 percent.

Federal stimulus funds helped some, but belt-tightening has occurred across state government.

Kansas closed three minimum-security prison units in 2009 and cut back on highway maintenance. Public schools had 3,700 fewer teachers and other staff this fall. In November, the state cut what it pays doctors for services under its Medicaid program by 10 percent. The state recently stopped paying for dental care for some seniors.

“They cannot cut their way out of this any more,” said Mark Desetti, a lobbyist for the state’s largest teachers’ union. “Every function of government has been cut to the bone.”

Legislators are likely to focus first on closing exemptions to the state’s 5.3 percent sales tax.

You don’t pay the tax on dozens of things, including Girl Scout cookies or lottery tickets, or when you put coins into a washer at the laundromat. There’s an exemption for what religious groups buy and ones that keep consumers from paying the tax on services and farmers from paying it on equipment.

Democrats also have talked about suspending or reversing tax breaks granted in recent years to businesses. For example, the state is phasing out its corporate franchise tax, paid for the privilege of doing business in Kansas.

“First and foremost, we’ve got to look at the tax cuts that have been put on the books recently, plus the exemptions,” said Senate Minority Leader Anthony Hensley, a Topeka Democrat.

Yet many Republicans argue it’s a bad idea to force people to pay more in taxes. They believe working class families can’t afford more sacrifices and that hitting up businesses will keep the economy from improving.

How about consolidating state agencies or some of the state’s 295 school districts? Or turning some services over to the private sector? House Appropriations Committee Chairman Kevin Yoder said those ideas should be considered first.

If legislators increased taxes, the Overland Park Republican said, “We’d be missing a golden opportunity to reform government and make it operate in a more efficient manner.”

Some legislators, particularly anti-tax Republicans, see the state’s budget headaches as the hangover from spending binges after the state emerged from economic problems from 2001 to 2003 until the current downturn began in mid-2008.

In its fiscal 2008 budget, the state spent $6.1 billion in general tax revenues. That was 41 percent — nearly $1.8 billion — more than in fiscal 2004, the first budget after the state’s previous hard times.

Aid to public schools alone was $1 billion higher in fiscal 2008 than in fiscal 2004, pushed upward by Kansas Supreme Court rulings in an education funding lawsuit.

“We simply spent well more than we could afford,” said Derrick Sontag, state director for Americans for Prosperity, an anti-tax, smaller-government group.

But some legislators, particularly Democrats, argue the state contributed to its problems by being generous with tax breaks, especially for businesses.

The Department of Revenue estimates the tax breaks enacted over the past 15 years will save individuals and businesses $920 million — more than twice the projected shortfall — in the next fiscal year.

“There are no good choices here,” said House Minority Leader Paul Davis, a Lawrence Democrat. “That’s what folks need to understand.”