Kansas governor to seek higher taxes to close projected $400 million budget gap

Kan. governor proposes sales, tobacco tax hikes

TOPEKA, Kan. — Kansas Gov. Mark Parkinson on Monday proposed raising taxes on groceries, clothing, cigarettes and other consumer goods to eliminate a projected budget shortfall.

In his State of the State address, Parkinson asked legislators to increase the state’s sales tax to 6.3 percent from 5.3 percent, but only for three years, starting in July. Kansas imposes the tax when consumers buy food, clothing, household items and most products, but not on gasoline or services.

The Democratic governor also asked the Republican-controlled Legislature to boost tobacco taxes to national averages and impose a statewide ban on smoking in public places. Kansas’ cigarette tax would increase by 55 cents a pack, from 79 cents to $1.34, while the tax on other tobacco products would quadruple to 40 percent.

Those changes would raise $378 million during the fiscal year beginning July 1, almost enough to cover a projected budget shortfall approaching $400 million.

Other changes and shifting of funds around state government would allow Kansas to restore some previous cuts in aid to public schools, higher education and social services. The state also could reverse a 10 percent cut Parkinson imposed in November in payments to health care providers for services under the Medicaid program.

“Everything that has been built is at risk,” Parkinson said during a joint session of the Legislature. “Now is the time to stop cutting aid to education, to stop cutting aid to public safety and to stop cutting aid to our elderly and disabled.”

Parkinson’s proposals are likely to face strong opposition. Many Republican legislators, particularly in the House, argue any tax increases will hurt struggling families and businesses — and slow the state’s economic recovery.

“Taxpayers can’t pay more until they start making more, and we’ve got to help them make more money so the state revenues will grow,” House Speaker Mike O’Neal, a Hutchinson Republican, said.

House Majority Leader Ray Merrick, a Stilwell Republican, called Parkinson’s tax proposals “shameful.”

Senate President Steve Morris, a Hugoton Republican who’s been more receptive to raising new revenues, took heart in Parkinson’s saying that he is “open to all options.” Morris said raising the sales tax rate is a difficult sell.

Democrats and advocates for education and the needy have focused on reversing business tax breaks granted in recent years and eliminating exemptions to the sales tax. No specific proposals have emerged, but items exempted include bingo games, Kansas Lottery tickets, farm machinery and supplies purchased by religious groups.

“I’d like to see us have a discussion about exemptions and tax credits — I mean, things that have benefited businesses and folks who are more higher-income,” said House Minority Leader Paul Davis, a Lawrence Democrat.

Under Parkinson’s sales tax proposal, the levy would drop from 6.3 percent to 5.5 percent in 2013. Money raised from the 0.2 percentage points of extra tax that remains would go to highway projects.

Parkinson and other Democrats have said for weeks that the state did enough budget-cutting in 2009.

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 occurred across state government. Kansas closed three minimum-security prison units last year and cut back on highway maintenance. Public schools had 3,700 fewer teachers and other staff this fall. The state recently stopped paying for dental care for some seniors.

“What I am not open to are further crippling cuts to our critical state programs,” Parkinson said. “Our ancestors fought too hard to build this state to what it is right now, and now it’s our turn. It’s our turn to fight.”

Associated Press Writer John Milburn contributed to this report.

On the Net:

Kansas governor: www.governor.ks.gov

Kansas Legislature: www.kslegislature.org

(This version CORRECTS governor’s quotes to reflect speech as actually delivered.)