Andrew Bahl
| Topeka Capital Journal
There was no shortage of familiar items in Governor Laura Kelly’s budget proposal released to lawmakers and the public on Wednesday. Some of the governor’s flagship policies are unlikely to have any effect in the Republican-controlled legislature.
Kelly’s plan is only the starting point for budget discussions, and lawmakers have ample leeway to go their own way, although the governor’s plan is an important starting point for debate.
Here are the key takeaways for Kelly’s proposed spending plan and the likely development of the budget discussion over the coming months.
No tax increases in the event of a pandemic
The budget does not include any sales or income tax increases as many Kansans are suffering from economic problems due to the COVID-19 pandemic.
Kelly alluded to this fact in her speech on Tuesday, and Republicans firmly believed that Kansans should see their tax burdens shrink, not increase.
In fact, conservative lawmakers are already introducing plans to cut taxes, especially for those who had to pay higher income taxes in the face of the comprehensive 2017 federal tax law.
And Republicans say that one of Kelly’s proposals to apply sales tax to digital purchases is actually a new tax.
Currently, sales tax is not charged on digital purchases such as Netflix subscriptions, iTunes downloads, or Kindle books. The governor attempted to change that in 2019, and lawmakers gave way when the increase was offset by tax cuts elsewhere. However, the final bill was unacceptable to Kelly and she vetoed it.
Proponents said a digital sales tax would improve the playing field for brick and mortar retailers who are forced to levy taxes on DVD, CD and book purchases.
“That immediately puts the local Kansas company investing at a disadvantage here and real estate here and employees here,” said Adam Proffitt, Kelly’s budget director.
She also proposes a tax on online retailers such as eBay, Etsy, and Amazon, which would allow buyers to purchase goods from a third party.
Legislators said they will try again to offset the proposals with cuts elsewhere.
“Are we going to bet that on what everyone is already paying for?” said Rep. Sean Tarwater, R-Stilwell.
If you don’t succeed at first …
There were other things that revived Kelly from previous proposals, most of which Republicans have rejected in the past, and they seem ready to do so again.
“It just seems like we’re going back to the same methods over and over again … that have been rejected by lawmakers in the past,” said Rep. Troy Waymaster, R-Bunker Hill. “So why are we trying to revive the components of a budget that, for the most part, will not pass the legislation?”
Above all, this includes expanding the state Medicaid program to include an additional 165,000 low-income residents. Politics has been a major wish for Democrats and some Republicans for some time.
But Tarwater said the cost of the plan was “voodoo bookkeeping,” and Conservative leaders have long protested the cost hike to the state, even though most of the expansion would be covered by federal dollars.
Kelly is also trying again to refinance the state’s pension system, saying it would free over $ 150 million this year.
But Republicans are less convinced of the plan than they were when Kelly first proposed it last year. They argue it would add billions of dollars to the state’s pension obligation in the long run, despite Kelly claiming the system will likely refinance at some point anyway.
“I don’t see this forward,” said Waymaster. “But you never know it might surprise us.”
Deviations from Kelly’s plans could result in other priorities, such as a 2.5% raise for all government employees, being cut because their source of funding has disappeared.
More money to go to higher education, keep K-12 spending
Kelly stayed true to her desire to maintain constitutional spending on K-12 education, and her budget continued to be funded through a 2019 court ruling.
Some Republicans have puzzled over the ruling, though many members have also argued that there is little point in turning the apple cart around at this point to adjust funding levels.
Kelly’s budget includes more money for higher education and the recovery of funds cut last year after COVID-19. It also protects $ 2.4 million in financial aid funding and gives the Kansas Board of Regents $ 10 million more on administrative priorities.
The treatment of substance abuse in prisons has expanded
$ 13 million has been earmarked for extensions to correctional facilities in Winfield and Lansing, which were also partially cut from last year’s budget after revenues fell during the pandemic.
This would mean more treatment for geriatric inmates or those in need of treatment for more serious medical conditions. It would also convert part of Lansing into more substance abuse support for inmates to reduce the number of people who are reoffended when leaving prison.
“This frees up our budget later because we spend less on corrections as we drive fewer people back into the system,” said Proffitt.
The budget also includes $ 16 million upgrades to the Kansas Highway Patrol’s air units, including two new helicopters and a new aircraft.
Despite the improved outlook, uncertainty remains
The state’s fiscal picture is better than it was in the spring, when it stared at a shortfall of more than $ 1 billion due to falling tax revenues caused by the pandemic.
That number has shrunk significantly, but there are still many unknowns about where the pandemic will lead and what a new presidential administration will mean for economic policy.
Proffitt said the governor tried to include this in their proposal.
This includes delaying the repayment of a $ 132 million loan from the Pooled Money Investment Board to free up more money for spending this year, though Republicans are likely to be scrutinizing that plan too.
Kelly pointed out that the plan is leaving the state with an ending balance of $ 767.5 million, a cushion that will hit the threshold the state would like in the event of another economic downturn.
But things can still change quickly.
“Do we think things are good? Not yet,” said JG Scott, director of the Legislature’s impartial research division. “We still have many concerns, many problems. The concern we still have is this uncertainty.”