KEPC UPDATE: Income tax, property tax, school efficienty, $8m ...

In this issue ?

• Income tax surcharge?
• Brownback would eliminate property tax deduction
• School Efficiency Task Force report released
• $8 million in Kansas ?closing fund?
• Hearing Tuesday on ?transparency? bill

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Income tax surcharge?

Several people at a Kansas Association of Counties program Thursday afternoon in Topeka heard the same thing.? House Majority Leader Jean Vickrey (R-Louisburg) was discussing the possibility that Governor Brownback?s proposals for raising revenue might not be successful.

Almost in passing, he said something about a 2-year income tax surcharge as a possible solution.? He was not specific beyond that.

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Brownback would eliminate home property tax deduction

Speaking of surprises, legislators from both political parties were taken aback at a proposal to fill the big budget hole caused by last year?s individual income tax cut which included eliminating the tax deduction for property taxes paid on homes.

It came as Budget Director Steve Anderson unveiled Governor Sam Brownback?s plan for even more income tax cuts.

Eliminating the property tax deduction appeared to be new, coming a week after the Governor revealed his budget.? It would raise $68 million.? Brownback had previously asked the lawmakers to eliminate the interest on home mortgages, which brings in $162 million.

The Administration says the property tax deduction was always part of the Governor?s plan and that people just didn?t notice it.? Brownback did not mention the deduction in his state of the state message.

The explanation has many at the Statehouse scratching their heads.? In a lengthy January 16 appearance before the Senate Ways and Means Committee to explain the Governor?s budget and tax plan, Anderson never mentioned the property tax deduction going away.

Here?s the officially requested legislation by the administration, which includes a sort of trigger mechanism to lower income taxes in the future.? Hearings are expected to begin next week on the proposal in the Senate Assessment and Taxation Committee.

Retain the state sales and use tax rate at 6.3% and distribute same amount of revenue from state sales and use tax receipts to the State Highway Fund as under current law;

Decrease the individual income tax lower bracket rate from 3.0% to 2.5% in Tax Year 2014 and from 2.5% to 1.9% in Tax Year 2016; decrease individual income tax upper bracket rate from 4.9% to 3.5% in Tax Year 2017.

Exclude from the Kansas itemized deduction residential interest and real property taxes effective Tax Year 2013; and

Provide that commencing in Fiscal Year 2015, state general fund growth from tax receipts in excess of 4% will be applied to reduce individual income tax rates in future tax years.

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School Efficiency Task Force Report released

This week in Topeka, the long awaited report by the Governor?s School Efficiency Task Force was released.? After three meetings to study K-12 education spending and ?develop guidelines on how to get more funding into classrooms,? these are the 12 recommendations in a nutshell.

These are summarized, and are mostly the exact language. We have changed some wording for clarity.

1. Establish a statutorily-required 2-year school funding cycle.
2. Place a priority emphasis on the timely transfer of state payments to school districts in June and January.
3. Conduct a study to reevaluate the state?s open-ended obligation to equalization of school construction bond issues to provide the state a better visibility from a budgeting perspective.
4. Conduct a study on implementing a state data management and accounting system that is integrated with K-12 school systems and post-secondary institutions.? The study says a lack of standardized data management system across all districts is resulting in an inconsistent and bifurcated process that is inherently more costly as each district defines and utilizes its own process.? There were numerous examples provided to the Task Force where state-required reporting obligations imposed on districts were ?cumbersome, inefficient, and time consuming.?
5. Restructure the operating parameters associated with the Capital Outlay Fund.
6. Revise/narrow the Professional Negotiations Act to prevent it from hindering operational flexibility/resource assignment.? Included with this item: review tenure; replace the salary schedule with a salary range based on criteria such as experience, education, area of expertise, etc.; narrow the number of mandatory negotiable items.? Items such as work hours, amount of work, insurance benefits, etc ?should be changed from mandatory to permissible items for negotiation.?
7. Legislatively eliminate, reduce, and consolidate the statutory cash reserve accounts and separate fund accounts that currently exist, thereby ending the ?use-it-or-lose-it? policy.
8. Authorize a study of school district administration personnel structures and positions.? Develop a state plan for district-level administrative reorganization and alignment.
   1. Investigate the regionalization of administration structures; and
   2. Realign district geographical boundaries in order to facilitate administrative efficiencies.? Administrative resource models exist in a non-standardized manner, resulting in staffing levels that are discretionary, unregulated and costly.? The intended purpose of this recommendation is not for determining which schools students should attend, but rather is intended to cultivate efforts to combine/streamline administrative office functions and advance shared services (e.g., food service, counseling, etc.) in a more cost effective manner.
   3. Require that a university level finance/accounting/budget management course be included in the district leadership licensing requirements, if not already included.
   4. Form a task force of education, finance, and legislative members to establish a commonly-accepted definition of ?instruction? spending and review the 65% public policy goal figure.
   5. Place a limitation on duration of due process proceedings for special education hearings.
   6. Conduct an efficiency study/audit of the Kansas State Department of Education.

The full report is available online.

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$8 million in Kansas ?closing fund?

Kansas Secretary of Commerce Pat George told the House Taxation Committee this week there?s about $8 million in the economic development ?closing fund? that was created by the 2011 Kansas Legislature.? That?s the first time many observers were aware of how big the fund has grown.? The fund was proposed by Governor Brownback and supported by most of the business and economic development community.

The information came as the result of questioning by Representative Tom Sawyer (D-Wichita).? During the discussion, Sawyer noted that Texas has a $125 million closing fund, the largest of any state.? Our information indicates Texas also has a half billion dollar technology fund its governor can use to incentivize new businesses.

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Hearing Tuesday on ?transparency? bill

HB 2047 is the so-called ?not a tax lid? bill. The bill will have a hearing Tuesday in the House Taxation Committee.

It requires cities and counties to vote if they wish to increase property tax revenues over the previous year and to publish notice of the vote in the official newspaper.? Sponsors say this is only an ?openness in government? bill.? League of Kansas Municipalities officials says the language is somewhat unclear.? The League will suggest some new language to make it more concise.

The League and Kansas Association of Counties will probably not oppose the bill if they are assured it is not a tax lid.? Some cities and counties have reviewed the language and believe it is okay, while others remain suspicious.

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Source: http://ksepc.org/2013/01/24_update/

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