Kansas Leglislative Outlook
An inside view of the political issues
that will affect our members.
Dan Murray
KAIA Lobbyist
ith the 2019 Session nearly halfway
complete (at printing time), the
landscape and significant battles have
firmed up. Governor Laura Kelly
is finding out that striking a balance with the
republican-controlled legislature and her policy
proposals is difficult, if not elusive. In her “State of
the State” and proposed budget, Governor Kelly
charted a fairly bold plan to settle a K-12 finance
lawsuit, expand Medicaid, and increase state
employee salaries. All of these budget priorities were
founded on spending down reserves and on using
revenue generated by refinancing the state employee
pension system, KPERS, reserves. However, elements
of the proposed budget have been met with
skepticism and downright objection by many in the
legislature. Further, proposals to address the so-
called “windfall” created by the passage of federal
tax cuts have complicated the budget.
W
Response to Federal Tax Cuts and Jobs Act
The relationship between the Governor and many
republicans in the legislature has been heated
over what to do with the new revenue the state
collect if it does not decouple from the federal
tax code following the passage of tax cuts by
Congress. A tax bill to decouple Kansas tax filings
from the federal code has been at the center of
this debate. The bill’s proposed changes would
result in individuals and businesses keeping
income that the state would not have otherwise
collected prior to the passage of the federal tax
reform. Proponents of the measure argue that
the state’s inaction constitutes a tax increase on
Kansas individuals and businesses. Opponents,
including the Governor, have said the bill is an
imprudent tax break for large corporations. The
fact is, though, the enactment of the Federal
Tax Cuts and Jobs Act increased the standard
20
deduction to $24,000. Because Kansas is coupled
with the federal code, individual filers who use
the federal standard must also use the Kansas
standard deduction of $7,500 and cannot itemize
deductions. So those who previously itemized
eligible deductions totaling more than $7,500
will be paying more to Kansas than they did the
previous year unless the state decouples and allows
filers to itemize. This unintended hit to individual
taxpayers is estimated to be about $60 million. The
corporate collections of income tax that had not
been previously collected is about $130 million.
But, whether you call it an unintended tax
increase or a reckless tax break, the implications
for the Governor’s proposed budget are the same.
The Governor’s budget, already on shaky ground
because of the unlikely passage of her KPERS
refinance proposal, would take another hit if this
bill were enacted. So, if SB22 passes the House and
makes its way to Kelly’s desk, we expect she will
exercise her veto powers. And, as it stands, there
doesn’t appear to be enough votes to override the
veto. So, look for the legislature to sweeten the bill
with other items like a reduction in the food sales
tax rate to encourage Kelly to sign the bill.
KPERS Issues
Republican legislative leaders and other
stakeholders have continued to condemn Governor
Kelly’s plan to reamortize KPERS. Kelly’s plan to
refinance the state’s retirement fund would initially
raise a few hundred million dollars, but would
result in a roughly $7 billion hit to the fund’s long-
term liability. The proposal designed to help pay
for the administration’s planned budget increases
appears to stand little chance in the legislature.
Without this plank of her budget, it’s unclear how
the priorities will be paid for.
KANSAS INSURANCE AGENT & BROKER | January - February 2019 |