With the passage of more than 150 bills, the 2013 legislative session came to an end early Sunday morning, on June 2. After a full day of debate and compromise, the governor, House and Senate agreed to a tax plan and budget. It is sometimes difficult to understand why it takes so long for the legislature to work, but it is a process. It wasn't designed to be easy or quick, but to be deliberative and reasoned.
With the end of the veto session, the last day is officially called Sine Die. This is Latin meaning "without day" which is the final close of the 2013 session. Sine Die adjournment will be Thursday at 10 a.m.
May tax receipts
The state received some good news in the monthly tax receipt report. The revenue department announced receipts were 12.7 percent higher than projections or $65.9 million. This is welcome news as the state begins its next fiscal year July 1. The additional revenue was reported in the individual income tax and sales tax categories. Income tax receipts were 23.2 percent higher which generated $58.9 million in additional income. So far this year, state tax receipts have been 1.1 percent higher than estimates.
Twice a year the state makes revenue estimates to assist policy makers in their decision making. This is conducted by the Consensus Revenue Estimating Group. The group consists of economists from the University of Kansas, Kansas State University, and Wichita State University, along with the Secretary of Revenue, Director of Legislative Research and Director of the Budget.
State's economic development recognized
Kansas won the national "Gold Shovel" award in May for outstanding economic development projects in the state in 2012. Kansas was ranked the highest in our population tier in recognition of our value added investments. Kansas Department of Commerce facilitated 164 projects in 2012, resulting in $2.3 billion of investment. The annual Shovel awards analyze a state's innovative policies, infrastructure improvements, processes and promotions that attract new employers as well as investments in expanded facilities. In the analysis of Kansas, the awards board noted how the projects Kansas invests in were diversified across a wide swath of the economy which makes the best economic policy. The other states to join Kansas in winning in their population tier included Texas, Alabama and Georgia.
The one constitutional duty of the legislature each session is to pass a budget for the state. On the June 1, the House fulfilled this duty by passing a budget that makes the government more efficient and leaves the state fiscally sound. Unlike previous sessions where it has been the norm to pass just a one-year budget, the legislature passed a two-year budget which includes appropriations for FY 2014 and FY 2015, in an effort to better address budget challenges up front.
The budget cuts an additional $104 million from the governor's two-year budget recommendation, totaling a reduction in State General Fund (SGF) expenditures of $198.7 million over two years. Through responsible budgeting practices, such as deleting funding for state government jobs that have been vacant for a sustained period of time, the budget found necessary savings. This diligence for finding waste throughout state government allowed for the avoidance of cutting core state services, such as K-12 education.
Page 2 of 3 - Less than three years ago, the state had only $876.05 in the bank. In comparison, this new two-year budget leaves the state with an ending balance of $515.6 million in FY 2014 and $331.5 million in FY 2015. Throughout the session, the House has emphasized the need to cut spending in order to help spur economic growth and many reductions proposed by the House were included in this budget. Because of the fiscal responsibility of the House and Senate, the state will maintain a healthy ending balance over the next two years even as income tax revenues drop due to the newly passed tax legislation.
The tax plan agreed to by House and Senate negotiators, coupled with the income tax reduction of last year, provides Kansans with $3.86 billion in tax relief over the next five years. With the passage of the agreed upon legislation, Kansans will receive both sales and income tax relief. The state sales tax rate will drop from 6.3 percent to 6.15 percent on July 1. State revenue received from the sales tax will be used to continue a buy down of income tax rates, dropping the bottom bracket from 3.0 percent to 2.7 percent and the top rate from 4.9 percent to 4.8 percent in 2014. By 2018, income tax rates will drop in the bottom bracket to 2.3 percent and in the top bracket to 3.9 percent.
The tax bill originally passed by the House contained a 2 percent growth in revenue trigger so that as revenues grow above 2 percent from the previous year, the excess funds would be used to continue to buy down income tax rates. This trigger was included in the compromise bill and was to kick in beginning in 2018 to ensure that extra revenue was not used for growing government, but rather for further reducing the tax burden on Kansans. This trigger was line-item vetoed by the governor. The final legislation takes another House position by not eliminating itemized income tax deductions in their entirety to pay for rate reductions. Rather, itemized deductions receive a gradual haircut from the 100 percent deductibility down to 50 percent deductibility in 2017 except for charitable donations, which remains 100 percent deductible.
At the beginning of the session, in his State of the State Address, the governor urged the legislature to ensure that Kansas remains on a glide path to zero state income tax. Until last year's tax reform, Kansas had the highest income tax rate any of its surrounding states, which had led to a decade of lost jobs. In contrast, 48 percent of all job growth in the United States between 2001 and 2010 occurred in the nine states with no income tax. The House and the Senate share the governor's commitment to turning the tide in Kansas and this new tax legislation is another significant step in so doing.
With the session over, I will be home in the district. My state house phone number will not be answered. I encourage you to continue to contact me via email John.Bradford@ house.ks.gov, or by phone 913-683-0871. I have several issues I will be working on over the summer in preparation for the next session. If you need any assistance or have any issues you would like to discuss, feel free to contact me. It has been an honor to serve you this session.
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