Pub. 5 2016 Issue 1

l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s 8 A FTER ENDURING A RECORD-SETTING 113-day state legislative session in 2015, it’s a safe bet that many Kansas lawmakers had a short and sweet 2016 legislative session at the top of their Christmas wish lists and maybe even at the top of their New Year’s resolutions for the coming year. Serving in the state legislature is supposed to be a part-time (90-day) gig, but last spring that gig went deep into overtime as lawmakers grappled with tax revenue enhancements needed to balance the state’s revenues with the $6.3 billion in state general fund spending they authorized. After finally approving a bump in the statewide sales tax rate (now 6.5%) and a hike in cigarette taxes (now $1.29 per pack), lawmakers were able to balance the FY-2016 state budget and close down the 2015 state legislative session. Unfortunately, any post session euphoria for those same lawmakers quickly faded as state revenues continued to fall short of expectations last summer and fall. A downward adjustment in revenue projections by the state’s Consensus Revenue Estimating Group back in November added a little more gloom to our state budget situation looking forward and has some state lawmakers predicting another tumultuous session. As state lawmakers settle in for the 2016 session, they once again face a significant gap ($160 million) between projected state revenues and state spending needed to fund state agencies and state-supported programs in FY-2017 (July 1, 2016 - June 30, 2017). Unlike last year, where raising taxes in one form or another seemed to be the consensus of most state lawmakers, that isn’t the case as debate gets underway at the Kansas statehouse. Kansas Governor Sam Brownback and Republican legislative leaders are universally condemning any notion of raising taxes. At a mid-December press conference Governor Brownback made his position on additional tax increases crystal clear when he stated, “I don’t think we ought to be messing with taxes.” The fact that 2016 is an election year for the entire 40-member Kansas Senate, as well as the 125-member Kansas House of Representatives, has undoubtedly dampened the will of many state lawmakers to even mentioned the “T” word (Taxes). Therefore, the 2016 state budget battle will likely focus on trimming expenditures from the state’s general fund. Education Lawsuit Wildcard While addressing the $160 million gap between projected state revenues and projected state spending for FY-2017 has the immediate attention of state lawmakers, there’s a much larger issue looming just beneath the surface in Topeka. How and when the Kansas Supreme Court rules on lawsuits challenging the state legislature’s current funding of K-12 education could prove to be the wild card that turns a relatively mild state legislative session into a constitutional separation of powers showdown between the legislative and judicial branches of government in Kansas. Most state lawmakers expect the Kansas Supreme Court to rule on the equity portion of Gannon vs. Kansas , which could lead to the court essentially ordering state lawmakers to provide $54 million in equalization funding for school districts in both FY-2015 and FY-2016. The combined $108 million price-tag of the equalization funding issue alone would likely set off a firestorm between the two branches of government and would also raise the stakes for five of the seven Kansas Supreme Court justices that will be on the November 2016 ballot for retention. An even larger component of the Gannon vs. Kansas lawsuit deals with the adequacy of total funding provided to Kansas school districts. The Kansas Supreme Court is also reviewing a lower court ruling that suggested the state legislature needs to increase state funding of K-12 by more than half a billion dollars. Most Agriculture & Natural Resources .2% 0.20% Transportation .2% 0.20% General Government 4.1% 4.10% Public Safety 6.2% 6.20% Human Services 26.6% 26.60% Education 62.8% 62.80% Agriculture & Natural Resources .2% Transportation .2% General Government 4.1% Public Safety 6.2% Human Services 26.6% Education 62.8% STATE EXPENDITURES Fiscal Year 2016 Sales & Use Taxes 42.30% Other Excise Taxes 5.50% All Other Revenue 2.3 2.30% Individual Income 42.20% Corporate Income 7.00% Other Income 0.60% Sales & Use Taxes 42% Other Excise Taxes 6% All Other Revenue 2.3% Individual Income 42% Corporate Income 7% Other Income 1% STATE RECEIPTS Fiscal Year 2016 Source: FY-2016 Governor's Budget Report STATE LAWMAKERS HOPE 2016 SESSION IS SHORT AND SWEET By DougWareham, EVP-Government Relations Governor Brownback made his position clear, “I don’t think we ought to be messing with taxes.”