By Gene Meyer | Kansas Reporter
TOPEKA — Kansas is in a state of transition, Gov. Sam Brownback said Wednesday in his State of the State message to legislators.
Kansas, he said, is changing from a state with high taxes to a state where taxes are low.
Kansas made significant progress in the past year, Brownback said during his speech, which lasted about 30 minutes. Kansas had $876 in its checking account when he took office, and 12 months later it has more than $100 million, he said.
"We overhauled our state's economic-development system, enacted modest tax relief and sent word around the world that Kansas is open for business," Brownback said.
But more needs to be done, he said. The governor called on lawmakers to continue the work they've begun toward cutting taxes, revamping the state's budget-dominating school funding and Medicaid programs, and making further cuts in state spending.
"We need to do as much as we can to improve Kansas' business and grow the private incomes of its citizens," said state Rep. Richard Carlson, R-St Mary's and chairman of the Kansas House Taxation Committee, which will get a closer look at the governor's tax proposals Thursday.
"He (the governor) certainly hit all the right notes," said state Sen. David Haley, D-Kansas City. "It's the direction Kansas wants to go, but we still must ask what we have to give up to get there,"
Brownback outlined what he described as "a major step in overhauling our state tax code to make it it fairer, flatter and simpler."
The plan would lower the state's top personal income tax rate of 6.45 percent to 4.9 percent for taxpayers with incomes of more than than $15,000, or $30,000 for married taxpayers filing jointly. Rates for taxpayers with lower incomes would drop half a percentage point — to 3 percent — and individual state income tax on most small business income would be eliminated.
"As we modernize our tax code and lower everyone's rates, it is also time to level the playing field and simplify state taxes by eliminating income tax credits, deductions and exemptions," the governor said.
"With that in mind, I ask the Legislature to limit further growth in government expenditures to no more than 2 percent a year, and devote all additional revenues to reduction in state tax rates," Brownback said. "This will get us even closer to the pro-growth states with no state income taxes, which are among the country's strongest economic performers."
Kansas Revenue Secretary Nick Jordan is scheduled to outline more details of the proposals in a Thursday morning meeting with the Kansas House Taxation and Senate Assessment and Taxation Committees — the top tax committees in both houses.
Brownback said his proposed fiscal 2013 state budget would provide for an ending balance of $465 million, larger than a statutorily required 7.5 percent of the budget that past legislators have waived since the onset of the Great Recession. The Senate Ways and Means Committee and the House Appropriations Committee will see those budget plans Thursday morning.
"The budget begins to address long-term structural issues that have placed the state in years of fiscal peril," Brownback said.
Those include:
- Using expected revenues from new casinos — in Kansas City and near Wichita — to pay down state debt.
- Converting the state's $13 billion Kansas Public Employees Retirement System pension fund to a retirement savings plan for teachers and workers hired after this year.
- Continuing the state's planned conversion of its $1 billion Medicaid program to a managed care system run by three private companies, which remain to be selected by bidding, due to close at the end of January.
"Many states have made the choice to either kick people off Medicaid or pay doctors less," Brownback said. "Kansas has a better solution."
Brownback urged legislators to pass new school finance legislation outlined by his administration in December. The move would lift basic state aid to elementary through high school districts to $4,492 per pupil — from $3,780 — and is designed to give local schools more authority to raise additional money through property taxes.
In a formal response to the address, Kansas House Minority Leader Paul Davis, D- Lawrence, said the governor's proposals failed to provide details about how his programs would help Kansas continue recovering from its worst economic setback since the 1930s.
"Although we are starting to recover from the worst economic crisis since the Great Depression, more than 50,000 Kansans are still without work," Davis said said in remarks prepared for broadcast in response to the speech..
"We heard a lot tonight about government reforms that might eventually stimulate private-sector growth," he said. "However, Governor Brownback offered few concrete proposals designed specifically to get Kansans off unemployment rolls and onto a payroll. "
Davis said Democrats, in contrast, have been presenting more detailed plans — which they will introduce this session — to use new gaming revenues to fund job creation programs and to use some of the higher-than-expected ending balance to restore school funding cut as the Great Recession affected tax revenues.
But "the governor's plan will shift more of tax burden onto middle-income families and set the state's public schools back 20 years," said Senate Minority Leader Anthony Hensley, D-Topeka.
Hensley said, "Democrats have real concerns about the proposed tax reform and particularly how it will be paid for."
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