By John Celock
Following an election that sent more legislators pushing for changes to his signature tax cuts to Topeka, Kansas Gov. Sam Brownback (R) stood by the cuts in his State of the State address.
Brownback used his annual message to lawmakers Tuesday to defend the cuts, but also says that he would propose “modest, targeted revenue measures” in his budget proposal. The defense of the tax cuts comes as Kansas lawmakers are expected to tackle a reform of the tax cuts, including proposals to repeal the elimination of taxes for LLC owners, which have contributed to a multi-million dollar budget deficit in the state for several years. Brownback, one of the nation’s most conservative governors, used much of the address to outline a series of conservative proposals, including in the area of education.
“As a state, we have pioneered new ground on small business policy,” Brownback said of the LLC Tax cuts. “Kansas was the first state in the nation to pass such a small-business tax policy focused on lifting the income tax burden from job creators. With two-thirds of Kansans working for small businesses, this policy is targeted support that Kansans have used to increase pay for their employees, hold prices down for their products, or expand their businesses.”
Kansas lawmakers introduced a bill Monday to repeal parts of the tax plan that allows LLC owners not to pay income taxes, which has proved to be one of the most controversial parts of the 2012 tax cuts enacted by Brownback and lawmakers. Opponents of the tax plan say that the plan has allowed for people to form LLCs to reduce their tax burden but it has not created jobs in the state. Brownback and his supporters have said that the plan created jobs in small businesses statewide. The plan also provides for LLCs in the state not to pay income taxes.
During the speech, Brownback cited a business in Clay Center that used savings from the tax to raise employee salaries.
Brownback did not define the revenue measures that would be in his budget proposal, which will be presented to lawmakers Wednesday. He did say though that the budget would include various cuts and efficiencies. He did not detail specifics but said that a merger of the state boards regulating cosmetology and barbering were likely along with a merger of the state insurance commissioner’s office and the state securities commissioner’s office. Several other states have merged insurance and banking regulation into the same department.
Brownback also said that the budget would include recommendations from the government efficiency study presented to the Legislature last year by the consulting firm of Alvarez and Marsal. The study – commissioned by legislative leaders – contained 105 recommendations which the firm says could save the state $2.04 billion over five years. Several of the recommendations were adopted by agencies last year.
House Appropriations Committee Chairman Troy Waymaster (R-Russell) has tasked his budget team with reviewing the A&M study as part of the legislative review of the budget, including addressing the $346 million shortfall in the current fiscal year budget.
Brownback used the speech to describe the drafting of a new school finance formula this year as the “most significant legislative task.” Lawmakers are expected to complete a new formula this year to replace one repealed in 2015 and replaced with a temporary two-year system of block grants. Lawmakers and the state Supreme Court have been engaged in a series of battles of school finance over the past several years, with the Court opposing the block grants system and issuing rulings in school finance litigation calling for increased funding for schools.
Brownback used the speech to call for a “students’ first” school finance system and outlined a series of measure popular with conservative governors in the education realm. He attacked the old formula as not providing money to classrooms.
“For decades, the children of Kansas suffered under an overly complicated education finance formula that lacked accountability for results, hand-cuffed local school boards, and spent money unrelated to student achievement,” he said.
The old formula has been promoted by education advocates, including the Kansas National Education Association. Many of the new legislators elected in 2016, particularly moderate Republicans and Democrats from Johnson County, were elected with support from education advocates opposed to the block grants and an overhaul of the school finance system.
Brownback also used the address to call for merit pay for teachers and the creation of a grading system for schools, as part of a drive that he said would increase transparency for parents.
“Infrastructure and recruitment are partial keys to success, but we must also empower parents with information and choices, creating more competition in our education system,” he said. “For parental information and transparency, we should create a grading system for our schools to measure and report their status to the public. Parents have the right to know how the performance of their child’s school compares to other schools. “
He also proposed the creation of a new scholarship program for Kansas college students who commit to teaching in a subject matter or school district with hard to fill spots.
Brownback also used the speech to reiterate his opposition to the Affordable Care Act and Medicaid expansion. This included defending his decision not to open a state based health insurance exchange under the ACA, a plan pushed by former state Insurance Commissioner Sandy Praeger (R) and his Democratic predecessor, Kathleen Sebelius, who was serving as U.S. secretary of health and human services at the time.
“Of the 23 state exchanges established under ObamaCare, a majority have failed, at a cost of billions including significant hits to state budgets,” Brownback said. “As major insurers abandon the few remaining state exchanges, the decision to refuse early adoption looks increasingly like declining a discount ticket on the Titanic.”
With more pro Medicaid expansion advocates in the Legislature – including in leadership positions on the House and Senate health committees – Brownback said that the state should not adopt the Medicaid expansion, with federal lawmakers and President-elect Donald Trump calling for the repeal and replacement of the ACA.
“Promises of limitless ‘free’ money from Washington to cover expanded populations were never going to be kept, but that reality might now arrive sooner than later,” Brownback said. “For states who took the expansion path, the reckoning could be severe. Given these facts, it would be foolish to endorse the ObamaCare expansion of Medicaid now—akin to airlifting on to the Titanic. Kansas was right. Kansas should stay the course.”
Brownback also used the speech to propose a new series of initiatives focused on rural health care, including a new $5 million fund to create medical residency programs in the state, a privately funded doctor of osteopathy medical school in the state and the creation of the state’s first dental school at the University of Kansas Medical Center. He said the proposals would address the shortage of doctors and dentists in the state’s rural areas.
“Let us begin working toward the future now, moving forward to address the chronic health care needs of our state,” he said.