TOPEKA, Kan. (AP) - Republican lawmakers in Kansas have advanced tax relief and pension proposals that would thwart Democratic Gov. Laura Kelly’s plans for boosting spending on public schools, quickly setting up a test of whether she can build bipartisan coalitions in the GOP-dominated Legislature.
A Senate committee Thursday endorsed a bill designed to prevent Kansas residents and businesses from paying more income taxes to the state because of changes in federal tax laws at the end of 2017. Republican leaders have made eliminating the revenue “windfall” a top priority.
The tax committee’s voice vote came a day after the Senate budget committee backed a bill to make a $115 million payment before July to the state’s pension system for teachers and government workers. It is money the state shorted the pension system in 2016 - with added interest, but the measure runs counter to Kelly’s budget plans.
The Senate expects to debate both bills next week. Meanwhile, Kelly has called on legislators to pass a bill in February to phase in a $364 million increase in aid to public schools funding over four years in hopes of ending an education funding lawsuit filed in 2010.
Projections this week from legislative researchers suggest that the state can’t enact the Republicans’ tax relief plan while also boosting education funding as much as Kelly wants without facing a small budget shortfall by 2022. Adding the pension payment to the mix would widen the gap.
“That will make it much more difficult to look at what we should be paying for,” said state Sen. Pat Pettey, a Kansas City Democrat.
Kelly has little choice but to work with moderate Republicans to get her initiatives passed. But moderates will have to break with their conservative GOP leaders on tax relief, an issue that has broad appeal with the party’s right-leaning base.
The federal tax changes championed by President Donald Trump cut rates and are designed to stimulate the economy. But they included provisions that inadvertently raise extra revenue for Kansas because of how its income tax code is tied to the federal code.
Kansas doesn’t allow filers to claim itemized deductions on their state forms if they don’t itemize on their federal returns. Changes in federal law discourage itemized deductions.
Republican legislators also worry that the state will start taxing foreign income earned by individuals and corporations that it hasn’t touched previously. The tax committee heard testimony that the coming change will hurt the state’s business climate.
“We’re going to lose a bunch of jobs,” said Sen. Julia Lynn, a conservative Olathe Republican. “That’s my issue, pure and simple.”
The Kansas Department of Revenue estimates that the tax relief bill would cost the state - and save taxpayers - $192 million during the budget year beginning in July. Kelly spokeswoman Ashley All called the bill “irresponsible” and said the state should focus on stabilizing the budget while “reinvesting in schools and roads.”
“The state’s financial outlook continues to be very uncertain and we have very little room for error,” All said.
Department of Revenue officials acknowledge that it’s been difficult to pin down the size of any windfall and the GOP tax bill’s effects.
Sen. Vic Miller, a Topeka Democrat and former department official, said the state is “still guessing” and even Wagle called the projections “a shot in the dark.”
“We might as well shake our Magic 8-Ball,” said Sen. Tom Holland, a Baldwin City Democrat. “What if it’s a whole lot more?”
Democrats also argue that increased spending on public schools is a bigger priority because of the education funding lawsuit. The Kansas Supreme Court ruled that a law enacted last year to boost funding wasn’t sufficient because it didn’t account for inflation.
Kelly’s plan represents education officials’ best guess for complying. A Senate committee will begin hearings on her plan next week.
But GOP leaders are resisting. They argue that the spending couldn’t be sustained without a tax hike - and they view failing to pass the GOP’s tax relief bill as raising taxes.
“We have a governor who has a big-spending agenda,” said Senate President Susan Wagle, a conservative Wichita Republican. “She’s in a corner.”
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