TOPEKA — The House advanced measures Thursday to borrow more than $317 million from a state-managed investment fund and freeze pension contribution levels in an effort to balance the budget, while also passing a bill raising taxes to generate revenue in future years.
The trio of bills would fill the state’s current budget shortfall of a little more than $310 million and, in theory, generate enough new revenue to close an anticipated shortfall next year of more than $500 million.
The tax increase legislation — raising personal income taxes and eliminating an exemption for businesses — constitutes a rebuke of Gov. Sam Brownback’s 2012 tax policy, powered by a wave of fresh lawmakers who campaigned on returning the state to budget stability. Lawmakers approved it in a 76-48 vote, a day after the House gave first-round approval after no debate in an 83-39 vote.
Lawmakers on a voice vote gave early approval to a bill authorizing a loan from the state’s long-term investment fund. The House also gave first-round approval to a separate bill that freezes KPERS employer contribution levels on a voice vote.
Final votes on those bills could come today.
The tax increase legislation now heads to the Senate, which had its own tax debate Thursday on a separate tax proposal. Senate President Susan Wagle, R-Wichita, has said her chamber will debate the House tax bill today.
Several conservative Republicans decried the bill in explaining their no votes. Rep. Blake Carpenter, R-Derby, said he was disappointed in the Republican caucus for voting for the bill, which he said goes against the GOP platform. Others called for lawmakers to restrain spending.
“Although I recognize that Kansas faces an uncertain financial future, I believe it is irresponsible to balance our budget and pay for excessive spending by raising taxes on job creators, the middle class and our working poor,” said Rep. John Whitmer, R-Wichita.
Rep. Kyle Hoffman, R-Coldwater, called the bill the largest tax increase in state history, mirroring a criticism Democrats made of a 2015 bill that raised the sales tax. But supporters argued the legislation offered a way for the state to reclaim budget stability.
Rep. Don Hineman, R-Dighton, said the bill would help rein in the excesses of the 2012 tax policy.
“Since the day the tax cut was first proposed and adopted in 2012, I have been convinced the plan went too far, too fast. It created an inequitable tax system and destabilized state revenues,” Hineman said.
Under the proposal, income between $30,000 and $60,000 would be taxed at 5.25 percent, up from 4.6 percent currently. Income above $100,000 would be taxed at 5.45 percent. Income up to $30,000 would remain at the current rate of 2.7 percent.
The legislation also would restore a tax deduction for medical expenses.
The Kansas Department of Revenue estimates the bill would generate approximately $590 million next year.
Brownback, while speaking with reporters Wednesday, indicated he wouldn’t sign the bill. If the bill reaches his desk, it still can become law without his signature. In order to block a bill, he must veto it.
In a separate statement issued by his office, Brownback promoted his budget proposal, saying it avoids “punishing tax increases” on the middle class.
“While on the campaign trail many of these representatives pledged to raise taxes on the wealthy, but now they are attempting to tax everyday Kansans,” Brownback said. “It doesn’t have to be this way. I will continue the fight to keep your income taxes low.”
Lawmakers easily advanced House Bill 2161, which authorizes the state to take $317 million from a long-term investment fund and place it into the general fund as a loan. The state would have to pay back the loan in installments of approximately $53 million a year for six years.
Rep. Kathy Wolfe Moore, D-Kansas City, said she supported the bill even though she doesn’t like the idea of taking from the investment fund. She indicated the just-passed tax bill helped her to vote yes to use the one-time cash source.
“The situation could not be more serious,” Wolfe Moore said.
Last, lawmakers gave first-round approval to a bill that balances the current budget when paired with the use of the investment fund. House Bill 2052 freezes KPERS contributions at 2016 levels of about $300 million annually.
That amounts to making only three of every four quarterly payments. The move is expected to save nearly $85 million this year.
But the bill would transfer 50 percent of the ending balance to KPERS in an effort to make up the cut. Ten percent of the ending balance would go a budget stabilization fund.
House Appropriations Committee chairman Rep. Troy Waymasters said the two bills combined would leave the state with an ending balance of approximately $90 million this fiscal year, which ends in June.