Gov. Sam Brownback proposed a budget today that includes an increase in taxes on liquor and cigarettes, while continuing an income tax cut and a 4 percent cut in state agencies funding.
Kansas Democrats today released this statement about the proposed budget, from the Democratic leaders office: “At first glance, there are several components of Governor Brownback’s budget proposal that give us concern, but we will review it carefully and provide official comment when the Legislature reconvenes next week.”
School finance
The governor’s proposed budget recommends an end to the current school finance formula on July 1, 2015, and a new school finance formula for the future. Until the new formula is passed, the governor has recommended a block grant to distribute state funding to school districts, according to the budget overview.
The cost of retirement funds and capital outlay will be passed from the state to the local school districts under the proposed budget.
About $63 million in education caseload escalators in the fiscal year 2015 revised budget, including capital outlay, local option budget and bond-interest aid are backed out of the fiscal year 2016 and fiscal year 2017 block grant proposal, according to the budget overview. Increases for the school portion of KPERS also were backed out of the block grant, with schools paying for the increases instead of the state, according to the proposed budget. The KPERS amount was $44.6 million for fiscal year 2016.
Medicaid funding
According to the proposed budget, Medicaid funding from the state has increased by $182 million from fiscal year 2012 to the fiscal year 2015 revised budget. According to the budget overview, a number of changes for policies and contracts are being proposed to result in a $50 million reduction in the state general fund expenditure for Medicaid costs in fiscal year 2016 and fiscal year 2017.
Efficiencies
The budget overview also discusses $350 million in state general fund savings in three budget years that come from different sources, such as expanding the debt set-off program with the federal government, refinancing bonds to lower rates and consolidating state information technology systems.
A 4 percent cut in state agencies funding will continue. Many state agencies are affected by the cut.
Highway fund transfers
The budget also proposes a transfer of $150 million from the state highway fund for fiscal year 2015, and transfers of $100 million for fiscal years 2016 and 2017. Currently, about $263 million is being transferred from the state highway fund to other agenices.
Income tax cuts
The governor’s budget also continues the income tax cuts. Current rates are 4.6 percent and 2.7 percent. According to the proposed budget, the lower rate would decrease to 2.66 percent on Jan. 1, 2016. In the future, the income tax rate cut would occur only when revenues exceeded 103 percent.
Also, there would be a decrease in income tax deductions that are allowed. The planned 50 percent reduction in itemized income tax deductions would begin earlier, on Jan. 1, 2015.
Tax increase on cigarettes and liquor
An increase in taxes on cigarettes, tobacco products and liquor is proposed in the new budget. According to the budget document, the last increase on cigarette taxes was in 2003. Cigarette tax was increased to 79 cents a pack in 2003, according to the budget overview. Tobacco taxes would go up to $2.29 per pack and 25 percent of wholesale price.
Liquor taxes would be increased to 12 percent. It last went up in 1983 from 4 percent to 8 percent, according to the budget document.
Liquor and cigarette taxes are estimated to total $107.9 million in fiscal year 2016, the overview stated.
Budget revenues
In the budget document, the governor reiterated his “State of the State” remark that “the days of ever-expanding state government are over.”
The budget statement says the state’s revenue for fiscal year 2014 was $333 million below the consensus revenue estimates. For fiscal year 2015, the estimate was decreased by $2205.9 million, according to the budget statement.
The overview also cites a change in federal tax policy concerning capital gains in 2013 as causing a drop in revenues. The revisions for revenues, Medicaid caseloads and education led to about $315.7 million less revenue and additional expenditures in the fiscal year 2015 budget, according to the overview.
The proposed budget is online at http://budget.ks.gov/gbr.htm.