Fixing Kansas budget problems could undo no-tax promises

The path for digging Kansas out of a deep budget mess could end up paved with broken promises.

Conservative Republicans came to power vowing a leaner state government, one that would cut taxes and leave a smaller footprint.

Cut taxes they did. But a massive budget hole followed, one that may now require higher taxes to balance a still-growing state budget.

Republican Gov. Sam Brownback, who pushed for those deep income tax cuts, wants fellow conservatives to ignore the no-new-tax pledges so many of them have made since 2012.

Brownback proposed higher taxes on cigarettes and booze, an idea that has been coolly received in the Legislature. The governor’s budget also depends on a $136 million tax increase on health maintenance organizations.

Meanwhile, leading lawmakers have entertained their own ideas, including hikes in sales or gas taxes or a tax on “passive income,” including earnings from rent.

Another move afoot would close a loophole that lets wages go untaxed for owners of limited liability companies, sole proprietorships and the like.

While income from those businesses was supposed to be tax-free, the wages paid from that revenue were always still intended to be taxed, lawmakers said.

Efforts to raise taxes, however, run headlong into traditional opposition from conservatives who ran for office touting their anti-tax credentials.

About of a third of the 125-member Kansas House has signaled an unwillingness to raise taxes when revenues fall short of spending. Almost half the 40-member Kansas Senate is on record opposing new taxes.

The calculus presents a political problem for legislative leaders piecing together a budget puzzle that will dominate the Legislature’s attention when it reconvenes at the end of April after a monthlong break.

“It’s going to be difficult to put together a revenue solution,” said Rep. Marvin Kleeb, an Overland Park Republican and chairman of the House tax committee.

The problem is compounded because Democrats aren’t eager to bail Brownback out of a budget mess they believe he caused with the very income tax cuts he signed into law.

And it worsens still because moderate Republicans aren’t likely to raise taxes after they were targeted by the conservative wing of their party for doing just that in the past when the budget was hurting.

But the biggest bloc of lawmakers who will need to be coaxed into a tax increase will be conservatives.

Without their support, it will be hard to get anything passed without the backing of Democrats and moderates — maybe an even less likely possibility given the fallout from past tax increases they supported.

That means some promises may need to be compromised.

In the last two election cycles, the conservative group Americans for Prosperity has surveyed legislative candidates about their views on taxes. The group, funded partly by billionaire industrialists David and Charles Koch, asked candidates for their top priority if revenues fell short of expenses.

Thirty-six House members said they would cut spending and not raise taxes, according to surveys filled out during the 2012 and 2014 election cycles.

Another seven House members said they would only consider a tax increase if spending was cut more than 5 percent. The proposed state budget for 2016 is now at $6.5 billion, about $200 million more than the current budget.

Political support for a tax increase faces similar problems in the Senate, where 11 legislators said they would prefer to cut spending over raising taxes.

Another six senators signed pledges with anti-tax crusader Grover Norquist’s group — Americans for Tax Reform — promising to oppose new taxes.

Among those signing that pledge was Senate President Susan Wagle, a Wichita Republican. Her office declined to comment for this story.

Some lawmakers answering the Americans for Prosperity survey were open to higher consumption taxes as long as the overall tax burden is reduced or remains steady.

The proposed 2016 budget currently depends on about $200 million in new taxes, unless the state revenue picture gets gets gloomier — a distinct prospect because the state is already about $48 million below estimates for the current year.

Meanwhile, Brownback’s idea for raising taxes on cigarettes and alcohol has been widely criticized. Norquist jumped into the fray early this legislative session when he urged Kansas lawmakers to oppose the measure.

Americans for Prosperity is watching the tax debate in the Kansas Legislature. The organization is ready to hold lawmakers accountable for their promises.

“We’ll certainly remind them,” said Jeff Glendening, state director of Americans for Prosperity in Kansas.

Now, some of the lawmakers who said their top priority was cutting spending are softening their anti-tax rhetoric.

Among them is House Speaker Ray Merrick, a Johnson County Republican. For months, the speaker has often repeated the mantra that the state has a spending problem, not a revenue problem.

Maybe not so much any more. Merrick was among the lawmakers who said their priority was to cut spending instead of raising taxes. But in an emailed statement, Merrick acknowledged that his goal faced a “big obstacle.”

He said the Legislature promised not to cut schools while a new funding formula is developed. He also said the Legislature can’t control escalating costs for social services, including medical care for the poor. Cutting is hard.

“The Legislature is not equipped effectively to identify savings in the rest of the budget,” Merrick said. “Lawmakers do not have time or resources to go into the agencies and identify places for cuts or where duplication of efforts may exist.”

Merrick pointed out that the current budget includes $3 million for a study to find ways to identify savings and make government more efficient.

But some in the Legislature complain that lawmakers haven’t done enough to cut the budget. They grumble the House won’t even get a whack at the budget because of a procedural maneuver limiting that chamber’s debate on the spending plan to an all-or-nothing vote without amendments.

“We have not yet exhausted nearly enough effort to reduce spending,” said Republican Rep. John Rubin of Shawnee.

Rubin said in a survey he would only raise taxes for a “true emergency,” something he says occurs when there aren’t options left for patching the budget.

But he said the novel procedure employed for debating the budget limits each lawmaker’s ability to influence the state’s spending plan.

With amendments, Rubin said he might be able to limit the need for more taxes.

“I’m not going to get that chance,” he said.

Republican Rep. Steve Brunk of Wichita has been a staunch opponent of tax increases. Last year, he told Americans for Prosperity in a candidate survey that he wouldn’t raise taxes. He also has signed the Norquist pledge.

Today he talks like a lawmaker who’s more open to the idea of raising taxes, a marked departure for his seven terms in the Kansas House.

“It’s a different world today,” Brunk said of the survey he filled out before the state’s revenue problems set in.

Brunk said he’s still wrestling with the idea of raising taxes given the massive budget hole the state faces. He still wants to see more budget cuts, but he’s not sure if that’s enough to fill the deficit.

“There’s my personal ideology on this issue,” Brunk said, “then there’s the uncomfortable reality of where we are.”

Other conservatives such as Republican Sen. Rob Olson of Olathe are dug in.

“I’m not going back on the no-tax pledge,” Olson said. “If they’re counting on my vote (for taxes) to get out of there, it’s going to be a pretty long session.”

This story was originally published April 13, 2015 at 11:10 PM with the headline "Fixing Kansas budget problems could undo no-tax promises."