Increasing school funding will impact homeowners, economy

I’m penning this column five days before Election Day, but after the Republican primary vanquished a large number of conservatives, my crystal ball is clear: the 2017 Kansas legislature will be less conservative than the 2016 one.

A lot of so-called moderate Republicans and their Democrat allies made a lot of promises that are going to be nearly impossible to keep. There’s only so much money in the state budget. So the question becomes, just how big a bite will the newbies agree to take out of your wallet?

If they keep only one of their promises — to increase school funding — homeowners should start setting money aside now to pay next year’s property taxes. The Kansas Association of School Boards recommended that in order to be funded properly, Kansas public schools need an infusion of $900 million.

With numbers so large, it’s difficult for the Average Joe to understand exactly what that means for their own pocketbooks. Allow me to explain:

Currently, Kansas homeowners pay 20 mills to the state each year. For the state of Kansas’ budget, a tax rate of 1 mill brings in about $30 million. In order to raise an additional $900 million for schools, legislators would need to increase the mill rate by 30 mills — assuming they just go the simplest route to raise the money. They could also opt to add sales taxes, fees, or make cuts to other services to feed the insatiable public school spending beast.

So what does an extra 30 mills look like for the average property owner? In Johnson County, the median home is worth about $230,000. Under the current tax laws, the owner of a $230,000 home in Olathe paid $3,208 in property taxes. Of that, about $2,339 went to fund public schools. Add another 30 mills in order to fund schools to the tune of $900 million, and that property owner’s tax bill increases by $794.

For most homeowners, that would mean their monthly house payment would increase by about $66 per month. That’s assuming the county, state, library board, parks board, community college and fire district boards don’t also decide to increase taxes.

That’s also assuming that the home appraises for the same amount next year. If the appraised value of the home increases, the homeowner will pay even more than $66 each month.

Put into real dollars, $794 doesn’t sound so bad, and another $66 taken from the monthly budget doesn’t seem all that unreasonable. It’s about the cost of a family eating one meal out per month, but if every Johnson County family decides to forgo one meal out per month to make up the budget difference, restaurants close. And we haven’t even addressed what a 30 mill increase does to the restaurant owner.

Commercial property is assessed differently than residential property, but business properties pay property taxes as well. And commercial property is often worth a lot more than residential property, which means they pay more than the average homeowner.

I looked at one Johnson County restaurant’s tax bill. This restaurant’s appraised value was $598,000 in 2015. Based on that assessment, the restaurant owner paid $23,713 in property taxes, more than $10,000 of that tax bill went to fund public schools.

If legislators increase property tax rates to 50 mills in order to add $900 million to school funding, that restaurant will pay an extra $4,485 next year — or about $323 per month. And that’s only if no other taxing entities raise tax rates, and the restaurant continues to be appraised at the same value.

That restaurant is going to have to sell a lot of tacos to make up that $323 per month budget hit. For what it’s worth, many Johnson County restaurants are also LLCs.

We keep talking about these massive numbers like $900 million as if the Kansas Legislature can just make a few cuts here, add a few fees there, drop the LLC exemption and presto, chango! It’s raining cash in Kansas, but that’s not how this works. That’s not how any of this works.

That restaurant will have to raise prices or cut staff to pay next year’s tax bills at the same time that homeowners are cutting back to pay their own tax bills. It’s a recipe for broke homeowners paying extra for tacos, and eventually, for empty buildings that once housed restaurants.　　　　　　

This story was originally published November 9, 2016 at 12:37 PM with the headline "Increasing school funding will impact homeowners, economy."