Kansas Lawmakers Pass Tax Plan After Brownback's Budget Warnings

By  | 

TOPEKA, Kan. (/AP)-- Kansas Republican legislators Friday narrowly approved a plan for raising taxes, responding to warnings from top aides to GOP Gov. Sam Brownback that failing to erase a budget deficit risked funding for universities and invited a downgrade of the state's credit ratings.

Legislators in past years backed the GOP governor by slashing personal income taxes in an effort to stimulate the economy, but those policies contributed to a budget deficit that ballooned this year.

Brownback was forced Thursday to publicly plead with Republican legislators to increase the state's sales and cigarette taxes to balance the next state budget. His pitch — and his aides' warnings that he would otherwise have to take drastic action early next week — prompted GOP lawmakers to tinker with a plan that had failed early Thursday in the House by a wide margin. They approved a package of two bills.

"It's not going to get any better," said Republican Sen. Steve Fitzgerald, a Leavenworth Republican. "We need to get out of here."

The two bills together would raise $384 million during the fiscal year that begins July 1. Even with the new revenues, Republicans who drafted the plan said Brownback might have to cut up to $50 million in spending.

One measure raises the state's sales tax to 6.5 percent from 6.15 percent. The House approved it early Friday, 63-44, and the Senate passed it Friday afternoon, 21-19.

"I congratulate them on coming together in a spirit of cooperation and compromise to do what is right for Kansas," Brownback said in a statement issued after the vote.

The other measure was approved Sunday by the Senate and includes an increase in the cigarette tax of 50 cents a pack, to $1.29. It also includes a modest increase in taxes for business owners and farmers, at a level Brownback would accept, rather than a more aggressive proposal sought by some GOP lawmakers.

Both measures now go to Brownback, who is expected to sign them.

The Senate's vote on the sales tax bill cleared the way the Legislature to end the longest annual session in state history, at 113 days.

Brownback's budget director, Shawn Sullivan, had warned that if lawmakers didn't increase taxes, one option for the governor was vetoing state universities' operating funds and allowing them to use tuition dollars to pay staff in the short-term. Another option was across-the-board cuts that would cost public schools $197 million in state aid.

Secretary of Administration Jim Clark warned that bond rating agencies would likely respond negatively to budget uncertainty.

But critics accused Brownback and his aides of using potential cuts for schools, universities and programs to coerce Republicans.

"He used it as a tool to force people to do things that are bad tax policy," said Democratic Rep. Jim Ward, of Wichita.

Other states have seen Kansas's experience as a cautionary tale. In February, when South Carolina Gov. Nikki Haley outlined proposals for slashing income taxes, she said, "We are not doing what Kansas did." In Nebraska, the unicameral Legislature flirted with following Kansas in 2013 but rejected the idea in favor of a tax study — which recommended against big tax cuts.

Brownback argues that Kansas still has "pro-growth" economic policies if it preserves most of the income tax cuts enacted by legislators in 2012 and 2013, even if it raises sales and cigarette taxes to close the budget gap.

Democrats opposed increasing the state's sales tax, arguing it hurts poor and middle-class families.

They also argued that the state should reverse a key 2012 policy from Brownback that ended income taxes on the profits of 281,000 business owners and 53,000 farmers. Many Republicans agree it's unfair to allow business owners to pay no income taxes while the wages of their employees remain taxed.

___

Associated Press writer Grant Schulte in Lincoln, Nebraska, also contributed to this report.