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25th District

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CONTACT MELISSA

In Topeka: 
State Capitol Room 168-B
Topeka, KS 66612
melissa.rooker@house.ks.gov
785-296-7686

At home in Fairway
4124 Brookridge Drive
Fairway, KS 66205
melissa@melissarooker.com
913-961-1555

Dear Friend:

The legislature adjourned last night after a very intense 4-day Veto Session. The good news is the ceremonial end of session, “Sine Die,” is scheduled for June 1. Typically I could say with confidence we are done legislating for the year, but in this case we await the decision of the Kansas Supreme Court regarding the “equity” fix sent to them in the form of HB 2655. If that plan is rejected, the legislature will need to reconvene for a special session to deal with school finance.
 
We worked a long and contentious weekend to complete our work (the budget debate did not begin Sunday night until the stroke of midnight), with the budget overview delivered less than 30 minutes before debate began.
 
Budget Reconciliation Bill
Each year, we pass an “omnibus budget bill” to reconcile the differences between the state budget and new legislation passed during the session that contains a price tag for implementation. This year, much like the last several years, the omnibus budget also had to account for a significant budget shortfall.
 
Hammered out in conference committee this weekend, the omnibus budget contained elements of all three of the governor’s proposals for dealing with the $290 million revenue shortfall:

  • Transfers $185 million more dollars out of the state highway fund
  • Cuts university budgets an additional $17 million (in addition to March’s $17 million cuts)
  • Delays $96 million payment to KPERS until June 2018
  • Sweeps Tobacco Settlement funds that exceed amount appropriated
  • Authorizes across-the-board 3% cuts to state agencies 
The highway fund transfers have caused cancellation of 25 major projects over the next two years. The securitization proposal for the tobacco funds was stopped, but the budget hole will still consume the excess dollars intended for investment in early childhood programs via the Kansas Endowment for Youth. For KU and K-State, the cuts are especially onerous. A proviso was added that directs a higher percentage to be taken from their budgets than the other universities in the Regents system. A second proviso removes the language capping tuition increases, so it is apparent who will be footing the bill for the cuts in state aid.
 
The sweetener in the bill was “protection” for K-12 funding from the 3% across the board cuts. Seems like the right idea, given the promise of stability given to our schools when the block grant bill was passed, but the stress put on other state agencies made education advocates very uncomfortable. I voted NO on the budget, but it did receive the bare minimum 63 votes needed to pass and allow us to close the session down - which may be the best thing that happened this Veto Session!

The Infamous LLC Bill

On Friday, the House took a vote regarding the LLC exemption. While many of us have been calling for the opportunity to address the changes made to our tax code in 2012 & 2013, this was not truly that opportunity. The process was once again corrupted to prevent meaningful debate with the ability to amend, vet and shape the legislation. The bill was defeated 45-74. I voted NO.  Here is my official explanation of vote:
  • MR. SPEAKERWithout a more comprehensive plan, we face crippling cuts to essential services this year and next. H Sub for SB 63 proposed a “fix” that still leaves us on a march to insolvency, a path both reckless and irresponsible. No bill to debate, no time to vet and no input in the process for 120 House members. We understand incremental progress, negotiation, compromise and consensus building. Sadly none of those traits describe this process. Bill written in conference committee in the morning, voted on same day. We remain committed to fighting for real revenue reform. We vote NO. – MELISSA A. ROOKER 
I appreciate how frustrating the process seems from the outside looking in, however the reality is far more complicated than a 100-word explanation in the House Journal can convey.
 
The proposal contained in House Sub SB 63 called for repeal of the LLC exemption but delayed implementation for a year, thereby delaying revenue until the FY 2018 budget cycle. Because of the delay, it is important to point out this bill did absolutely nothing to prevent the budget cuts about to be announced for FY 2016 & 2017.
 
I have consistently called for comprehensive reform and continue to work for that outcome. You may recall in my most recent newsletter I shared remarks I gave last week at a legislative forum that articulated my concern that focusing solely on the “LLC fix” ignored the true nature of the problem:
  • “Many of us knew these tax cuts were too much too fast and called for more reasonable tax policy from the beginning. Historically, Kansas has maintained a very balanced tax code, spreading the tax liability around income, sales and property taxes so the burden was shared without falling too heavily on one source of income. This balance helped mitigate the risk of volatility in sales tax revenues, or a slumping economy that reduces personal income, or a drop in property values tied to weak prices in agriculture or oil and gas. Failing to resolve this imbalance will only serve to mask the problem for the moment, but fails to position Kansas on strong financial footing for the future. Re-evaluating our tax code and making comprehensive structural changes to restore balance and fairness is the right path forward.”
Even if the House passed this proposal, the Senate President and Majority Leader were adamant that the Senate would not hear the bill and the governor remained solid in his opposition to the repeal. We did not have the language of the proposal to read and in fact there were many legitimate questions raised about how business losses would be treated - questions that potentially could have meant we lost more revenue than we take in depending on the extent of the changes. Why were we being asked to vote on a bill that would not fix the problem, had the potential to create more problems, and would not be debated in the other chamber? There’s just one answer - it’s an election year.
 
Triggering the March to Zero
Furthermore, a trigger mechanism remains embedded in our tax code that kicks in when state general fund revenue exceeds 2.5% growth and directs the Secretary of Revenue to use those excess funds to reduce personal income tax rates. When personal income tax rates reach 0%, the excess funds will then be used to reduce corporate income tax rates until they too reach 0%. This trigger is the “March to Zero.”  While it seems simple to say, “Just start taxing LLCs and all will be right with our budget,” increasing taxes without addressing the trigger has the potential of throwing gasoline on the fire, rather than actually solving the problem.
 
Circumventing the Process
The proposal in House Sub SB 63 was created in conference committee at 10am Friday (6 people are involved in that process out of 165 lawmakers). The vote was taken a few hours later. This is the same broken process that brought us the 2012 tax plan in the first place.
 
While a vote Yes on the bill would have been a symbolic gesture, one that might have felt good at the moment, I view it as being no different than our US Congress voting dozens and dozens of times to repeal "Obamacare" while never actually taking steps to fix the very real problems with that legislation. In other words, it amounts to election year political theater. Taking the bait - casting that vote and disrupting the process evolving to build the momentum for a true reform package that is closer to "Option 4" and puts sustainable, balanced, well-crafted tax policy in place – would have proven counterproductive.
 

What is Option 4?

In response to Governor Brownback’s three options for cutting state services to balance the budget, a group of education, transportation, early-childhood and economic policy advocacy groups compiled an alternative entitled “Option 4.” This proposal recognizes that reversing the LLC loophole is only one step toward real revenue reform and fixing 3.5 years of hundreds of millions in lost revenue cannot be fixed with that change alone. The details of this type of comprehensive plan can vary, but the criteria must start with repeal of the trigger mechanism, and a balanced approach to restore both equity for all taxpayers and adequacy of funding to restore our state to fiscal health.
As always, I encourage you to connect with me if you have questions or concerns. I am honored to serve.

Sincerely,

Rep. Melissa Rooker
Kansas State Representative, District 25
Serving Northeast Johnson County
Copyright © 2016 All rights reserved.
Paid for by Rooker for State Representative, Shelia Davis, Treasurer,