Gov. Sam Brownback’s office released a budget proposal Wednesday that is likely to put him at odds with large swaths of the Legislature.
Legislators in both parties won re-election last year on platforms that included repealing a state income tax exemption for business owners and providing a state general fund that balances annual spending with tax revenue and doesn’t rely on one-time sweeps of other money.
The proposal outlined Wednesday by State Budget Director Shawn Sullivan barely alters the tax exemption and does not balance the general fund until 2019.
Sullivan told legislators the tax exemption is a valuable economic development tool and cutting spending to match tax revenues remains unrealistic while the state’s farm and oil industries languish.
Brownback’s budget continues to rely on one-time fixes like sweeps of the highway fund, further deferments of payments to the state employee pension plan and the sale of the Kansas Bioscience Authority.
He also proposes selling the state’s annual payments from a legal settlement against tobacco companies for a lump sum payment. Several legislators have called that a non-starter.
To solve the immediate budget deficit — about $350 million before July 1 — Brownback proposed tapping a long-term investment fund and paying it back over the next seven years.
“(That’s) to get through this year, in order to protect us from major cuts halfway through our fiscal year or other options which we don’t believe are feasible,” Sullivan said.
Legislators want to consider other options.
Key Republicans like Rep. Steven Johnson, chairman of the House Tax Committee, and Senate Majority Leader Jim Denning told the Associated Press they favor a quick repeal of the 2012 income tax exemption, which would net an estimated $260 million in annual tax revenue.
Brownback’s proposal would restore the state income tax only on “passive revenue” like rents and royalties, bringing in an estimated $40 million.
The governor’s budget also would continue cuts to higher education support, and Sullivan reminded the committee that cuts of 8 percent to 10 percent have been “plugged in to pretty much every agency’s budget already.”
One cut Brownback proposed reversing was a 4 percent reduction imposed on most Medicaid providers last year.
Sullivan outlined a package deal to raise fees on hospitals and on the three managed care organizations that administer Kansas Medicaid, or KanCare.
In exchange the state would reverse the 4 percent cuts as well as invest in more medical residency slots, a new osteopathic medicine school and a dental school.
Rep. Dan Hawkins, a Republican from Wichita who chairs the House Health and Human Services Committee, said the extra investments might “sweeten the pot” enough to get legislative approval for the hospital fee increase.
“There is going to be some resistance to the hospital assessment fee, but with some of the things they are proposing I want to hear them out,” Hawkins said.
Andy Marso is a reporter for KCUR’s Kansas News Service, a collaboration of KCUR, Kansas Public Radio and KMUW covering health, education and politics in Kansas. You can reach him on Twitter @andymarso. Kansas News Service stories and photos may be republished at no cost with proper attribution and a link back to kcur.org.