More pessimistic state revenue estimates released this week could breathe new life into tobacco and alcohol tax increases that lawmakers thus far had ignored.
The state’s Consensus Revenue Estimating Group said Monday that Kansas should expect to collect about $5.71 billion in taxes in the fiscal year that begins July 1. That’s almost $100 million less than the group of economic experts estimated in November, making a difficult budget puzzle even more vexing for legislators.
The American Cancer Society’s Cancer Action Network quickly seized on the new projections as evidence legislators should increase the tobacco tax.
“Making tobacco significantly more expensive is a powerful economic tool that will save lives and cut health care costs while also addressing Kansas’ budget shortfall,” said Reagan Cussimanio, the group’s government relations director in Kansas.
Before the Legislature went on break April 5, the Senate passed a budget that requires $6.48 billion from the state general fund. If that holds, the state will be planning to spend about $770 million more from the state general fund than it takes in.
That level of spending would entail transferring money from other funds to backfill the state general fund or imposing new taxes.
That already was the case, though to a lesser degree, before the new estimates came out. Gov. Sam Brownback had proposed a combination of transfers and tax increases to make up the difference.
After transferring money from sources including the state highway fund, Brownback proposed to fill the rest of the budget hole by slowing scheduled income tax cuts and adding significant alcohol and tobacco taxes expected to bring in about $210 million a year.
But industry groups pushed back on the “sin taxes,” and Brownback was lukewarm in encouraging legislators to look past the opposition.
Last week Sen. Jim Denning, the vice chairman of the Senate budget committee, told Kansas City Star columnist Steve Rose that the tobacco and alcohol tax hikes were “dead, dead, dead." He proposed his own package of budget fixes, including a tax on electronic cigarettes.
But Monday’s revenue adjustments mean that the state budget would be short even if all of Denning’s ideas were enacted.
Rep. Jerry Henry, the top Democrat on the House budget committee, said Tuesday that he thinks tobacco and alcohol taxes will be on the table when the Legislature reconvenes April 29, but as part of a larger tax package.
“I believe those will still be in the mix,” said Henry, of Atchison. “But, gosh, if there’s any type of alcohol and cigarette tax, I’m sure it will be less than what the governor’s asking for and it will probably be a mix of consumption taxes too.”
Public health advocates rallied around Brownback’s proposal to raise the state tax on a pack of cigarettes from 79 cents to $2.29, saying it would save 15,000 lives by causing some Kansans to quit smoking and others to never take up the habit. That also would save the state $1 billion in long-term health care costs, they said.
A prominent researcher said data on past tobacco tax increases suggests that even as people quit smoking, Kansas still would gain tax revenue from the proposed increase.
Cussimanio said those arguments should find new traction now that legislators know just how deep the budget hole is.
“The state of Kansas needs to get its fiscal and physical health in order,” Cussimanio said. “One proven way to do so is to increase the price of tobacco.”
Public health advocates have been less visible in the debate over increasing alcohol taxes, but new research found those increases correlate with lower rates of alcohol-related car crashes and other related health issues.
Henry said the Brownback administration has scheduled a Thursday meeting with legislators on the budget committee to discuss a plan to address the new revenue shortfall numbers.
He said there is a bloc of conservatives in the Republican-dominated Legislature who would prefer across-the-board spending cuts over tax increases, but he expects the discussions to ultimately revolve around a combination that is more heavily weighted to new taxes. The sticking point, he said, likely will be the amount of income taxes versus consumption taxes.
Henry said he could not pinpoint what sort of tax and budget package might be able to get 63 House votes, 21 Senate votes and Brownback’s approval — which is necessary to end the 2015 session.
“I don’t believe there’s a clear-cut plan at this point,” he said. “We may know a little bit more on Thursday.”
Andy Marso is a reporter for KHI News Service in Topeka, a partner in the Heartland Health Monitor team.