Taxes and legislation that would impact businesses by re-defining personal property were at the fore of questions concerning citizens who attended a legislative breakfast Saturday at Marion City Building.
State Rep. J. Robert Brookens and State Sen. Jeff Longbine outlined the status of key legislative issues and responded to questions from the group of 20 attendees.
Longbine addressed a question from Marion City Administrator Doug Kjellin about Senate Bill 317, which would reverse a decision by the Kansas Court of Tax Appeals that could cost businesses millions of dollars in property taxes on equipment that has been considered exempt.
“This started out as a case in Montgomery County with the appraiser reclassifying some property in a refinery. What had been classified as personal property, the appraiser said we’re going to treat it as real property and tax it,” Longbine said.
Longbine illustrated the potential devastating effects if the decision is allowed to stand with an example of a southeast Kansas concrete plant.
“They’re currently paying about $3.5 million in property tax per year. If this is upheld their property tax would go to $25 million. It would effectively put them out of business,” Longbine said.
“Are we looking at removing personal property tax exemptions from farm equipment?” Central National Bank President Todd Heitschmidt asked.
“Not a chance,” Brookens said.
Marion County Commissioner Dan Holub questioned a proposal to reduce property tax on vehicles that he said would negatively affect smaller counties who could not offset the loss with increased sales tax collections.
“What about counties with no car dealers, or counties with less sales tax than the city of Wichita, they will see nothing,” Holub said. “What will happen to these counties is that you’ll have reduced revenue and you’re going to force the burden back on residential property owners and small businesses.
“Every time you guys make a cut or provide an exemption, 99 percent of the time residential property owners have to pick up the slack,” Holub said.
Longbine said the bill, which has not come to the Senate floor yet, raises property tax on older vehicles and would provide a more accurate depreciation method for newer vehicles.
“They did this 10 years ago and it did significantly increase business, and there was a significant increase in property tax and sales tax,” Longbine said.
Holub followed up with criticism about the tax exemption for the Keystone pipeline that he said is costing local taxing entities hundreds of thousands of dollars.
“I understand your frustration. Bob and I spent countless hours between sessions talking about the best way to handle this,” Longbine said.
“I went to the Senate tax committee chairman, I went to Senate leadership, the majority leader, president, vice president, I went to the governor, and I found nobody that would help me put through a bill,” Longbine said.
The legislators fielded questions on a wide variety of issues ranging from wind energy to the attorney general’s office to state assistance for rebuilding the Pilsen road.
The legislators discussed school finance relative to Gov. Sam Brownback’s proposed system and a measure that would place a 2 percent cap on annual increases in local budgets.
Longbine said the governor’s plan was split into parts when it came to the Senate, as the range of issues it addressed merited individual scrutiny.
“Under the governor’s plan, twenty-five percent of the students, their districts get more money, while 75 percent of students are basically locked in. That became difficult,” Longbine said.
Brookens addressed a proposal that would cap annual governmental budget increases at two percent. Brookens objects to the measure because it isn’t linked to the rate of inflation, and the cap would unreasonably restrict school and government services during periods of higher inflation.
“Spending would be capped at 2 percent above last year’s level. What do you do when we have an inflationary rate of five percent, or three percent?” Brookens said.
Longbine shared Brookens’ concern.
A proposal in Brownback’s education package that legislators have rejected is one that would standardize teacher evaluations across the state and post results on a public website.
“I don’t think there’s any appetite to try to standardize teacher evaluations based on student achievement and compare a teacher and student in Johnson County to a student and teacher in Marion County,” Longbine said. “The populations are different, the challenges are different, the resources are different. We didn’t feel that was proper.”
“It’s not even a relevant tool,” Brookens said.
Both legislators reinforced their support for measures that would lessen income tax and property tax burdens, but Brookens argued against the idea of eliminating the state income tax, citing comparisons with other states to show such a move would not have desirable effects.
“I’m very happy with the idea of reducing income tax, I’m very eager for reducing property tax. I am not interested in a march to zero, because none of the evidence I’ve been able to find anywhere suggests that leads us to a good result,” Brookens said.
Brookens described the tedious process House bill 2212 went through from starting as a bill to restrict local budgets to one that proposes $45 million in revenue sharing over two years to provide property tax relief.
“It’s a chance to speak loudly for property tax relief,” Brookens concluded.
Rising costs and decreasing funding make Medicaid reform a critical issue with no clear solution, Longbine said.
“The problem we have is that 10 years ago Medicaid was about nine percent of our budget, today it’s 19 percent, and it’s projected to double in the next ten years. It’s unsustainable at current levels,” Longbine said.
“The managed care model the governor is proposing we go to has been troublesome and scary for a lot of people receiving those services,” Longbine said. “I’m not sure where we’ll end up. It’s a very difficult, highly-charged, highly-emotional issue.”
Longbine said if the problem isn’t addressed, the increasing costs and decreasing federal share could force the state into decreasing payments to service providers and restrict eligibility for the program.
Both chambers of the legislature are working on changes in district boundaries to reflect shifting population, and factors in the Senate make Longbine’s district the most susceptible to significant change.
“I’ve got to gain about 9,700 people, and the last time I looked there weren’t 9,700 extra people hiding behind rocks between here and Emporia, so I’ve got to get bigger geographically. I’m trying my best to hold on to Marion County,” Longbine said.
Declines in populations in Brookens’ district also necessitate redistricting.
“Between losing five percent of our population in Marion County, a couple of percent in Chase County and the areas of Butler, we needed to make up 2,000 people,” Brookens said.