• Pace picks up in week 5
• Budget update: Rescission bill passes, attention turns to FY 2011
• General Government Budget Committee activities
• School consolidation study presented
• Supreme Court denies petition to reopen school finance case
• Hearing on insurance scores scheduled for next week:
• House Bill 2544 expands beer sales
• House Tax Committee begins series of hearings
• House smoking ban act receives committee hearing
• Survey results

Pace picks up in week 5

In this issue I can report that the pace has picked up significantly.  Committees had a full schedule all week on a variety of high profile issues, including: the FY 2010 rescission bill, 2011 agency budgets, tax policy, school funding lawsuits, health care, smoking bans, and liquor sales.  The 2011 budget debates in Appropriations has tended towards approving funding levels no greater than the 2010 levels.  The halfway point of the session is next week.

I am often ask why the legislature takes so long to debate and approve a budget.  As you know the state fiscal years begins July 1 and ends June 30.  Two critical dates determine the timing of the budget.  One is in April when the Consensus Revenue Estimating Group (CREG) sets the statutory level of receipts that the state can spend in the coming fiscal year.  The second is in November when the CREG revises the projected receipts for the current fiscal year.

We generally pass a preliminary budget for the coming fiscal year before we break in April.  After the CREG meets and publishes the new revenue estimates, we then pass the final budget in May.

In January, we begin work on a rescission bill for the current fiscal year if the CREG projects income will be less than what is budgeted in current fiscal year.

Budget update: Rescission bill passes, attention turns to FY 2011

Because state revenues have been consistently lower than expected, it was necessary to make additional cuts to the FY 2010 budget that will ensure we end the fiscal year with a positive ending balance.  Most of the necessary cuts were been made in November by Governor Parkinson, but some required statutory action.  The Appropriations Committee voted the rescission bill out of committee last week and we took it up on the House floor on Wednesday.

For the most part, the House accepted Governor Parkinson's proposal, with only a few amendments.  Specifically, a floor amendment was adopted that will reduce the salary of every elected official by 5 percent (this includes all public officials who are paid with state monies: statewide offices, state legislators, district judges, etc).  Some Medicaid cuts were also shifted that will enable health care providers to receive more in matching funds.  The total Medicaid cuts remain 10 percent, but by making a few changes we were able to lessen the loss of federal dollars. 

We probably aren't finished with FY 2010 budget.  Revenues were lower than expected again in January, and the state will likely be short approximately $40 million by July even with the additional cuts we approved this week.  I expect we will revisit this again in April when the most updated round of revenue estimates are released and we have a more accurate picture of the shortfall.  In the interest of the legislative calendar, it is best to turn our attention to FY 2011 for now.

General Government Budget Committee activities

The budget committee for general government reviewed the budget presentations for twelve agencies this week.  The agencies reviewed were:

• Home Inspection Registration Board Budget
• Kansas Board of Examiners in the Fitting and Dispensing of Hearing Instruments Budget
• Board of Barbering Budget
• Board of Cosmetology Budget
• Kansas Dental Board Budget
• Office of Administrative Hearings Budget
• Board of Pharmacy
• Board of Mortuary Arts
• Real Estate Appraisal Board Budget
• Real Estate Commission Budget
• Judicial Branch Budget
• Judicial Council Budget

Once the agency has made its presentation on their proposed budget request the committee then debates and proposes modifications.  This process is called "working" as opposed to "hearing" the budget.  The following agencies budgets were modified and approved by the committee and will now go to the full appropriations committee for review, debate, modification, and approval:

• Department of Revenue Budget
• Kansas Lottery Budget
• Department of Labor
• Board of Barbering Budget
• Board of Cosmetology Budget
• Home Inspection Registration Board Budget
• Kansas Board of Board of Examiners in the Fitting and Dispensing of Hearing Instruments Budget
• Board of Mortuary Arts
• Kansas Dental Board Budget
• Office of Administrative Hearings Budget
• Board of Pharmacy

During the debate on the Boards of Barbering and Cosmetology, I made a motion to instruct the two boards to meet and develop a plan to combine the two agencies.  The motion passed unanimously. They were instructed to bring a recommendation to the committee by May 1.  Each committed to a good faith effort to develop a workable proposal.

School consolidation study presented

In the House Appropriations Committee, the Legislative Post Audit Division presented its findings on a school consolidation study.  This study, which cost $180,000, looked at two scenarios to reduce the number of smaller school districts:

• Scenario 1-Consolidate districts that do not meet the original consolidation requirements of the 1960s. This scenario would reduce the number of districts from 293 to 266.
• Scenario 2-Consolidate districts with fewer than 1,600 students. This scenario would reduce the number of districts to 152.

The report provided the following summary as regards Operating and Capital Expenditures:

Operating Expenditures

• We estimated the potential for cost savings under Scenario 1 was $18 million, and would result from closing 50 schools and having 230 fewer teachers and administrators.
• The potential for cost savings under Scenario 2 was $138 million, and would result from closing 304 schools and having 1,532 fewer teachers and administrators.
• The State's share of the potential cost savings was $15 million under Scenario 1 and more than $129 million under Scenario 2, primarily because the State would provide less low-enrollment funding.
• Under both scenarios, many districts would lose more money in State funding than they save by reducing their operating expenditures.
• In all, almost 900 more students would need to be transported under Scenario 1, and 7,000 under Scenario 2. To reduce students' time on buses districts may have to consider adding more bus routes.

Capital Expenditures

• Some districts likely would need new or expanded buildings to accommodate a consolidated high school, costing districts an estimated $1 million a year under Scenario 1, and almost $46 million a year under Scenario 2. We did not try to estimate the impact on elementary and middle schools.
• The State provides bond and interest aid to some "property poor" districts to help equalize the cost of building new facilities. We estimated the cost would be $400,000 under Scenario 1 and about $18 million under Scenario 2.

To summarize the report suggests that the state could save up to $129 million by closing 304 schools and laying off 1,532 employees.  A total of 141 districts would be impacted.

State support for K-12 education is approximately $2.3 billion.  That is 40% of a state general fund budget of about $5.83 billion.  The savings of $129 million is 5.5% of state general fund expenditures for K-12 schools.

A $129 million is lot of money.  However, the cost in terms of the impact to communities all across the state has not been factored into the study.  No attempt was made to measure the economic impact to towns and counties that would lose their schools and teachers.  Additionally the study shows that of the $129 million in savings to the state a cost shift of $49.4 million would be to those local communities.  They would have to pick up that amount of funding or see a net loss in services such as librarians, custodians, music, arts programs, etc.  Also, no estimate was provided for the cost of additional elementary or middle schools as a result of the increased number of students in the surviving district.

Given the results, I believe it will not gain the state of Kansas as whole to pursue this alternative.  I am certain that the overall economic, social, and cultural costs are much greater than the potential savings.

Supreme Court denies petition to reopen school finance case

On Friday, the Kansas Supreme Court announced its decision to deny a petition by public school districts to reopen the 2006 Montoy school finance lawsuit.  Friday's ruling from the court means that any new challenge to the state's school finance system must start over at the district court level. 

Attorneys for a coalition of 74 districts argued that the state is failing to comply with the court's earlier ruling that state aid to schools was unconstitutionally low.  The Court opinion says that the July 28, 2006, decision found the Legislature to be in "substantial compliance" with the remedial orders made by the court in that case by passing bills in the 2005 session and special session and the 2006 session.  The Court also said that the 2006 decision and closing of the case were "limited to determining compliance" with the Court's orders in the specific case before the Court.

There were several problems with continuing the case originally filed in 1996.  Ryan Montoy probably is no longer in public school and, therefore, does not have standing to sue under the new formula.  Also, the situation of the original school districts has changed over time.  The opinion pointed out, the case on remand would have to go through essentially the same process as a new case and "there is nothing the plaintiffs are seeking that they cannot accomplish by filing a new lawsuit", said the court.

The decision to dismiss the case was not unanimous but made by a majority of the Court.  Attorney General Steve Six fought the districts' request to reopen the case. He said a 2005 Kansas law requires that any challenge to school finance must first be filed in district court.

I agree with Governor Parkinson: this is not the best time for anyone to sue the state, whether it is the Speaker of the House or public school districts.  At the end of the day, we are engulfed in a budget crisis and we need to stay focused on getting out of this mess as quickly as possible.  Legal battles prolong everything in Topeka; they make everything more complicated and political.  Sometimes they are necessary, but in these circumstances, it is more productive for legislators to direct their energy to the immediate problem at hand.

My commitment to public education remains steadfast.  Regardless of the Supreme Court decision today, we have a constitutional obligation to protect public schools.  I will do all I can to prevent further cuts to public schools in FY 2011 and will advocate to restore the cuts of FY 2010 once the economic climate of the state improves.

Hearing on insurance scores scheduled for next week:

After numerous meetings with the chairs of the House and Senate Insurance committees, I was able to persuade them to hear and work the bill I introduced to allow consumers to freeze their insurance score when they experience extraordinary life circumstances.

I will be presenting evidence that many consumers in Kansas are experiencing declining credit scores due to high levels of unemployment and the associated stresses surrounding the economy.  The representatives of the insurance industry have indicated they support these changes to the law and I expect them to present positive testimony.

Many of you have expressed your opinion that the State of Kansas should ban the use of credit scores in computing an insurance score for rating a consumer's risk of claims.  I could not agree with you more, but the practical possibility of getting that done is zero.

I am more inclined to pursue an incremental change that will assist consumers in managing their credit scores and mitigating the impact of job loss and other factors that are out of their control.

House Bill 2544 expands beer sales

The House Federal and State Affairs Committee is considering a bill that would allow convenience and grocery stores to sell beer with 4 percent alcohol rather than the 3.2 percent beer that they sell now.  The weaker beer was created to circumvent Prohibition regulations in the 1930s; the law was never changed to allow grocery and convenience stores to sell full-strength beer.  If the bill passes, it will not allow convenience and grocery stores to sell other types of liquor.  Also, Alcoholic Beverage Control would be in charge of cereal malt beverage vendors.

Opposition to this proposal comes primarily from local liquor stores, who are currently the only distributers of full-strength beer.  They argued that it is easier for liquor stores to ensure underage citizens are not sold alcohol because it is required by law that liquor store workers be at least 21-years-old.  They also voiced concern that this change would just be the first step in expanding alcohol sales to grocery and convenience stores, followed by wine and other hard liquors.  Because grocery and convenience stores offer a wider selection of products, they fear this could ultimately put liquor stores out of business.

Proponents, mainly owners of convenience and grocery stores, have been advocating for this law change for several years.  They argue that liquor stores profit from their ability to set the price of alcohol and have little competition.  They believe this bill would not only increase competition, it would also increase choice and convenience.  Convenience store owners contend that they do not have the room to carry the selection of beers a liquor store would carry and therefore would not put the liquor stores out of business.

House Tax Committee begins series of hearings

After five rounds of budget cuts, and a $400 million budget deficit still looming, revenue proposals have been a major component of the budget debate.  On Monday, the House Committee on Taxation began a two-week series on various proposals regarding tax exemptions, which will continue next week.

HCR 5028 would establish a three-year moratorium on the granting of new tax exemptions, tax credits or economic development incentive programs involving employer withholding taxes.  This idea, in addition to rolling back some tax exemptions, has been widely touted throughout the interim as an alternative to a sales tax increase. 

This proposal is a nonbinding resolution and would not affect exemptions already in place (a repeal of any tax exemptions already on the books would require additional legislation).  The Kansas Advisory Council on Intergovernmental Relations (KACIR) testified that the number of tax credits has increased exponentially in recent years, putting a significant dent in the state's revenue stream.  As we work through massive cuts in Medicaid and public schools, it is critical to protect what revenue we have until the economy stabilizes.

Opponents of the proposal came primarily from the business community, who testified that a moratorium would prevent Kansas from being open to new business investment. 

For years, the Legislature has arbitrarily granted or denied tax exemptions with no set criteria on which to base its decision.  If nothing else, this proposal highlights the need for clearly defined and consistent guidelines for granting exemptions in the future.

There were several other proposals before the committee this week and there will be more next week.  I will keep you updated as we move along. 

House smoking ban act receives committee hearing

In an effort to protect Kansans from harmful secondhand smoke, Governor Mark Parkinson encouraged the Legislature to produce a strong statewide public smoking ban in 2010. In his State of the State Address, Parkinson requested legislation that was not "full of loopholes" and that would satisfy the 75% of Kansans that want a "real public smoking ban."  A smoking ban proposal has been put forth by the chairwoman of the House Health and Human Services Committee (HB 2642).

HB 2642 is less of a ban than a laundry list of exceptions to a smoking ban.  It would allow businesses to decide whether to allow smoking within their building just as they do in most places now.  Businesses would be allowed to have smoking indoors by paying an exemption fee of $1 per square foot of the designated smoking area. The bill does call for, "physically separate smoking areas".  Although this bill mirrors the Wichita ordinance in many ways, it would repeal the smoking ordinances already in place in cities across the state of Kansas. 

House Bill 2642 is considerably less restrictive and comprehensive than the bill proposed in the Senate (HB 2221).  Governor Parkinson has endorsed the Senate bill and, although it is far from perfect, is more in line with what opinion polls show is favored by the vast majority of Kansans (see my survey results in this issue).  

Proponents of a state-wide ban site studies that link the effects of second hand smoke with respiratory problems such as asthma, as well as ear infections, sudden infant death syndrome and cancers.  They state strong smoking bans have the ability to reduce heart attack rates by as much as 25% according to a report from the Institute of Medicine.

In contrast, Governor Parkinson's proposal prohibits smoking in places of employment and restaurants and bars with no option of paying a fee to "opt out."  It should be noted however that the bill exempts state owned casinos and private sporting clubs.  Neither bill is perfect by any means.  However, there comes a time when I cannot let the perfect get in the way of the good.  I will support the Governor's proposal and the Senate version.

Survey results:

Last week in Statehouse News, I included a survey also mailed to a little over 2,000 voters in the district.  Many of you responded to the survey, as did those who received the written newsletter.  I want to share the results as they currently stand.  The total number of unique responses as of February 14 was 128.

Question:

Do you support the Governors proposed $.01 increase in sales tax?   

Yes         No          Unsure

75%        17%          8%

Do you believe there are too many tax exemptions?                              

Yes         No          Unsure

63%        12%        25%

Do you support the increase in the tobacco tax from $.79 to $1.34?

Yes         No          Unsure

72%        21%          7%

Do you support a state wide smoking ban?

Yes         No          Unsure

74%        16%        10%

Many comments and suggestions were returned and I appreciate your taking time to respond.  The most common responses were that we should also increase taxes on alcohol products, the increase in sales tax should be for only three years, and that the smoking ban should be as strict as possible.