March 1st, 2017 Newsletter
I am delighted to introduce my redesigned newsletter that is compatible with mobile devices. This regular newsletter keeps you in touch with news and developments in the Kansas legislature. In this and all newsletters, I shall be reporting decisions and discussions taking place in the legislature that impact my constituents, and all Kansans. As your Kansas Senator, I encourage you to reach out to me and share your concerns and questions. You can reach me at Jim.Denning@Senate.KS.Gov or call my office at 785-296-2497.
Quick Facts

Johnson County Economy Remains Healthy

Homes sales YTD - 10,472
  • 2.1% increase over last year
Retail sales YTD: $11.1 B
  • 4.0% increase over last year
Residents Employed: 316.8K
  • 2.4% increase over last year
Consumer Confidence Index: 100.9
  • Last year 92.6
Source: CERI
Kansas Will Change its Income Tax Policy This Session

We passed a large tax cut in 2012. The 2012 tax cuts lowered personal income tax rates by 27%. After four years we now know the following; rate cuts were too large, the cuts did not produce the rate of economic growth that was projected, Kansas fell into a rural recession, the national economy has been anemic at best, and we did not cut government spending enough to match up with the lower tax revenues. As a result of all these factors, our budget is unstable and we can't pay the cost of our core services. Kansas has had two bond downgrades and we are currently on the negative watch list of the major bond raters. Bottom line is we have to take back some of the large tax cut from 2012 to put Kansas back on sound financial footing.

It appears to get the budget in balance we have to take back about 50% of the large personal income tax cuts from 2012. So the 27% cut in personal income tax cuts will be adjusted down to a 14% personal income tax cut from 2012 levels.

The Senate, House, and Governor's office have all produced plans to fix the budget deficit. All working independently, all have arrived at the figure of $400-450 million needed to structurally fix the budget.

The Governor's plan is to use one time money to raise the necessary revenue. His plan securitizes the tobacco settlement money and shorts KPERs payments. These total $500 million. Problem with this approach is it does not structurally fix the budget. The Governor's plan exhausts in fiscal year 2020 and the deficits return.

Both the House (HB 2178) and Senate (SB 147) have produced tax plans that raise between $400-450 million. About $200 Million came from closing the LLC Tax Loophole, the other $250 Million came from an increase in Kansas Income Tax Rates. Including a retroactive withholding tax on workers' paychecks. Here is where the unfairness occurred and why I did not vote for HB 2178. HB2178 as proposed would have become effective on July 1, 2017, but the increased Kansas Income tax withholding rates on workers' paychecks would have become effective back to January 1, 2017 - a 6 month retroactive period. Most Kansas workers would have been "under-withheld" by at least 50% for their Kansas payroll taxes in 2017. I did not vote for the House plan, HB2178 and it also failed in a veto override attempt in the Senate.

I was unwilling to make Kansas workers to pay an additional $125 Million in payroll taxes in April 2018 because of the retroactive application of a tax increase made effective January 2017. This would have been a surprise tax on all wage earners.

The future tax plans need to have the retroactively on wages removed to gain my vote.

The Legislature is responsible to the citizens of Kansas to solve the financial problems of Kansas - and we will do so. The highest priority for the Legislature is to get Kansas back on sound financial footing.
February Tax Collections
8-Month into the Fiscal Year

Tax receipts for February finally brought some good news. We have met our projections every month since the projections were reduced last November by the  Revenue Consensus Group. Several pieces of good news, finally. With revenues going to be met for the entire FY-17 
ending  June 30th we now know that our $350 million deficit is not 
going to get any larger, but smaller. Will help with the tax and budget debate going forward. February receipts came in $37 million, or 13%, over estimates for the month. Year to date this brings our actual collections to $68 million or 1.9% over estimates.

An important point to make is with the robust February receipts we are now in positive growth territory for the year. Up until February we were down -.3% compared to actual FY-16 YTD receipts. Actual receipts for 8 months ending Feb-16 were $3.68 billion.  Actual receipts for 8 months ending Feb-17 were $3.7 billion. The difference of $18 million or .5% is small but positive growth rate.  Remember, up until February we were down -.3% compared to prior year actuals. We have a long ways to go with the normalized Kansas growth rate being in the 3.8% range. Normal growth rate 3.8% Vs. FY-17 growth rate of .5%.  
Rural Recession
Starting to Ease

The Kansas rural recession is starting to ease, but we still have a long way to go. Below are commodity prices between January 2017 to present.

The Rural Recession started in late 2013 and continues through today. It has played a role in the State missing its revenue projections over the years. And of course, has made it very difficult on our rural economies. Two major drivers of the rural economy, agriculture commodity prices and oil & gas went into recession. The Kansas Department of Agriculture performed corollary analysis on the effect of low agriculture commodity prices. Department of Agriculture reports that for every 1% decrease in commodity prices there is a corresponding $7.7 million decrease in sales tax collections. This is further documented with retail sales trends in Kansas' 105 counties. The 10 largest urban counties reported an average 1.31% increase in retail sales while the remaining 95 counties reported an average -4.42% decline in retail sales. The 95 counties for the most part are rural economy dominated.
 
The low Oil & Gas prices are estimated to have a $60 million negative effect on the State General Fund (SGF). The low agriculture prices are estimated to have an $80 million negative effect on the SGF. The rural recession has contributed to at least a 2% growth rate reduction in SGF tax receipts.
Senate Bill 63
Access to Digital Assets Act

This bill is necessary and important as a result of large dollar amounts of personal assets being held by mutual fund companies, banks, trusts, insurance companies, etc. - with few paper records. Online electronic record keeping, protected by digital passwords, has become the norm.
 
Most people no longer receive actual stock certificates and many people receive their bank statements online, and pay bills online - all digital, password protected transactions.
 
This bill would give the owner of the account, the ability to direct the custodian of the account to release passwords, and thereby give access to these assets to beneficiaries. Otherwise, a court proceeding would be necessary to access these electronic records and assets.
 
This ability to permit access to digital records, and the assets those records represent, will become part of all estate planning and wills in the future.
Other News

Session Reaches Half-way Point

Last Thursday marked the halfway point deadline of this year's legislative session, also known as "turnaround". By rule, non-exempt bills need to be passed by their chamber of origin, i.e. House or Senate, to continue the process of becoming law. If these non-exempt bills do not receive approval by their chamber of origin, they are considered dead or stationary, and cannot be heard for the rest of session. Only bills that have been referred to and passed by exempt committees or that have been passed by the opposite chamber may be moved to the floor for consideration.
Exempt committees of the Senate include:
  • Way & Means - Budget
  • Fed & State Affairs
  • Taxation
Legislators will take a short break and return back to work on Monday, March 6th, allowing for clerical staff time to process the significant amount of paperwork resulting from the turnaround deadline.
 
The Senate will shift its attention to writing a new School Finance Formula upon return.
Capitol Office
300 S. W. 10th Street, Room 330-E
Topeka, KS 66612
785.296.2497
jim.denning@senate.ks.gov
Overland Park
8416 W. 115th Street
Overland Park, KS 66210
913.345.9416
jimdenning@discovervision.com

Paid for by Jim Denning for Kansas Senate - Kathy Vance, Treasurer
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