January 16th, 2018 Newsletter
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
  • Kansas has met every monthly revenue projection since June 2017
  • The national and state economies are improving. Consumer confidence, employment, and GDP growth all returned to healthy levels. The stock markets are at historical highs
  • The Rainbow Crisis Stabilization Center to receive full funding in the budget
  • It is expected that Governor Brownback will receive a renewed vote for Ambassador-at-Large for Religious Freedom in the Trump administration. When the Governor receives the confirmation vote he will resign
The 2018 Legislative Session Begins
The 2018 session picked up right where it left off

School finance litigation and an unbalanced budget remain the big issues for the 2018 session which began on January 8th. Considerable good faith effort was made by the legislature to comply with the Supreme courts concerns over K-12 school funding in the 2017 session. I personally thought the legislature had solved both of these major issues when we completed the 2017 session last June.

In 2017 we modified Kansas tax policy to increase taxes by $600 Million over a 12-month period. About half of the increase came from closing the LLC Loophole. The other half came from partially rolling back the personal income taxes rates effective July 1, 2017 following the deep cuts effective January 1, 2013.

I voted for the tax increase with the understanding schools would receive $200 million in additional funding in 2017, and another $100 million in 2018. The remaining additional taxes would be applied to shoring up core services; Mental health, Foster Care, Medicaid for children, Medicaid for the frail and elderly, early childhood education, and public safety. The attorneys representing the schools who are suing the state for more money would have none of that. They argued in front of the Kansas Supreme Court that at least another $600 million would be required to satisfy their demands. The Kansas Supreme Court appears to be out of patience after dealing with school litigation off and on for the last quarter of a century. They ordered the Legislature to respond back to them by April 30th with expert studies showing a school finance structure that is adequate and funded appropriately.  The studies by nationally respected outside experts are currently underway and are expected to be completed by March 15, 2018.
Governor's Proposed Budget
Deficit spending is back

The Governor appears to be out of patience as well with the school litigation he has dealt with his entire governance. Instead of waiting on the expert studies to be completed which would give updated guidance on structure and funding adequacy he decided to just pay the attorney's demand for more money. His budget has the state paying an additional $600 million over a five-year period. The problem with this is there is no way for the state to pay that amount and it puts the states budget right back in a deficit. The Governor's budget is presented below. You can see that deficit spending begins in Fiscal Year (FY) 19. By FY 20 there is a $300 million-dollar deficit.

The Kansas Constitution does not allow a budget deficit. The projected $300.7 million-dollar deficit must be eliminated by spending cuts, tax increases, or a combination of both by FY-20.  Another tax increase or an 18% across the board cut to all services would be required to get the budget balanced. There is no majority will in the Senate to pass another income tax increase. I will not support further increases in personal income tax rates.
School Finance Litigation
24 years and counting

Litigation over adequate and equitable school funding for K-12 public schools has been on going since 1966. In 1966, the Kansas Constitution was amended by the people.  Two words were part of the new constitutional language approved by the people.   These two words, "suitable provision" have been the basis for the attorneys suing for more money. 
School funding litigation has been stair stepping up since 1994.  24 years and counting.  The first court decision was about 28 pages.  The second major decision was about 130 pages.  The latest decision which came down in 2017 was up to 880 pages.  The legislature must address the Supreme Courts concerns by April 30th of this year.  That is the short term urgent piece that must be addressed this session.   The long-term solution is to have a full and transparent discussion if it is time to allow the people of Kansas to reevaluate the wording in the Constitution to see if they want to amend the wording to stop the perpetual litigation. 

The Transportation Industry wrote an editorial on their take on the current school funding demands being placed on the budget.   It is well worth a read.  Here is an Excerpt:

"In fact, Alan Rupe, the Wichita lawyer paid to represent school districts in the court case, recently told The Wichita Eagle that other programs "may have to suffer" so that schools receive more money."

Click here to read the full article.

The Plaintiff's attorneys have made a business out of suing the state over school funding.   Since 2010 alone, the attorneys have been paid $6.1 million by schools.  It is time to explore options to reduce or eliminate the perpetual cycle of conflict over school finance and end the perennial and recurrent threat of school closures by the Kansas Supreme Court.
Kansas Utility Cost
The federal corporate tax cuts should reduce utility costs for everyone

Kansas has the highest prices for electricity in the entire Mid-Continent Region. Kansas's electricity price increases have far outpaced inflation over the last 5 years and have, in fact, grown 3 to 5 times faster than the pace of inflation over that time. Kansas electricity prices are approximately 25% higher than the prices in Iowa or Arkansas and are approximately 20% higher than prices in Oklahoma and Texas. Prices for electricity in the states of Nebraska and Missouri range 10-15% lower than prices in Kansas. This regional price disadvantage affects every Kansas customer, whether residential, commercial, or industrial.

The Kansas Corporation Commission (KCC) is responsible for approving electric rates. The KCC, as well as other agencies - for example, the Kansas Department of Commerce - must address this regional price disparity so that Kansans are not disadvantaged as compared to residents of surrounding states.

On January 11, 2018, a number of large volume electric users in the State requested the Kansas Department of Commerce address the issue of noncompetitive electric prices in Kansas, as compared to the prices for electricity in surrounding states - since regionally-high pricing likely affects business retention and expansion, and employment expansion in Kansas.
As a separate matter, effective January 1, 2018, Congress reduced the corporate income tax rate from 35% to 21%. Kansas electric customers have prepaid utility income taxes as a part of their electric rates - at the former 35% level. With the reduced federal tax rate to 21%, Kansas electric customers are owed a return of these prepaid tax amounts, which are no longer owed to the federal government. These amounts, which must be returned to Kansas electric customers, are substantial - likely totaling in the hundreds of millions of dollars. 

The Citizens' Utility Ratepayer Board (CURB), as well as the Kansas Industrial Consumers Group, Inc. (KIC), have filed Complaints with the KCC demanding that these overpaid tax amounts be accounted for and returned to Kansas electric customers. The KCC will be responsible for directing the manner in which all utility companies will pass these tax reduction savings - which have already been paid by utility customers - back to the customers, who have now overpaid.

In addition to these refunds of prior over payments, current rates must be immediately reduced to reflect the lower federal corporate tax rate.

The Kansas legislature must follow all of these matters closely. The legislature should support every reasonable effort to reduce electric rates in Kansas so that the existing regional price disparity does not continue into the future, to the detriment of Kansas residents and businesses.
Other News

  • Marearl has organized the "Happy Birthday Kansas Student Photo Contest".  This is the 4th year.  627 photos have been submitted from first grade through high school.  Winners will be honored at 11:00 a.m. Friday, January 26, 2018.  The awards ceremony will be on the first-floor rotunda, at the Kansas State Capitol.  This year's theme is "Your Community History."  Awards will be presented at the Kansas State Capitol as part of the Kansas Day celebration. The University of Kansas University Chamber Singers will perform and the Kansas Day cake will be presented.
  •  KPERS. With the stock market at all times high KPERS should report a $2 Billion-dollar investment gain for 2017. This should bring the total asset level to around $19 billion and improve the funding ratio. 
  • In 2018, U.S. Supreme Court will decide if online retailers must collect and remit state sales tax. This will level the competitive playing field between brick & mortar retailers and on-line retailers. Click here to read the story.
Capitol Office
300 S. W. 10th Street, Room 330-E
Topeka, KS 66612
Overland Park
8416 W. 115th Street
Overland Park, KS 66210

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