TOPEKA, Kan. — Kansas legislators approved a $14.3 billion state budget Sunday, clearing the way for them to end an annual session marked by arguments about whether huge income tax cuts will juice the economy or leave the state with a catastrophic shortfall.
By a 22-13 vote, the Senate approved a compromise spending plan for the fiscal year beginning July 1. It now heads to Gov. Sam Brownback, as the House had approved the measure 80-35 hours before.
The proposed budget, drafted by negotiators, is slightly more generous than the one pushed by the conservative GOP governor, but it still trims overall state spending about 3 percent. It also meshes with aggressive income tax cuts already on Brownback's desk.
Brownback and his allies saw much of the year's work as historic, even though many of them had hoped to push through a less aggressive alternative to an income tax bill now awaiting the governor's signature. That effort foundered because GOP moderates and conservatives couldn't agree on how far to back off.
Supporters of the tax cuts argued that the state's economy will get a big, job-creating boost from the legislation on Brownback's desk, but the Legislature's staff forecasts that a budget shortfall will emerge by July 2014. The measure would cut individual income tax rates for 2013 and eliminate income taxes for the owners of 191,000 businesses.
Even with the tax cuts, any potential budget problems appear a year off. The next budget still was expected to leave healthy cash reserves at the end of June 2013 — in sharp contrast to the projected shortfall Brownback and lawmakers closed after he took office early last year.
"We're getting a good, healthy tax plan," said House Speaker Mike O'Neal, a conservative Hutchinson Republican. "We're getting a good, healthy budget."
Lawmakers expected to leave another big task — redrawing political boundaries to reflect population shifts over the past decade — to a federal court. A bitter feud between GOP factions, anticipating primary elections that will determine which camp controls the Senate next year, prevented passage of any redistricting proposals. The acrimony spilled over into most other big issues, including taxes.
Sunday was the 99th day of the Legislature's session — nine days longer than scheduled. The record is 107 days in 2002.
The conservative-backed tax cuts on Brownback's desk would be coupled with a sales tax reduction already planned for next year. The package is expected to provide $231 million in tax relief during the fiscal year that begins July 1, and the annual figure grows to $934 million in six years.
Brownback has until the end of the week to decide the bill's fate, but he's publicly embraced it. His administration had talked about having a signing ceremony Monday in Wichita, though plans weren't firm as of Sunday.
The next fiscal year's budget didn't need much more tightening, because the state expects to have adequate cash reserves to cover the tax cuts and still have a $464 million surplus at the end of June 2013. The proposed budget even boosts base aid to public schools by $60 per pupil, or about 1.6 percent, offsetting a small portion of earlier reductions in aid prompted by the Great Recession.
Critics called the tax cuts irresponsible. The Legislature's research staff has projected that the combination of income and sales tax cuts will spawn a budget shortfall that would balloon to nearly $2.5 billion by July 2018 if left unchecked.
"If we can't rectify some of the issues with that when we come back next year, there will be huge problems," said Senate President Steve Morris, a moderate Hugoton Republican who was even skeptical of alternative proposals to phase the same cuts in over six years.
Under the tax bill, the state's top individual income tax rate would drop to 4.9 percent from 6.45 percent for 2013. The business tax break is targeted at the owners of partnerships, sole proprietorships and other small businesses, though critics believe large companies will change their legal structures to will take advantage.
The sales tax will drop to 5.7 percent from 6.3 percent in July 2013. Lawmakers promised the reduction two years ago when they boosted the rate to close a budget shortfall, before Brownback took office.
Online:
Kansas Legislature: http://www.kslegislature.org
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