Governor says bipartisan bill too costly, risks throwing state into financial turmoil
TOPEKA — Gov. Laura Kelly said there was “absolutely no way” to avoid vetoing the $2.3 billion tax reduction bill approved with bipartisan majorities in the Kansas Legislature, arguing the cumulative year-to-year result of a half-billion-dollar drop in revenue would crack the state’s financial foundation.
Kelly said debate about major tax reform would resume at the statehouse after she called a special session of the Legislature to consider an alterative plan. She promised during an interview with Steve Kraske on KCUR’s “Up To Date” news program to present a new tax package for consideration by House and Senate members.
“I have made it very clear from the get-go that I will veto any bill that came to me that would put Kansas in financial jeopardy. The bill the Legislature passed would do exactly that,” the Democratic governor said. “There is absolutely no way that I would sign it. I’ll call the Legislature back into a special session to pass a good tax cut bill.”
Kelly said the flurry of tax-reduction bills adopted by the 2024 Legislature would create financial problems for the state government within several years despite the current multibillion-dollar revenue surplus. She said the cumulative loss of more than $500 million annually from those bills would be unsustainable. She said it could lead to budget problems reminiscent of the administration of Gov. Sam Brownback, who led the state into a financial quagmire by aggressively reducing the state income tax without cutting spending.
“We do have enough money to do a very robust tax cut, just not as much as the Legislature proposed,” Kelly told KCUR. “There’s no way in the world that I would put my signature on a bill that I think will take us back to those (Brownback) days of four-day school weeks, crumbling roads and bridges, a foster care system that was totally broken. I can’t do that. I promised the people of Kansas that I would fix things. I did and I’m not going to now break them.”
There was a complex political calculus to a veto of Senate Bill 37 because it was approved by the House on a vote of 108-11 and by the Senate with a vote of 25-9. Both Republicans and Democrats have urged her to sign it into law.
The bill in question would eliminate the state’s 2% sales tax on groceries on July 1 rather than Jan. 1, 2025. It would repeal the state income tax on Social Security benefits in the 2024 tax year.
The bill would elevate to $100,000 the exemption from property taxes tied to the statewide school finance levy. That would be a substantive increase from the current $42,000 exemption. The property tax mill levy for education would be cut from 20 mills to 19.5 mills.
It would increase the standard deduction and personal exemption on state income taxes, while lowering the state’s top income tax rate from 5.7% to 5.57%. The state’s lower income tax rate would fall from 5.25% to 5.2%.
In the KCUR radio interview, Kelly said she was most concerned about the excessive cost of income tax reductions woven into bills favored by the Legislature.
Republicans and Democrats who voted for the tax bill pleaded with Kelly to bend to their will. There was urgency to their plea given that all 125 House seats and all 40 Senate seats would be up for grabs in the August primary and the November general election. A quick special session wouldn’t have much impact on those campaigns, but a protracted dispute over tax policy could interfere with fundraising and campaigning.
“I have voted for many income tax reduction bills this session,” said Sen. Brenda Dietrich, a Topeka Republican who also voted for SB 37. “I was hoping this would not be vetoed and it would bring tax relief to Kansas residents sooner rather than later.”
The state’s tax revenue forecasters reported in mid-April that Kansas could end the current fiscal year June 30 with a surplus of $2.6 billion in the general treasury and $1.7 billion in a special rainy-day fund. Assuming state tax revenue was reduced next fiscal year by $530 million, the forecast said the state could end the upcoming fiscal year with a $1.9 billion general fund surplus and $1.8 billion in the emergency account.
House Majority Leader Chris Croft, an Overland Park Republican who endorsed SB 37, said the state’s anticipated surplus left the governor with no legitimate reason to issue a veto.
“Under our bipartisan tax relief plan,” Croft told constituents, “every Kansan gets a tax cut, no matter their income. Only one signature stands between you and tax relief.”
Rep. Jason Probst, D-Hutchinson, said the state government could afford tax changes contained in SB 37. He was among House members who voted for the bill.
“In my experience, we don’t get many chances to give real money to real people before the big money players come to get theirs,” Probst said. “I have a real worry that if we miss this moment, most of the tax cuts will go — once again — to people who don’t need it.”
Kansas Reflector is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Kansas Reflector maintains editorial independence. Contact Editor Sherman Smith for questions: info@kansasreflector.com. Follow Kansas Reflector on Facebook and Twitter.
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