The Fed's latest news has prompted another round of what-ifs.
June 22--GOP leaders hold class in Salina
By ERIN MATHEWS Salina Journal -- Sunday, June 22, 20147:38 AM
There's something good happening in the Kansas economy, and the state's revised tax policy is a part of it, the state secretary of the Department of Revenue told a small group of Republicans on Saturday in Salina. Nick Jordan, who was among guest speakers at a Republican Leadership Series class on taxes and government spending at the Salina Community Theatre, said a 2 percent drop in the unemployment rate in the past three years is one positive indicator In 2011, the Kansas Department of Labor reported an unemployment rate of 6.8 percent. In May, it was 4.8 percent, and more people are employed than ever in the state, Jordan said.
"You don't go from 6.8 to 4.8 with a static, lousy economy," Jordan said. "People are getting hired. You tell me something isn't happening in the Kansas economy that's positive."
Jordan also cited a record number of new business filings in the state over the past two years.
Jordan said 98 percent of Kansas businesses have fewer than 100 employees, and in 2011, those businesses in Kansas were paying the second highest tax rate in the region.
He said now Kansas is second lowest, with only Colorado taxing less, and because of the lower tax rates, business owners are investing in needed equipment and hiring more people.
"We have had absolutely some of the best stories of what people are doing with their money," he said.
Jordan was among six local and state officials who spoke Saturday before about 25 people selected through an application process to attend forums on the operation and policies of state and local government. Many of those attending are expected to go on to serve as elected and appointed officials in the future.
Media accounts misleading
Jordan said media accounts that compare actual tax revenues collected the year before the income tax reduction to actual revenues collected in fiscal 2014 are misleading. He said actual revenues were anticipated to drop, and the state's budget is built around the decreased revenue projections.
He said what's more important is how actual revenues compare to the revenue projections upon which the budget was based. He said tax receipts were actually $131 million above estimates through March, but then in April and May there was a $300 million shortfall as people began hearing that the federal government was not likely to renew George Bush-era tax cuts on capital gains and other income.
He said people moved reported income to 2012 instead of 2013 to avoid a higher tax rate. He said Kansas and 35 other states underestimated the impact of the federal tax change.
Even so, Jordan said Kansas will end fiscal 2014 with a $400 million to $500 million positive balance.
Jordan said Kansas was hit hard during the recession from 2008 to 2010, losing a billion dollars over that two-year period. He said that in 2010, the state had a $27 million budget shortfall for the first time in history.
Jordan said that in 2011, the state's economy was stagnant and Kansas was losing billions in income to other states, mostly Texas, as businesses and families migrated to states with low to zero income tax. He said 20 to 25 counties in western Kansas were seeing double-digit population decline.
"Tax policy is not the only reason to move, but it is a factor," he said. "It plays an important role."
Rural opportunity zones
Jordan said Gov. Sam Brownback established rural opportunity zones to entice people to move to declining areas by offering out-of-state residents five years of no personal income tax, as well as college debt payment of $15,000 over five years. He said the program has been promoted through social media, and about 1,000 young people have applied.
To help small businesses, Jordan said the state is accelerating depreciation on equipment purchases and eliminated taxes on nonwage business income. He said that as a result, small business owners have money to invest in needed equipment purchases and hiring more people.
He said 9,100 new jobs have come to the Kansas City, Kan., area as Missouri businesses have seen the more favorable tax climate in Kansas. He said Wichita continues to struggle because of a lag in demand for small jets, and the state is working with city officials to seek new opportunities for the city's skilled labor pool.
Although the state's budget is built around decreased revenue estimates, legislators still reached agreement to fund a court-ordered increase in K-12 education funding to equalize educational opportunities across the state, Jordan said.
Salina School Superintendent Bill Hall, another speaker at the morning session, said that additional revenue from the state will allow the schools to complete new construction projects recently approved by Salina voters without an overall mill levy increase locally.
Differing with Hall
Audience members seemed to differ with Hall on several points, including his view that there is nothing wrong with the school finance formula except that the state hasn't been putting enough money into school funding. Several class members said the formula was created by Democrats and needs to be revisited.
Several in the audience also expressed the belief that Common Core standards are a mistake.
"That's water under the bridge," Hall said. He said the state is four years into implementing the standards.
Put signs in yards
Class members also suggested that a trend in Salina toward increasing numbers of students receiving free and reduced school lunches could be halted if the names of those in the program were published. One person suggested signs in the yards of school lunch recipients.
Salina Chamber of Commerce CEO Dennis Lauver discussed Kansas tax policy and said it is working against the state in attracting larger corporations. He said the state's tax approach, which relies on a triple-weighted formula including property owned in state, payroll paid and sales made in state, tends to penalize businesses for investing in property and employees here. He said other states have gone to a tax structure based purely on sales, and that is more attractive to larger employers.
"I sat in the governor's car one day while he was here in town, and we talked about this approach," Lauver said. He said state officials don't disagree with the concept, but state government has other priorities. He said he thinks the state would be better served to hold off on lowering individual income tax rates and phasing in a single-factor tax structure.
Saline County Republican Party Chairman Clarke Sanders discussed state politics, saying he has heard the names of Kansas Attorney General Derek Schmidt or Congressman Mike Pompeo as possibilities for Kansas gubernatorial candidates in four years.
Sanders said Republicans must make an effort to retain all offices, adding that it was one loss in a "down ticket" race in 1994 that led to Kathleen Sebelius building a political organization that propelled her to governor and then federal government.
He said Republicans had victories in every race except the commissioner of insurance position.
"Who won that race?" he asked.
"Her," several people responded.
"The name of which cannot be spoken," added one class member.
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