by Tracy McCue, Sumner Newscow — The Kansas State Legislature has been working overtime to try to come to some kind of solution on the $406 million budget gap now plaguing the capitol. The latest news is all nonessential state workers will be immediately furloughed if a budget isn’t worked out by June 7.

Steve Abrams

But one proposal that died quickly was one proposal by Kansas State Senator Steve Abrams, who represents Sumner County. The 32nd District Senator proposed ending a sales tax exemption for some nonprofit organizations, including 118 of the state’s 127 hospitals that are non-profit. Sumner Regional Medical Center in Wellington is on that list.

Abrams contended that eliminating the exemptions would allow the state to avoid increases to sales taxes and income taxes.

His plan would have closed a sales tax exemption on property and services for public and nonprofit hospitals and blood banks. Ending this and those of other exemptions would bring in $635 million total according to budgetary estimates.

The proposal, issued on Sunday, died a quick death in Topeka. The Senate voted down the the plan on Monday after several hours of debate. But with the state facing a budget gap with new taxes, there’s a chance lawmakers could take another look at it.

SRMC CEO Leonard Hernandez said the proposal on Monday “could” hurt SRMC but the proposal was so new then, he couldn’t determine what the impact would be to the hospital.

The Kansas Hospital Association issued the following statement:

“During the debate, an amendment was offered by Senator Steve Abrams (R-Arkansas City) that attempted to balance the budget by largely removing the sales tax exemptions for certain organizations, including non-profit hospitals. Senator Abrams suggested his amendment was intended to broaden the tax base for the state and avoid an increase in the state sales or income tax. During the floor debate, many senators spoke on the amendment including several who raised concerns about its impact on non-profit hospitals. In the end, only 9 Senators supported the amendment brought by Senator Abrams and 30 voted against the removal of the sales tax exemptions.

Towards that end, this most recent amendment demonstrates that the legislature is considering any solution to address the budget shortfall. While this recent amendment was defeated soundly, the hospital community should be on alert that other similar proposals may arise. If you have not done so recently, this is an opportune time to reengage your elected officials.  Ask them to support their local community hospital and reject any future recommendations that may harm the ability to provide care.

In the Hays Post, Abrams said the plan was based on recommendations made in a 2010 Legislative Post Audit report.

The rationale, Abrams said, was to remove exemptions for nonprofits that compete with similar for-profit entities that don’t enjoy the same tax privileges.

Sen. Vicki Schmidt said legislators had given nonprofit hospitals the tax exemption for a reason.

“I would guess it’s because nonprofit hospitals have a charity mission and for-profit hospitals often don’t share that mission,” said Schmidt, a Republican from Topeka. “And we treat charities differently in our law.”

Sen. Molly Baumgardner, a Louisburg Republican, raised concerns during the caucus meeting that taxing hospitals and Boy and Girl Scouts would spark public backlash. Abrams said any tax plan would be viewed as targeting someone.

Abrams’ plan also included the closure of exemptions for machinery and equipment, to bring in more than $200 million.

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