Sumner Newscow report — The following is a newsletter written by Kyle Hoffman, House Representative District 116…

Turnaround and beyond

Kyle Hoffman

With the February 23 Turnaround Day behind us, the day when bills passed by either chamber are sent over to the other chamber for review and possible passage, both chambers are continuing to hold hearings and work the other chamber’s bills.  But as the weeks pass, more and more time is being spent on the floor of the House debating bills in anticipation of the end of regular session on March 25.

It is truly an honor and privilege to represent you here in Topeka. Please remember bills and other helpful information can be easily accessed through the legislature’s website at www.kslegislature.com.

Budget and tax — 

Last week the Governor signed into law SB 161 which makes changes to the FY2016 and FY2017 budgets we passed before leaving for Turnaround and brings those budgets into balance.

In the last six years, I have seen the ups and downs of revenues and spending; overall we have been successful in keeping the rate of government spending growth to a minimum.  As shown in the graph, the last several years spending per year has only increased around 1.8% instead of the much higher rates seen in the past. Even with the adjustments made in SB161, state general fund spending is scheduled to increase by just short of 1% in FY2016 and around 1.4% in FY2017 when compared to FY2015.  I will acknowledge that if revenues continue to miss the estimates, in the future those numbers will have to change, that is why we gave the governor the authority to make those necessary changes without being forced to make across the board cuts to all programs.

As far as revenues are concerned, here is a little information I hope you will find helpful. 

At the end of February, tax receipts were 79.6 million below expectations, but we were still 43.5 million or 1.2% above the year to date revenues compared to this time last year.  The problem is that we are a far cry from the 282.2 million that the revenue estimators projected we would be above last year’s revenues by this time in the fiscal year.  Not a good revenue picture when trying to balance a budget.

The Kansas economy (as well as the U.S. and world economy) is very stagnant right now. Our main Kansas industries; Agriculture, Oil and Gas, and Aviation, are all struggling.  We all see this in our local economies and it is no different at the state level.  Although many want to blame tax cuts on our budget problems, the reality is that downward economic pressures are causing the biggest problems.  Would we have more money coming in if we hadn’t cut taxes, possibly, but we also don’t know how much the higher taxes might have worsened our current economic downturn, possibly bringing in less revenue?

While 70 percent of the tax reduction went to individuals, the elimination of income tax on S Corp, LLC, and sole proprietors has gotten the most attention, good and bad.  Evidence does show that by allowing more money for investment and attempting to give small businesses the same advantage as C Corporations to retain earnings without tax for future investment, the policy has caused business growth and that there are many completely new taxpayers in Kansas who are operating as an LLC; unfortunately, there is other evidence that simply points to tax avoidance by some that has little economic benefit for the state.

If an LLC is taxed as a partnership, then under federal law the partnership can not pay wages to the partners. A sole proprietor can not pay wages to the owner. However, all the profits from the LLC and Sole Prop are considered earned income. But since it is not a wage, it is not subject to Kansas income tax.  To that end, this exemption is being examined by both the House and the Senate this year with HB2444 and SB508.

With all these factors in mind, we continue work to appropriate the money paid in by hard-working Kansans to fund the government as fairly and efficiently as possible.

KPERS

Four years ago, KPERS was only 56.4 percent funded, which was considered extremely underfunded and hovering around insolvency.  Many factors caused this underfunding, but a key factor was that employer contributions since 2004 averaged only $224.4 million per year, millions of dollars under the suggested actuarial rate.  In 2011 we made a commitment to put the system back on solid footing.  KPERS is now 67% funded, and the average employer contribution since 2012 has been over $387 million per year, over $100 million more per year.  KPERS is now out of the bankruptcy zone due to those investments and on its way to being considered fully funded within the next 20 years.

Because of this funding commitment, we protected KPERS payments from any across-the-board cuts in SB161, while giving some flexibility for cash flow purposes at the end of the fiscal year. This cash-flow tool will be available if the state bank account goes below $100 million and will allow the Governor to delay the final state payment to KPERS in FY2016.  If the Governor uses this option, the payment must be made up in the first three months of FY2017—plus 8 percent interest, furthermore, the bill clarifies that the KPERS payment scheduled for the beginning of FY2017 cannot be delayed, assuring that all payments will be current by the end of the first quarter in September of this year.  It is important to reiterate that KPERS funds are protected by IRS rules and cannot be borrowed once they are paid into the KPERS system, we have simply allowed for the employer payment to be delayed for a couple of months.  Also the director of KPERS, Alan Conroy, has stated repeatedly that delaying the payment will not change any pension payments to retirees or jeopardize the stability of the system.

I am proud of the work we have done on KPERS in the last several years, it has been a priority of this legislature to safeguard the pension system for those in the system now and into the future.

Guantanamo Bay

For years, President Obama has sought to close the Guantanamo Naval Base detention facility and move the terrorist detainees to U.S. soil. A recent plan suggested placing detainees in Fort Leavenworth, Kansas. The administration sent a Pentagon team to Fort Leavenworth to evaluate the facility as one where terrorists could be housed. In response, the House debated and passed HCR5024 urging the President to obey U.S. law and abandon transferring the detainees to Fort Leavenworth.

Fort Leavenworth is not equipped with the necessary measures to hold the highly dangerous detainees and we heard testimony from military officials that our very successful Foreign Officer War College housed at the facility would be in jeopardy if the transfer took place.  The areas surrounding Fort Leavenworth would also be unprepared as they do not have in place adequate law enforcement or emergency response resources to properly keep citizens safe if a dangerous situation arises.

Although not binding, the resolution gave our state a voice in rejecting the President’s plan and gave our federal delegation more direction in the matter.

Pages and Visitors

Pages for the session. This week, I enjoyed sponsoring three pages from South Barber Jr. High —Adrienne, Takira, and Trevor.  I hope they had as much fun during the day as I did visiting with them.  Thanks for coming.

Would your Jr/Sr. High student like to be a page for a day at the Capitol? Please call, so we can work out a date that works for you. Along with paging on the House floor, they will get a guided tour of the beautifully restored Capitol and their picture with the Governor; please contact Hosanna, my office assistant, at 785-296-7643, if you are interested.

Visitors to the Capitol. If you are coming to Topeka, I look forward to seeing you. I would ask that you let my office know if you are attending a conference in Topeka so that I can make every effort to attend.I’m also always happy to arrange a time to meet with you individually.

Not able to come to Topeka? Please feel free to contact me anytime; I’m always interested in discussing your thoughts on what you’re hearing around the district.  It’s very helpful for me when I have reliable feedback.

Contact Information

My office is 481-W, State Capitol Building, Topeka KS 66612

Tel # 785-296-7643 or 800-432-3924; email kyle.hoffman@house.ks.gov.

My district mailing address is 1318 Avenue T, Coldwater, KS 67029, Tel # 620-582-2217

As always, I welcome your comments as I work through this session.  I want to thank you for this opportunity and I consider representing you a great honor.

Please feel free to forward this newsletter to your neighbors in District 116.

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