DALLAS - Kansas Gov. Sam Brownback is proposing an increase in taxes on alcohol and tobacco to reduce budget deficits of more than $700 million over the current and coming fiscal years while sticking to his plan to reduce income tax rates.
In his state of the state speech Jan. 15, Brownback vowed to "continue our march to zero income taxes. Because the states with no income tax consistently grow faster than those with high income taxes."
In a budget submitted to the Kansas Legislature the following day, Brownback said the proposed higher taxes on alcohol and tobacco would produce $107 million in the fiscal year beginning July 1.
"Transitioning to consumption taxes allows Kansans more freedom to determine their spending and reinforce the principle that the family budget is more important than the governmental budget," Brownback said in a prepared statement accompanying the budget proposal.
Tobacco taxes would increase to 25% of the item's price from the current 10%.
The liquor tax would rise to 12% from the current 8%. The liquor tax in Kansas has not changed since 1983.
In December, Brownback announced 4% reductions in spending after projected deficits of $280 million in the current fiscal year and $436 million in the 2016 fiscal year were announced.
The revenue shortfalls come on the heels of tax cuts that Brownback supported in the Republican-controlled Legislature.
Brownback plans to drop the income tax rate on lowest income bracket to 2.66% from 2.7% in January 2016. The rate on the upper income bracket would remain at 4.6%.
Income tax reductions scheduled for 2017 and 2018 would not occur unless growth in state tax receipts exceeded 103% of the previous fiscal year's receipts.
Brownback's Democratic opponent in the 2014 election, House Minority Leader Paul Davis, proposed freezing state income tax rates at the 2015 level to build a reserve that could be used to restore past cuts in school funding.
To resolve a legal battle over funding of K-12 public schools, Brownback proposes scrapping the current formula and replacing it with block grants for two years or until the Legislature can create a new formula.
Brownback's budget includes a new "budget stabilization fund," which would claim a portion of annual revenue increases to establish a safety net when the state faces unexpected deficits. The governor estimated the fund could draw $22.9 million in fiscal 2016 and $86.9 million in fiscal 2017.
The Republican governor also proposed that the phase-down of the itemized tax deduction in Kansas set for 2017 to take effect immediately, which would inject $50 million into the 2016 budget and add $21 million in 2017.
Brownback also proposed a constitutional amendment declaring "the debt of the state is a general obligation of the state and we will pay it first."
In general, Brownback said that spending in the Sunflower State had grown too fast over the past in recent decades.
"That government spending growth was not reflective of the trajectory of our population or of the economy," he said. "It was government getting too big too fast."
In a Jan. 9 report, Standard & Poor's raised concerns about the state budget's structural imbalance and the impact of a recent court ruling requiring more spending on schools.
On Dec. 30, a Shawnee County District Court panel of judges suggested the state spend at least $548 million more a year on public education. That would represent almost 9% of the state's $6.3 billion fiscal 2015 budget.
Both Moody's Investors Service and Standard & Poor's issued reports calling the ruling a negative credit factor for the state, particularly given the budget deficit.
Moody's rates the state Aa2. S&P downgraded Kansas to AA from AA-plus in August 2014.
