DALLAS – Kansas lawmakers fell three votes short of overriding Gov. Sam Brownback's veto of a bill that would have raised more than $1 billion over two years by eliminating tax cuts.
The state is facing about $1 billion in shortfalls through the end of fiscal year 2019, including $300 million in the current fiscal year.
To close that gap, lawmakers passed House Bill 2178, which would have eliminated a tax exemption that allows more than 330,000 business owners to pay zero state tax on their income, and would have created a third tax bracket. The net effect of the changes would have been the elimination of Brownback's 2012 tax cuts that some have blamed for the state's long-running revenue shortfalls.
Brownback vetoed the bill Wednesday morning, and the legislature sought to override the veto the same day. The state House voted to override, but in the Senate, the override fell three votes short of the 27 needed to override the veto.
"I am vetoing it because the legislature failed to fulfill my request that they find savings and efficiencies before asking the people of Kansas for more taxes," Brownback said. "I am vetoing it because Kansas families deserve to keep more of their hard-earned cash. I am vetoing it because it is retroactive and thus incredibly unfair."
House Minority Leader Jim Ward, D-Wichita, believes that the legislation will reappear as the session moves forward.
"All this does is slow down the session for a couple of weeks," Ward told the Kansas City Star. "At the end of the day, you're going to see a plan substantially similar to what was rejected by an obstructionist governor and his followers in the Senate."
In his veto statement, Brownback called the proposal the "largest tax hike in Kansas history."
Brownback is proposing a combination of tax increases, cuts in transportation and pension funding and the sale of tobacco settlement securitization bonds.
"My budget proposal does not target Kansas families or the working class, but still achieves structural balance," Brownback said. "It is not too late; the legislature still has time to choose fiscal responsibility over tax increases on Kansas families."
In a proposal that anticipates flat revenue growth through the 2019 fiscal year, Brownback is calling for $6.25 billion in spending for the 2018 fiscal year that begins July 1. That represents a slight increase from the $6.07 billion available in the current fiscal year.
To cover the current shortfall, Brownback is asking to borrow $317 million in idle funds. He also proposes transferring $45 million in interest the state has earned on investments from the unclaimed property fund and collecting another $27 million in accrued interest on other investments.
Since lowering its revenue targets in November, Kansas has surpassed the estimates for three months in a row.
The state received about $24 million more than anticipated in January based on stronger sales tax and corporate income tax revenue.
Budget director Shawn Sullivan credited changes to the revenue estimating process in the second half of 2016 for the accuracy of the estimates. He also said the state has not made any major changes to tax policy in the past year and a half, which has made revenue easier to estimate.