Cities and counties came out Wednesday against a proposal by Senate President Ty Masterson to fill a budget hole caused by a bill that would eliminate millions of dollars in local sales taxes on groceries.
While they liked the intent of the Mastersons’s proposal, they said they were disillusioned by years of promises from the Legislature to reinstate revenues that it’s taken from local government.
“Why are we opposing this? To be blunt, we don’t trust you,” said Mike Taylor, lobbyist for the Kansas County Commissioners Association.
Appearing before the Senate Ways & Means Committee, Taylor recounted how the Legislature eliminated state revenue sharing and removed the property tax on machinery and equipment, which cost local governments many millions of dollars.
“Based on the track record, it’s hard to trust you all,” Taylor said.
“For local governments, what we’ve been promised over the years is a big, big juicy steak and a fully loaded baked potato,” Taylor said.
“What you’ve given us is a skinny hamburger and cold french fries,” he said.
Masterson has proposed putting $220 million into the state general fund to cover what local governments could lose in a separate tax bill that would eliminate all sales taxes – state and local – on groceries starting next year.
He also agreed to add in another $50 million that would be doled out for “local extraordinary needs” by a joint House-Senate committee approved by the House speaker and the president of the Senate.
The joint committee would review applications and approve the requests with a cap of $2 million on each project.
Cities testified in a House committee this week that would they would lose millions of dollars in revenue and be forced to choose between deep cuts in services or steep property tax hikes if the tax bill passes.
Topeka City Manager Stephen Wade said the elimination of the sales tax on groceries in his city would cost $5 million to $6 million annually, which he said was equal to 25% of the city’s police department or an eight-mill property tax increase.
The city of Wichita’s finance director told the committee that his city would lose an estimated $11.1 million annually from its share of a 1% of a countywide tax that Sedgwick County levies.
Junction City reported that it would lose $1.8 million, which would equate with a 9.5-mill property tax increase.
The city of Lenexa reported that forgoing food sales revenue would cost the city about $3 million to $4 million, or roughly 2 mills to 2.5 mills of property taxes.
The city of Pittsburg said it would lose about $2 million a year in sales tax revenue, which is used to fund roads, public safety and economic development – programs approved in local sales tax elections.
Nevertheless, local governments approached Masterson’s proposal with trepidation, fearing that money might not be there in the future.
“I like the concepts that are in this particular bill, and yet I stand here before you as an opponent,” said Jay Hall, lobbyist for the Kansas Association of Counties.
“We can’t bind future legislatures, and that’s where I really struggle with this,” Hall said. “There is no legislative mechanism to make sure that funding is always there.”
“If a county were to experience a large drop in their sales tax revenue, that drop is not a one-time drop. It is a continuous year-on-year drop in that revenue,” he said.
“There will come a day when you’re no longer in those chairs that you’re in…where others will come and say, ‘I didn’t make this agreement. I didn’t put these funds there,'” Hall said.
The city of Overland Park took a similar position in written testimony.
The bill’s “establishment of state funds to compensate cities for lost sales taxes they currently automatically receive will likely just result in cities not receiving any portion of those lost revenues,” Deputy City Attorney Michael Koss wrote.
The bill “would likely just provide the state with a justification for taking more funding and never reimburse cities for those lost revenues,” he wrote.
Masterson found the opposition testimony against the proposal ironic, suggesting it was working against the very interest of local governments.
“I found it quite humorous the mental gymnastics that they had to go through to oppose this for being held harmless,” Masterson said in an interview.
During the hearing, Masterson compared the debate over the bill to the adage of a “bird in the hand versus two in the bush.”
“This is the bird in the hand,” Masterson told Hall.
“This is telling you right now no matter what happens, you’re going to get a minimum glide path to adjust to whatever changes the state makes,” he said.
“It seems like you’re taking a very high risk in my mind that’s not in the best interest of your members,” he said.
Hall said if that bird in the hand is dinner, he wants to eat dinner today, but added, “I”m gong to need another bird tomorrow.”
The League of Kansas Municipalities was neutral on the bill.
“While the league is in favor of diversifying revenue streams to avoid shifting more burden to property taxes, we remain neutral on any legislative proposals that eliminate revenue in one bill while supplementing revenue in another,” the league’s new executive director, Nathan Eberline, said in written testimony.
“The legacy of tax cuts passing while revenue bills fail is too deeply established to take another posture,” Eberline said.
