Brownback proposes increase of alcohol and cigarette taxes to cover state budget shortfall
Kansas Gov. Sam Brownback wants to increase taxes on alcohol and cigarettes, among other things, to fill the state’s $378 million budget shortfall.
As The Kansas City Star reports, Shawn Sullivan, Brownback’s budget director, presented the governor’s tax and budget proposals to lawmakers yesterday.
In addition to the proposed tax increases, Brownback is also recommending liquidation of a long-term investment fund, selling off future proceeds from the state’s legal settlement with tobacco companies and taking additional funds from the state’s highway department.
Brownback is proposing raising the tax on liquor in July from 8 to 16 percent and adding a dollar to the tax on cigarettes, which would go from $1.29 a pack to $2.29 a pack. The increases would bring in a combined $195.5 million in additional revenues, respectively, over the next two years.
He is also suggesting an increase on the tax rate on other tobacco products from 10 to 20 percent, which would bring in about $14 million over the next two years.
Brownback, who hasn’t so much as hinted at reinstating the business income taxes he cut in 2012, did propose taxing income from rents and royalties, which is currently exempt under the law. Repealing that exemption would bring in about $250 million.
He also proposed increasing annual filing fees for businesses from $40 to $200, which would bring in about $33.6 million per year in revenues.
Idle funds from state agencies are invested by the state in an investment fund that Brownback would also like to tap into that would bring in $45 million, the profit the state has made. In addition to the fund’s $317 million principal, which would first have to be pulled back with legislation, Brownback is suggesting the total be paid back over seven years.
Brownback is also proposing to sell of future proceeds from the state’s legal settlement with tobacco companies, forgoing payment of approximately $60 million in favor of receiving about $530 million over the next couple of years. That money is currently used to fund Early Head Start and other children’s programs. Brownback is proposing that the state fund those programs through the general fund through 2019.
The governor also wants to use $596.8 million in state highway funds, a fund that has been depleted for the past few years, over the next two and a half years.
Other proposals made by Brownback include: freezing the state’s contribution to KPERS, the state employees’ pension fund, at 2016 rates to save $85.9 million; merging school district health plans under one state-run plan, which would save $120 million over a two-year period; requiring school districts to purchase goods through a joint procurement program, which would save $16 million over a period of two years; merging the Kansas insurance department with security commissioner’s office , which would save about $750,000 over a couple of years; increasing the hospital provider tax from 1.83 to 4.65 percent and the privilege fee for managed care operations from 3.31 to 5.77 percent, which would bring in more federal Medicaid dollars that Brownback wants to use to increase reimbursement rates for health care providers, after cutting rates last spring, and to increase reimbursements to rural hospitals.
Brownback wants to use $5 million to establish more medical residency training programs in rural parts of the state; $1 million a year, starting in 2018, to go toward funding 50 scholarships for any university that is able to offer a bachelor’s degree for $15,000 or less; $800,000 for the planning costs of building a dental school at the University of Kansas Medical Center; and establishing a scholarship programs to train teachers who agree to work in rural areas, by socking away $3 million for fiscal year 2018 and $6 million in fiscal year 2019.
Brownback has tasked lawmakers with passing a bill making the proposed budget adjustments by the end of the month . If lawmakers go along with all of his proposals, the state would have about $99.6 million in its general fund at the end of the current fiscal year.