Kansas lawmakers fall short in attempt to override tax cut veto

Bonds

Kansas Gov. Laura Kelly’s veto of expansive tax cut legislation barely fended off an override, which fell short by one vote in the Senate after easily passing the House. 

House Bill 2036, which cleared the Republican-controlled legislature in April with hefty majority votes, included changes to income, sales, and property taxes that would result in an estimated all-funds reduction of more than $1.5 billion over the next three fiscal years, according to a legislative conference committee report. 

It would have reduced the state’s three personal income tax brackets to two and dropped the top rate to 5.55% from 5.7%.

The veto of a tax cut bill that Kansas Gov. Laura Kelly said “jeopardizes our state’s future fiscal stability” survived an override attempt in the Republican-controlled legislature.

Bloomberg News

Claiming the measure “jeopardizes our state’s future fiscal stability,” Kelly, a Democrat, vetoed it last week.

The House’s 104-15 vote Friday overriding the veto moved the action to the Senate, where the 26-14 vote on Monday fell short of a two-thirds supermajority requirement.

Following the House override vote, the chamber’s Republican leaders issued a statement saying: “Kansans need tax relief and revenue estimates tell us it’s time to make that happen.”

A revenue estimate released April 19 showed general fund revenue growing by 9.7% to $10.18 billion in fiscal 2024 and by 2.2% to $10.4 billion in fiscal 2025, which begins July 1.

Kelly, who also vetoed previous tax cut legislation in January, has warned against tax reductions like those enacted under former Gov. Sam Brownback that led to big fiscal problems. 

She offered an alternative plan last week that would cost the state nearly $1.3 million from fiscal 2025 through 2027 that includes elements of the latest vetoed legislation, like accelerating the elimination of the state sales tax on food and ending state taxation of Social Security income.

Kansas has built up its budget balances and reserves, which S&P Global Ratings noted when it revised the outlook on the state’s AA-minus rating to positive last year. 

Fitch Ratings, which in January released its first-ever issuer default rating for Kansas at AA, cited the state’s “sustained trend of structurally balanced budgets” and the rebuilding of fiscal reserves to levels well above historical norms. The outlook is stable.

Moody’s Ratings assigns Kansas its Aa2 issuer rating with a stable outlook.

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