Property tax relief plan up for vote

The property tax relief plan is scheduled to have a vote in the House this week. It passed out of committee last week and has been sent to the floor for consideration.

The bill aims to curb property tax hikes at the local level by putting the power in the voters’ hands to stop excessive tax increases. Similar to last year’s bill, local governments are allowed a small percentage increase in property tax revenue each year, and if they go over that the voters can put a stop to it. The bill attempts to strike a balance between allowing the locally elected governing boards to adopt the budgets they feel are necessary but also giving the people the ability to stop property tax hikes that are just too much.

The current “revenue neutral” law has been in place for five years. Its focus is on calculating a mill levy that is adjusted to provide the exact same amount of property tax revenue as the year before by dividing the property tax revenues received in the prior year by the current year’s total assessed valuation. This was called the revenue neutral rate, and local governing boards were required to hold a hearing and vote to exceed this rate. If the board voted to exceed the revenue neutral rate, there was no further recourse available to the taxpayers – they were stuck with whatever budget the board adopted. It has been about as effective as a speed limit sign with no cops on duty, with some local governments being very mindful of it and others ignoring it completely.

With this new House bill, as assessed valuations go up and the property tax base increases, governing boards will be forced to lower the mill levy, something many of them do not like as was apparent in the opposition during the hearing.

Many local government officials that testified against the measure talked about how they have lowered their mill levy. I was not impressed. That’s like bragging on your resume you can tie your own shoes. With real estate market prices surging over the past several years, many local governments have reaped the benefits of higher tax revenues because they have not reduced the mill levy proportionately. If valuations increase 15-20%, the mill levy should decrease about 15-20%, but some of the most disingenuous elected officials will decrease the mill levy maybe 5% and give themselves a big public pat on the back for “lowering the mill levy!” During this hearing on this bill, some of the local governments talked about how they have lowered their budgets. But after asking a few questions and looking at the data, they were referring to how they cut their budgets from what was requested… not from what was actually spent. In other words, their original budget may have been a 20% increase from the prior year, so they “cut” the budget to where it was a 10% increase.

In my opinion, that’s NOT a cut, it’s a 10% increase, no matter how they try to spin it!

Many governing boards are very attentive to their year over year budget increases and try to minimize increases. I’ve compiled the 5 year data for the counties in my legislative district, showing the average annual increase over the past 5 years and how they rank in the state compared to all counties.

Decatur 4.51% #36

Thomas 3.85% #44

Wallace 3.77% #45

Rawlins 2.62% #60

Sherman 1.79% #72

Cheyenne -0.93% #102

This is an analysis of ONLY the county portion of the property taxes, and does not include the cities, schools, or other taxing jurisdictions. The county level data is readily available statewide but compiling this data for every single taxing jurisdiction is an ongoing project that will take time. I think it’s important, however, to see how your local government ranks in comparison to others across the state.

Property Tax Relief: The Details

The new bill is HB2745 and aims to accomplish three main things.

First, all property tax jurisdictions (county, city, township, fire districts, libraries, etc.) will have a target of 3% year over year increase in the amount of property tax they can levy. School districts are not a part of the limit because they already have other local budgetary limits in law. Sales tax and other sources of revenue are not subject to the limit, the focus is on keeping property tax as low as possible.

Second, if the governing board feels the need exceeds 3%, they can adopt a higher budget but the voters will have the chance to put a stop to it! The bar for a successful petition is 10% of the voters that cast a ballot in the prior Presidential election.

Third, as an incentive to help keep budgets no more than 3%, the state will create a Property Tax Relief Fund that will be distributed each year to every taxing jurisdiction that did not attempt to exceed the limit. The state recognizes the need for property tax relief and the legislature wants to be a partner, but only with those that are not trying to raise taxes excessively. Every dollar a local government gets from the state is a dollar that is not billed to the property tax payers.

Last year, a similar bill (HB2396) passed the House of Representatives 115-6. It contained similar provisions to this year’s bill and provides a simple and practical way to provide long-term property tax relief for homeowners, business owners, and ag producers across the entire state. It will even result in helping keep your vehicle property taxes lower!

Key Point: HB2745 aims to restrict spending.

Valuation caps and mill levy limits do not address the main underlying problem – spending. The most effective method of controlling property taxes must focus on spending.

All taxes are driven by one factor – government spending.

Elected officials and budget analysts look at the entire potential tax base, whether it is income tax, sales tax, or property tax and compare it to what they want to spend. From there, it’s a simple process of deciding what tax rate will provide the desired revenue to fund the desired spending.

With income and sales tax, rates are set and only changed when necessary. If the annual revenue is higher than necessary, the tax rates can be cut. If the expenses are outpacing revenue, the tax rates can be increased.

Property tax is different. Budgets are set each year by each governing board, and then the tax rate, called the mill levy, is determined by dividing the desired budget by the total assessed property valuation.

Therein lies the biggest problem with property taxes.

How many of you draft your household budget and start with how much you want to spend, then tell your employer or the buyers of your crops and livestock how much they need to pay you this year to match what you want to spend?

Doesn’t work that way, does it?

When you start with your spending, it’s pretty easy to justify all your “mandatory” spending if you’re not concerned about the income.

I won’t argue that the costs of local government are increasing. But so are household costs for every taxpayer. A wise elected official will keep that in mind when determining what is a mandatory expense verses a discretionary expense when it comes to building the budget.

As a former county commissioner, I want to respect local control because I believe the elected officials closest to the people have the best resources to be the most responsive to their constituents. However, I have also watched some of those budget hearings where citizens are adamantly protesting the budget increases, yet the governing board adopts the budget anyway. In these situations, HB2745 will put local control into the hands of the voters.

School cell phone ban moving forward

The Senate bill to ban cell phones for students in schools has passed both the Senate and the House. It isn’t headed to the governor’s desk just yet, however. The House made several changes through amendments that will need final Senate approval before moving on to the Governor.

It appears those changes may be only a formality, as the momentum behind this bill continues full-speed ahead. The original bill passed the Senate 40-0. The amended bill passed the House 75-48. The governor has indicated she would sign a cell phone ban bill, and if that holds true the bill only needs 21 votes in the Senate and 63 votes in the House.

I voted against the measure, not because I don’t agree that cell phone usage is highly problematic, but rather because I believe in leaving this matter to the local school boards to decide what policy fits their district the best. Many of the superintendents and board members and parents and students I visited with said their policy was crafted over a number of years as they figured out what worked best for the students and staff, and what disciplinary action worked best for violations. And any policy, even if it is a state law, is only as good as the enforcement, which is totally up to the school districts. Law enforcement officers are not going to be patrolling the halls and classrooms looking for violators.

I’m certainly not advocating for free-reign access to cellphones – the potential for abuse and the negative impact it has on our children these days is serious. As I said, I merely felt this did not need to be a one-size-fits-all state mandate.

House of Representatives Paging

Do you know any students who may be interested in being a Legislative Page for a day? I am taking requests for the new session and would love to sponsor anyone with an interest in experiencing a day in the House of Representatives! You are not required to by a resident of my district for me to sponsor you – although I certainly give priority to the northwest Kansas folks!

The Legislative Page Program offers a memorable experience in the Kansas Capitol. Learn how the state government process works by becoming a part of it for a day!

Basic Information:

• You must apply – there are limited spots available

• Recommended for young adults from 12 to 18 years of age

• Check in at 8:00 a.m. with the Page Coordinator.

• Take a photo at 9:30 a.m. with the Governor (if available).

• Serve as an assistant in the House of Representatives chamber, running errands as necessary for myself and other legislators.

• Receive a voucher for the snack bar.

• Tour the Capitol, including the inspiring “Dome Tour”, as your free time allows.

Upon completion, you will receiver a formal certificate recognizing your service to the state!

Each legislator is allowed a limited number of Page sponsorships per month on a first-come, first-serve basis. Be sure to get your requests in as soon as possible. If you have further questions, please contact me at 785-296-0715 or Adam.Smith@House.KS.Gov.