If Kansas government doesn’t have enough money to meet spending requests, it’s not for the lack of collecting taxes.
Here is a chart of state tax collections per resident, for Kansas and selected states.
Do you hear complaints of how Kansas is bankrupt and there is no money to spend on schools, roads, and other needs? If these complaints are valid (they aren’t), the problem is not caused by collecting insufficient tax revenue.
To learn more about the data in this visualization and to use it to make your own charts, click here.
Kansas House District 93
J.C. Moore and John Whitmer. Moore did not attend.
District 93 is currently represented by John Whitmer. It covers a small part of southwest Wichita and areas west and south. Cities: Cheney, Clearwater, Goddard (part), Haysville (part), Mulvane (part), Viola and Wichita (part). Townships: Afton, Attica (part), Erie, Illinois (part), Morton, Ninnescah, Ohio, Salem, Viola and Waco(part). A map is here: www.kslegislature.org/li/m/pdf/district_maps/district_map_h_093.pdf
A full-page advertisement critical of the leadership of Wichita State University, from “Advocates for Integrity, Transparency and Accountability,” appearing in the Wichita Eagle, Sunday June 3, 2018. For the advertisement as it appeared in the newspaper, click here.
This is part of a continuing series of advertisements debating the course of Wichita State University. For previous ads, see:
WICHITA STATE UNIVERSITY, IT’S TIME TO LIFT THE SHADE
A growing number of alumni, faculty, staff and citizens are concerned about decisions being made at Wichita State University. As higher education becomes more complex, transparency, shared governance and civility are just that much more important. The following are some of the concerns that have been gathered from a much longer list:
When the WSU Administration sold the idea of the YMCA Wellness Center on the Innovation Campus to the Student Government Association, did they explain how many years the student annual commitment of $5 million would apply? Students are going to be paying the full operational costs of the building and likely will have contributed $20 million before the facility is even completed. A 20-year commitment, as an example, would cost students $100 million, 40-years, $200 million. Should student fees be expected to fund Innovation Campus projects of this magnitude? Is there an agreement in place? Where is it? If it exists, who signed it? Can it be adjusted?
When Fairmount Towers, an old but serviceable low-cost residence hall was closed to protect investors in The Flats (a private luxury apartment building on the Innovation Campus that on its own had produced fewer than 50 contracts) four annual bond payments of $875,000 each were left outstanding, totaling $3,500,000. This debt service will have to be covered. What is the source of the payments, now that the student housing fees that previously serviced the debt have been redirected to The Flats? If the debt has been covered, from which pocket did that come from?
The University president has said he is no longer worried about headcount enrollment because “it doesn’t mean much anymore”. Even so, during his tenure, the University has invested a minimum of three million dollars in a multi-year agreement with the Royall and Company enrollment program (headquartered in Richmond, Virginia) for that very purpose, producing little if any discernible results. What is the payment source for this investment?
President Bardo lately has seemed dismissive of the role of the College of Liberal Arts and Sciences. He asked whether anyone would wish the University would be an “elite” liberal arts college, apparently failing to recognize that Liberal Arts and Sciences has provided the foundation for every educated student who has attended since 1895. When did excellence in this college cease to be less important than excellence on the Innovation Campus or elsewhere on the campus? Faculty and staff in Liberal Arts and Sciences feel they have borne the the brunt of budget cuts when state funding has declined, and there has been no noticeable administrative effort to restore academic positions. Is this perception accurate? If so, how can it be justified? The Innovation Campus offers only a small fragment of the education occurring at Wichita State.
Prior administrations utilized the majority of the City of Wichita/Sedgwick County mill levy tax appropriation allocated to WSU for student scholarships. In 2013, 57% of that allocation went toward student support and 32.6% to capital improvements ($800,000 to NIAR and $1.6 million to debt service). The budget for 2018 indicates the elimination of debt service obligations, resulting in $1.6 million in available funds that could have been restored to its original purpose of funding scholarships. Instead, allocations for WSU Innovation Campus increased from $513,036 in 2017 to $2,317,061 for 2018, an increase of 351%. The dollar amount for student support remained the same. Why did this administration choose not to return the mill levy funding back to its original purpose by increasing scholarship funding for students in Sedgwick County?
In 2016, an “Ideas Lab” to be housed in Henrion Hall was announced by the College of Fine Arts and enthusiastically supported by the central administration and WSU Foundation. It was intended to be a collaborative approach for teaching creative industries, using innovative methods and materials. Faculty were very excited about the possibilities, noting there was nothing like it in this region of the country. Representatives from the Fred and Mary Koch Foundation objected because in their view it was too similar to “GoCreate”, a Koch gift located elsewhere on the campus. As a result, even after the earlier public endorsement of the University, the project was canceled. How is putting such control in the hands of Koch good for WSU?
The use of corporate entities, Wichita State University Innovation Alliance and Wichita State Innovation Alliance Investment, Inc., to manage the Innovation Campus obscures the risks undertaken by WSU by investing in commercial entities and letting sub-leases that can create obligations in the form of debt, liability or lost opportunities for decades. The resources committed to these activities belong to WSU. Leases and sub-leases related to these resources should be subject to open records laws. Why are these documents being kept from public scrutiny? Who benefits from this arrangement? Have we built alliances with persons and entities who do not share our founding principles?
Why have conflict of interest issues among executives and representatives of corporations with whom WSU has entered into contracts gone undisclosed until discovered and reported from outside sources? (e.g. According to the Management Review for Wichita State University report to the Kansas Board of Regents, “As Dr. John Tomblin has many roles with the University, WSIA, WSIAIC, The National Institute of Aviation Research (“NIAR”), and personally owned entities, there is an increased risk for conflicts of interest with respect to time, compensation and fiduciary duty. For example, Dr. Tomblin and his wife own 29.33% of Aero Point Technologies, LLC (“Aero Point”). The University owns the rights and intends to exclusively license Aero Point’s technology.” Prior to this finding by BKD, the Conflict of Interest Policy then in place only required Dr. Tomblin to disclose the conflict if his ownership exceeded 35%. What was the rationale for choosing 35% as the threshold for disclosing a conflict of interest? Has a new, more robust and responsible conflict of interest policy been issued?
There is a climate of fear and retribution on campus. The administration has spent hundreds of thousands of dollars to settle personnel issues when staff and faculty members were forced to leave. Settlement was made subject to the signing of a non-disclosure agreement. What gave rise to this demoralizing environment and what is being done to correct it?
This ad was not written by enemies of Wichita State University, but by people who care.
This ad was paid for by
Advocates for Integrity, Transparency and Accountability.
Considering all government employees in proportion to population, Kansas has many compared to other states, and especially so in education.
Each year the United States Census Bureau surveys federal, state, and local government civilian employees. I’ve gathered this data and present it in an interactive visualization using several views and supplementary calculations. 1
The Census Bureau collects both counts of employees and payroll dollars. Comparisons based on the number of employees are useful, bypassing issues such as differing costs of living and salaries in general.
Considering all government employees, Kansas has 68.35 full-time equivalent (FTE) employees per thousand residents. Only two states and the District of Columbia have more.
For total elementary and secondary education employment, Kansas has 30.64 such employees (full-time equivalent) per thousand residents. Only two states have more.
Click here to learn more about the visualization and to use it yourself.
A full-page advertisement defending the leadership of Wichita State University, from “Friends of the University,” appearing in the Wichita Eagle, Sunday April 22, 2018. For the advertisement as it appeared in the newspaper, click here. For the advertisement from the week before, which criticized the university leadership, click on Wichita State University degraded, says ad.
INNOVATIVE THINKING FOR TODAY’S REALITIES IN HIGHER EDUCATION
The playing field of higher education is rapidly changing. The models of the 1970s, or even 1990s, are no longer applicable. With state public funding now paying only about 35% of total educational costs, roughly half of the amount covered less than 20 years ago, universities must seek new avenues of revenue and partnerships, enabling delivery of high quality education across their campuses.
Wichita State University, under President John Bardo, is on the leading edge of this forward-thinking concept. The WSU innovation campus, creation of WSU Tech, and a number of other initiatives recently launched will provide the pathway to ongoing success, not merely for the University but all of Wichita and South Central Kansas, for decades to come.
For the record, we support Doctor Bardo and his colleagues who are bringing highly favorable national recognition to our community, while assuring Wichita State’s ability to continue to prepare students with knowledge and skills for successful careers in all academic areas.
Loyal Shockers in Support of our University and its Leadership
Al Higdon, treasurer, 1513 Foliage Court, Wichita, Ks. 316-650-8665
We the undersigned endorse and have paid for this message, in the best interest of Wichita State University, its students, faculty and staff, as well as for the prosperity of our greater community.
There followed a list of signatories. Also:
Paid political advertisement
A full-page advertisement critical of the leadership of Wichita State University, from “Friends of the University,” appearing in the Wichita Eagle, Sunday April 15, 2018. For the advertisement as it appeared in the newspaper, click here.
WHOSE UNIVERSITY IS IT ANYWAY?
As Kansans and taxpayers, we protest the degradation of our public democratic institution, Wichita State University. The current university leaders have eroded the bedrock policies and values upon which the university was founded.
With their intimidations and threats to underfund The Sunflower, the student newspaper, they have assaulted freedom of the press
With the creation of the WSU Innovation Alliance, they have sublet public university land to private developers, thereby evading the requirements of the Kansas Open Records and Open Meetings Acts
With their refusal to fund faculty positions in certain disciplines, they have undermined the liberal arts and sciences, an insult to the university’s original purpose
With their use of student fees to support the Innovation Campus, they have saddled present and future students with millions in future debt obligations
With their decisions to build a multi-million-dollar housing complex, and to divert 5 percent of scholarship money to non-academic purposes, they have evaded accountability to the university’s owners, the people of Kansas
With their use of non-credit and non-academic courses to inflate student enrollment numbers, they have undermined public confidence in their integrity — and their stewardship
With their allocation of a public building to a private school, they have flouted the principle that public resources be used to the public’s benefit
As Kansans, we beseech the Kansas Board of Regents to redress these abuses of the public trust, and to protect students, faculty members and community residents from further such abuses.
There followed a list of signatories, plus an indication there are some who wanted anonymity. Also:
This ad was paid for by Friends of the University.
Anne Woods — Treasurer | P.O. Box 8714 | Wichita, KS 67208 | 316-688-1889
Paid political advertisement
Duane Goossen, former high Kansas government official, says the state’s highways are in trouble. What is his evidence?
In a recent op-ed, Duane Goossen laments the lack of spending on Kansas roads and highways. 1 His focus is his claimed lack spending on maintenance, which, he says, will lead to much larger repair bills in the future.
“But now the Kansas road system is truly threatened.” He raises the common “Bank of KDOT” criticism, writing “The highway fund became a convenient source of cash.”
It’s true, as Goossen writes, that a lot of money has been transferred from the highway fund to the general fund. At the same time, the amount of sales tax dollars transferred from the general fund to the transportation fund has risen, and by a factor of five over one decade.
But it isn’t true that Kansas highways are crumbling from lack of spending on maintenance.
Here’s a chart of the conditions of Kansas roads and highways. 2 It shows that, for interstate highways, the percent of the system in good condition has been pretty level since 2001. For non-interstate highways, the percent in good condition fell starting in 2004, but has rebounded.
Based on these charts, there’s no factual basis to claim that Kansas roads and highways are deteriorating.
But Goossen looks to the future, claiming that a lack of spending now will lead to big bills later. Now, it’s important to know that while money has been transferred from the highway fund, that alone doesn’t tell us about the level of spending on maintenance. Looking at actual spending instead of transfers to and from, we find that for fiscal year 2017, spending on three categories (Maintenance, Preservation, and Modernization) was nearly unchanged from the year before, while spending on the category Expansion and Enhancement fell by 31 percent.
For these four categories — which represent the major share of KDOT spending on roads — spending in fiscal 2017 totaled $738.798 million. That’s down 14 percent from $857.133 million the year before, and up from a low of $698.770 million in fiscal 2010. 3
And adjusted for inflation, spending on maintenance programs has declined somewhat, including in the years when Goossen held high office. These declines, however, are far short of setting up Goossen’s prediction of calamity.
Then, there’s this, which is really incredible. Goossen criticizes some of the bonds issued by KDOT in recent years, and he is on the mark: “And a portion of that debt has ‘interest only’ payments in the first years, with the principal payments still to come.”
However: The state also issued “interest only” bonds in 2004 and 2010. 4 Who was budget director during these years, as well as Secretary of the Kansas Department of Administration? Duane Goossen. 5 But now Goossen criticizes as irresponsible the same action the state took when he was in high office.
Given the insufficient factual basis for Goossen’s claims — not to mention the blatant hypocrisy — we have to wonder if this article is politically motivated. Perhaps it is, as we see Goossen making the maximum allowed contribution to Kansas Democratic gubernatorial candidate Laura Kelly.
Either that, or Goossen is auditioning for another government job.
That is an increase of 1.0 percent from 2016, when personal income was $137,305 million. These are current dollars, not adjusted for inflation. 1
The growth for Kansas — 1.0 percent — ranked 47th among the states. For the nation, personal income rose by 3.1 percent, and for the Plains states, it rose by 1.7 percent.
BEA gives the population of Kansas as 2,913,000, with per capita personal income at $47,603. That ranks 24th among the states, and is 94 percent of the value of personal income for the entire nation, which is $50,392.
Personal income, according to BEA, is “the income received by, or on behalf of, all persons from all sources: from participation as laborers in production, from owning a home or business, from the ownership of financial assets, and from government and business in the form of transfers. It includes income from domestic sources as well as the rest of world. It does not include realized or unrealized capital gains or losses.” 2
For Kansas, there were these notable changes in earnings:
Farm: Down by 0.66 percent
Non-durable goods manufacturing: Up by 0.23 percent
Wholesale trade: Up by 0.11 percent
Transportation and warehousing: Up by 0.15 percent
Management of companies and enterprise: Up by 0.15 percent
Health care and social assistance: Up by 0.23 percent
State and local government: Up by 0.21 percent
There is a movement to increase the transparency of government in Kansas, but there’s much to be done, starting with attitudes.
One of the major economic development programs in Kansas is PEAK, or Promoting Employment Across Kansas. 1 It provides benefits to companies when they expand their operations in Kansas, or sometimes when they merely threaten to leave. The recent expansion by Spirit AeroSystems is reported to benefit from $23.5 million in PEAK cash. 2
But finding out how much PEAK benefits are awarded each year is difficult, even though the state relies heavily on this program. It also appears that the Kansas Department of Commerce, the agency that awards and administers PEAK, isn’t aware of how many programs, and at what cost, have been authorized.
At one time a summary of PEAK data was readily available from the state. It covered fiscal years 2010 through 2015. 3 My inquiries late last year to the PEAK program manager for updated information were fruitless, despite many email and telephone messages. None were returned.
But a request to the interim director was answered. The answer is that the data through 2015 was a one-time effort, and there are no reports similar to that with recent data.
The fact that there is no recent data is remarkable. We must wonder if the Department of Commerce cares about things like this, because collecting this data as projects are awarded is not difficult. There aren’t many projects awarded. For the period 2010 through 2015, there were 68 PEAK projects awarded. And just a handful of data items need recording for each project.
But this isn’t done.
I made a request for recent data on PEAK awards, asking for the same data in the previous report: Company Name, Effective Date, Location (County), Proposed Annual Benefit, Benefit Term (Yrs), New or Retained Jobs, Project Payroll, and Additional Project Capital Investment. The response confirmed there is no simple report with the relevant data. I was offered the opportunity to purchase copes of all recent PEAK agreements, estimated to cost $750 to $1,200. Further, these documents would not contain all the data I asked for.
Who is managing?
As part of four initiatives to increase government transparency in Kansas, Governor Jeff Colyer told the legislature, “Third, I will implement performance metrics for Cabinet Agencies so Kansans can see how we perform.” 4 My experience with the Department of Commerce indicates there’s a long way to go. Agencies are not capturing and recording basic data.
Even if the Department of Commerce was capturing this data, there’s still much more analysis to perform. The data I asked for was simply the project parameters at the time PEAK benefits are awarded. The real question is this: Are the projected benefits actually realized?
There ought to be a law
There is a bill this year that would require several state agencies to report on the many programs they administer. It’s titled “HB 2753: An act concerning taxation; relating to income tax credits and sales tax exemptions; periodic review, reports to certain legislative committees.” 5
Kansas taxpayers might have thought this basic management of our tax-funded programs we already in place. It’s especially troubling in that the cost of this management is small. The fiscal note for the bill tells us these agencies already have the capacity to perform this work: “The Insurance Department, Department of Commerce, and Department of Revenue indicate that the administrative costs associated with implementing the provisions of HB 2753 would be negligible and could be absorbed within existing resources. Each agency would be responsible to collect and organize information regarding certain tax credits, incentives, and exemptions on a yearly basis.”
Local governments in Kansas are again seeking expanded power to seize property.
In Kansas, officials of many city governments feel they don’t have enough power to deal with blight. This year, as in years past, there is legislation to expand the power of cities to seize property. 12
John Todd, along with Paul Soutar, made a video to explain the bill and the surrounding issues. It’s just five minutes in length. View it below, or click here to view at YouTube. Todd’s written testimony to the Kansas Legisalture has photographs and examples. It may be viewed here.
Presently, tools are in place. Cities already have much power to deal with blight and related problems. Last year Todd and I, along with others, had a luncheon meeting with a Kansas Senator who voted in favor of expanding cities’ powers. When we told him of our opposition, he asked questions like, “Well, don’t you want to fight blight? What will cities do to fight blight without this bill?” When we listed and explained the many tools cities already have, he said that he hadn’t been told of these. This is evidence that this bill is not needed. It’s also evidence of the ways cities try to increase their powers at the expense of the rights of people. 3
The Governor’s veto. A similar bill passed the legislature in 2016. Governor Brownback vetoed that bill, explaining, “The right to private property serves as a central pillar of the American constitutional tradition.” 4
The Governor’s veto provoked a response from Wichita government officials. It let us know that they are not as respectful of fundamental rights as was Brownback. 5
For example, in remarks from the bench, Wichita City Council Member Pete Meitzner (district 2, east Wichita) said there is no intent to be “aggressive in taking people’s property.” 6 But expanding the power of government — aggression, in other word — is what the bill does. Otherwise, why the need for the bill with its new methods and powers of taking property?
And once government is granted new powers, government nearly always finds ways to expand the power and put it to new uses. Even if we believe Meitzner — and we should not — he will not always be in office. Others will follow him who may not claim to be so wise and restrained in the use of government power.
Government expands and liberty recedes. Government continuously seeks new ways to expand its powers through enabling concepts like blight. Did you know the entire suburban town of Andover is blighted? 7 Across the country, when governments find they can take property with novel and creative interpretations of blight, they do so. 8
It’s easy to sense the frustration of government officials like Wichita Mayor Jeff Longwell. In his remarks, he asked opponents of SB 338 “what they would do” when confronted with blight. That is a weak argument, but is advanced nonetheless. Everyone has the right — the duty — to oppose bad legislation even if they do not have an alternate solution. Just because someone doesn’t have a solution, that doesn’t mean their criticism is not valid. This is especially true in this matter, as cities already have many tools to deal with blight.
What Was Really the Matter with the Kansas Tax Plan
New Book Outlines Tax Lessons from Kansas “Experiment”
Tax relief opponents have repeatedly pointed to the 2012 Kansas tax plan as their primary example of why tax cuts do not work. But, other states like North Carolina, Indiana, and Tennessee contemporaneously, and successfully, cut taxes. What was different about the Kansas experience?
The answer to that question is multi-dimensional according to a new book from Kansas Policy Institute, entitled What Was Really the Matter with the Kansas Tax Plan — The Undoing of a Good Idea. The book covers the six years between the conception of Brownback’s tax cuts in 2011, the tax package being signed into law in 2012 and later repealed with the largest tax hike in state history in 2017. It documents the many mistakes that occurred, a toxic political undercurrent, and several unrelated economic circumstances that negatively impacted the budget and multiple misconceptions along the way.
Author and KPI president Dave Trabert says, “Much of what went wrong was avoidable. We hope citizens and legislators across the nation can learn from the mistakes made in Kansas as they strive to create the best path forward for everyone to achieve prosperity with lower taxes.”
The final chapter of the book is “Lessons Learned” and includes these big lessons:
Don’t cut revenue and increase spending.
Explain why tax relief is necessary (i.e., what are the consequences of not reducing the tax burden).
Develop a comprehensive plan to balance the budget on less tax revenue, with room for the unpredictable but inevitable misfortunes (like plummeting oil and farm commodity prices).
Have the right systems in place, including performance-based budgeting and a reliable revenue estimating process.
To ensure that lawmakers have this information as they work in statehouses around the country, nearly 8,000 complimentary copies are being distributed to every state legislator across the country in partnership with The Heartland Institute.
Danedri Herbert, an experienced journalist currently writing for the online publication “The Sentinel,” co-authored the book and former U.S. Senator Tom Coburn of Oklahoma wrote the Foreword. Coburn writes, “This is a very important book, not only for state and national legislators who try to represent citizens instead of special interests, but also for taxing and spending watchdogs in the press and those involved with good government citizen activist groups.”
What Was Really the Matter with the Kansas Tax Plan is published by Jameson Books, Inc. and copies will be available on Amazon.
Trabert concludes, “Kansas could have successfully cut taxes as other states have done. The undoing of a very good idea—allowing citizens to keep more of their hard-earned money—gets to the crux of the serious state and national challenges we face: policy takes a back seat to politics. The efforts of many elected officials are not on solving problems in ways that create the best path forward for all Americans to achieve prosperity, but on maintaining and consolidating power.”
New Kansas Governor Jeff Colyer proudly cites the low Kansas unemployment rate, but there is more to the story.
In his recent speech to the legislature, Kansas Governor Jeff Colyer said, “There’s some good news to report here. According to the most recent data, the Kansas unemployment rate is 3.4%. That’s one of the lowest in the country, and the lowest our state has seen in more than seventeen years!”
Data from the Bureau of Labor Statistics, part of the United States Department of Labor shows changes to Kansas employment. The recent peak of the unemployment rate in Kansas was in 2009, when the rate reached 7.3 percent, averaging 6.9 percent for the entire year. In December 2017 it was 3.4 percent, just as the governor said. But since the unemployment rate is a ratio of two numbers, it can change for several reasons, and not all reasons are good news.
As shown in the nearby table, the unemployment rate since 2009 is down, and down a lot. Similarly, the number of unemployed persons is down, too, by nearly half. Good news.
But the number of employed persons has barely changed since 2009, rising by just one percent. At the same time, the labor force has fallen by 2.4 percent. The contracting labor force is the largest factor in the declining Kansas unemployment rate, and that is not good news.
December 1, 2017
Tax receipts show promise of improved economy
TOPEKA–The state has collected $258.75 million over last fiscal year at this time, totaling over 11 percent growth in collections according to data from the latest revenue report released Friday.
So far this fiscal year that started in July, the state has collected $1.09 billion in total individual income tax, which amounts to $176.74 million over last year. In the same time, sales tax collections total $985.71 million, putting it $41.64 million over last year or over 4 percent growth. Corporate income tax continues the multi month trend of outperforming the previous year, hitting a value of $30.51 million over last year’s cumulative collections.
“Sales tax receipts have reached what appears to be stable growth above last year’s collections,” Revenue Secretary Sam Williams said. “Individual income tax collections are also above last year by a wide margin, but it’s difficult to distinguish the impact of the recent tax increase versus economic growth, and we won’t be able to discern that until April.
November tax receipts totaled $463.50 million, which is $62.23 million over November last year. Individual income tax collections totaled $207.62 million for the month, while sales tax revenue came in at $192.63 million. Corporate income tax totaled $379,518.
The use of PEAK, a Kansas economic development incentive program, varies widely among counties.
An economic development incentive program in Kansas is PEAK, or Promoting Employment Across Kansas. This program allows companies to retain 95 percent of the payroll withholding tax of employees. 1
Data is available for fiscal years 2010 through 2015. For this period, we can see that the application or use of PEAK varies widely among counties. Here is data for the two largest counties in Kansas:
Johnson County: 135 projects, 17,643 new or retained jobs, $36,085,527 cumulative annual benefits.
Sedgwick County: 8 projects, 1,113 new or retained jobs, $1,858,516 cumulative annual benefits.
According to the U.S. Census Bureau American Fact Finder, the 2016 population of Sedgwick County was 511,995. Johnson County population was 584,451. So Johnson County has 1.14 times the population of Sedgwick County, but it receives some 16 to 19 times the PEAK benefits as Sedgwick County.
Of note, this data is available on Kanview, the state’s data download portal. The data is from a spreadsheet compiled in August 2015. It contains data through fiscal year 2015, which ended on June 30, 2015. Upon my inquiry, it appears no similar data compilations were created in August 2016 or August 2017. I have asked for the data and it is taking some time to prepare it, which leads us to wonder how diligently the state collects data regarding economic development programs.
You can access an interactive visualization of PEAK data here.
PEAK, a Kansas economic development incentive program, redirects employee income taxes back to the employing company.
An economic development incentive program in Kansas is PEAK, or Promoting Employment Across Kansas. This program allows companies to retain 95 percent of the payroll withholding tax of employees.
PEAK incentive payments can be a substantial sum. Tables available at the Kansas Department of Revenue indicate that for a single person with no exemptions who earns $40,000 annually, the withholding would be $27 per week (for weekly payroll), or $1,404 annually. For a married person with two children earning the same salary, withholding would be $676 annually. Under PEAK, the company retains 95 percent of these values. (These illustrations are based on 2016 tax rates.)
There are requirements regarding the minimum number of jobs to be created or retained. Also, companies must pay wages greater than or equal to the median county wage. 1
Then, the Secretary of Commerce has “discretion to approve applications of qualified companies and determine the benefit period.”
Legislators and public officials like programs like PEAK partly because they can promote these programs as self-financing. That is, the state isn’t subsidizing a company. Instead, the company is paying its own way with its own taxes (actually, its employees’ taxes). PEAK supporters say the state is not sending money to the company. Instead, the company is just holding on to 95 percent of its employees’ withholding taxes instead of sending the funds to the state.
Schemes like PEAK call into question one of the fundamental principles of taxation: That tax funds be used to fund the operations of government, not to enrich one particular person or company. But continually, states and local government use programs like PEAK — and others like tax increment financing (TIF) districts, Community Improvement Districts (CIDs), Industrial Revenue Bonds, and others — that turn over a public function to private interests.
Here’s another consideration regarding the PEAK program. The amount of money withheld from a worker’s paycheck is not the same as the amount of tax the worker actually owes the state. Withholding is only an approximation, and one that is biased in favor of the state. Many Kansas workers receive an income tax refund from the state. This is in recognition that the sum of the withholding taxes paid by a worker is larger than the actual tax liability. Therefore, the state is returning money that the state was not entitled to.
Now, what about workers who are employed at a company that is in the PEAK program and who receive a state income tax refund? Their withholding taxes — 95 percent, anyway — have already been given back to their employer.
So: What is the source of the money used to pay these refunds? How much money is paid in refunds to employees working at PEAK-participating companies?
We should note that the funds don’t come from the PEAK company’s employees, as the employees receive credit for all their withholding taxes, even though 95 percent never contributed to the state treasury.
Inquiry to the Department of Revenue revealed that there are no statistics on actual income tax liability of PEAK employees vs. the amount of withholding tax credited to that employee that was retained or refunded to the PEAK employer. The Department of Commerce referred inquiries to the Department of Revenue.
If we wanted to know how much money was paid in refunds to PEAK-company employees, I believe we would need to examine the account of each affected employee. I’m sure it’s not possible to come up with an answer by making assumptions, because the circumstances of each taxpayer vary widely.
Whatever the amount, it represents state tax revenue being used to fund an economic development incentive program that is pitched as being self-funded.
“PEAK requires the qualified company to commit to creating five new jobs in non-metropolitan counties or ten (10) new jobs in the metropolitan counties of Shawnee, Douglas, Wyandotte, Johnson, Leavenworth and Sedgwick over a two-year period. The qualified company must also pay wages to the PEAK jobs/employees, that when aggregated, meet or exceed the county median wage or North American Industry Classification System (NAICS) average wage for their industry.” Kansas Department of Commerce. Promoting Employment Across Kansas (PEAK) Program. Available at http://kansascommerce.gov/141/Promoting-Employment-Across-Kansas-Progr. ↩
Kansas hotel guest tax collections presented in an interactive visualization.
Cities and counties in Kansas may levy a transient guest tax collection on hotel guests. It is sometimes called a bed tax or guest tax. The tax is collected as a percentage of total room revenue, not the number of rooms or the rate charged for rooms. While the Kansas Department of Revenue collects the tax, the proceeds are returned to the cities or counties, except for a two percent processing fee. In Wichita the rate is six percent.
In some cases, jurisdictions may levy additional taxes that may not be paid to the Kansas Department of Revenue. This is the case with the Wichita city tourism fee, which took effect on January 1, 2015. This tax of 2.75% is paid directly to the city1, so it doesn’t appear in KDOR figures.
Also, jurisdictions may change the tax rate. The Kansas Department of Revenue maintains a list of taxes charged. 2
The visualization has three views of data. One is a table of collections, including percent change from the previous year. A line chart shows the dollar amount of collections. A second line chart shows collections indexed to a common starting point. This is useful for comparing the relative change in guest tax collections. These line charts show data as the average of the previous 12 months.
This data does not represent all hotels in Kansas. Confidentiality rules prohibit disclosure when a jurisdiction has a small number of hotels. In the nearby example, the value “C” is reported for Sedgwick County, indicating such non-disclosure. Obviously, there are hotels in Sedgwick County. But considering hotels in Sedgwick County that are not located in cities like Wichita, the number is too small to report, based on confidentiality guidelines. Similarly, for small cities, data is probably not available to the public.
Of note, while Wichita is the largest city in Kansas, Overland Park collects the most hotel guest tax. Of the largest markets in Kansas, Wichita has experienced the least growth in hotel tax collections since 2010.
A look at actual spending on Kansas highways, apart from transfers.
When we look at actual spending on Kansas roads and highways, we see something different from what is commonly portrayed. Kansas Department of Transportation publishes a Comprehensive Annual Financial Report that details spending in four categories. These figures represent actual spending on roads and highways, independent of transfers to or from the highway fund.
For fiscal year 2017, when ended June 30, 2017, spending on three categories (Maintenance, Preservation, and Modernization) was nearly unchanged from the year before, while spending on the category Expansion and Enhancement fell by 31 percent.
For these four categories — which represent the major share of KDOT spending on roads — spending in fiscal 2017 totaled $738.798 million. That’s down 14 percent from $857.133 million the year before, and up from a low of $698.770 million in fiscal 2010.
Again, these are dollars actually spent on highway programs. A common characterization of the way Kansas government is funded is called “robbing the bank of KDOT.” To the extent that characterization is accurate, there is a separate line item titled “Distributions to other state funds” that holds these values. It appears in the nearby table. A chart shows sales tax distributions from the general fund to KDOT, and transfers from KDOT.
Many also criticize Kansas government for slashing highway spending, letting our roads crumble. While total spending on these four programs has been falling (after adjusting for inflation), the decline is minor compared to the hysterical claims of those with vested interests in more government, and especially highway, spending.
Kansas law specifies how much sales tax revenue is transferred to the highway fund. Here are recent rates of transfer and dates they became effective: 1
July 1, 2010: 11.427%
July 1, 2011: 11.26%
July 1, 2012: 11.233%
July 1, 2013: 17.073%
July 1, 2015: 16.226%
July 1, 2016 and thereafter: 16.154%
A nearby chart shows the dollar amounts transferred to the highway fund from sales tax revenue. In 2006 the transfer was $98.914 million, and by 2016 it had grown to $514.519 million.