Business Perspective: J. Kent Eckles, Vice-President of Government Affairs, Kansas Chamber of Commerce

The mission of the Kansas Chamber of Commerce is to make Kansas the best state in America to live and work by creating a policy environment that reduces cost of doing business in Kansas. 

There are several factors businesses consider when selecting a site in which to open or expand a business. The 2008 Area Development Magazine’s Annual Corporate Survey lists the

Top Business Factors:

• Highway accessibility
• Labor costs
• Occupancy and construction costs
• Tax exemptions
• Energy availability and costs
• Available skilled labor
• State and local incentives
• Corporate tax rate
• Low union profile
• Available land
• Availability of buildings
• Proximity to major markets
• Right-to-Work state
• Environmental regulations
• Expediting permitting
• Proximity to suppliers
• Availability of financing
• Availability of unskilled labor
• Training programs
• Raw materials availability

Top Quality of Life Factors:

• Low crime rate
• Health care facilities
• Housing costs
• Housing availability
• Rating of public schools
• Climate
• Colleges and universities in the area
• Recreational opportunities
• Cultural opportunities

Kansas Business Issues:

v     Government Efficiencies

v     Budget and Taxes

v     Business Recruitment and Retention Tools

v     Health Care

v     Unemployment Insurance

v     Workers Compensation

v     Energy and Regulatory Affairs

v     Transportation

v     Workforce Development

Government Efficiencies:

v     Lean Government Practices

v     Priority or Performance Based Budgeting

v     Transparency and Uniformity in Budgeting

v     Budget Stabilization or Rainy Day Fund

v     Realignment of Government Functions

v     Explore Public/Private Partnerships

v     Encourage Consolidation of Local Governments and School Districts

v     Oppose Use of Public Funds to Bring Litigation

The National Chamber of Commerce gave the Kansas schools a grade of  “F” in school management. Since 1983 the increase in state budget and inflation has increased 250%. That is unsustainable. Kansas finds itself in this position because of overspending. When taxes were cut, revenues increased. In 1962 $1 million was derived from adjusted individual income taxes. By 2001 revenues increased to $2 million, dropped in 2002 to about $1.7 million, after which revenues increased to almost $3 million in 2008. With the recession incomes tax revenues have declined slightly. Beginning in 1962 adjusted corporate income tax revenues were $200,000, rose to $300,000 in 1992 and 2000, dipped to $125,000 in 2002. After 2002 tax revenues climbed to about $475 million. The recession dropped the tax to $200,000, the same as it was in 1962. The adjusted estate tax has risen from about $6,000 in 1992 to over $10,000 in 2009. The adjusted corporate franchise tax has increased steadily beginning in 1992 at $7,000 to $25,000 by 2008. The recession has seen a decrease of $3,000. According to the governor’s office, adjusted total taxes have risen from about $3 million in 1992 to $6 million in 2008. In 2009 the tax was about $5.8 million.

Although good schools and a skilled workforce appear on the list of desired factors, there are many other factors that rate higher. Government efficiencies, budgeting and practices receive careful scrutiny when site selection is under consideration. Kansas is not growing. Business is asking when school funding will be enough as it is the largest share of the budget. Kansas needs to develop a growth strategy that reduces the cost of doing business in the state.

 Mark Tallman, Assistant Executive Director/Advocacy

Kansas Association of School Boards

Kansans are proud of the excellent education opportunities offered to their children.

v     Composite ACT test scores rose from 21.6 in 2000 to 21.8 in 2009. This is above the national average of 21.1.

v     The U.S. average per student spending and results of NAEP is $9,138. The Kansas average per student spending is $8,392 and ranks 7^th in the nation.

v     Kansas ranks 23^rd of 50 states in tax burden. Tax burden in state and local taxes as per cent of personal income is 11.7%.

v     In 1940 the state and local taxes as percent of Kansas’s personal income was 10.86. In 2008 it is 12.06.

v     In 1940 28.5 percent of Kansans had a high school diploma. In 2006 89% had a high school diploma.

v     In 1940 4.6 percent of Kansans had a bachelor degree. In 2006 28.5 percent had a bachelor degree.

v     Kansas ranks in the top 20 in the nation in per capita income (21), lower poverty rate (17), high school graduates (13), bachelors degree (17) and advanced degree (13).

v     Eighth grade reading proficiency has increased markedly between 2000-2008. Regular eighth grade increased from 70-90, free lunch from 40-65, Special education from 10-65, English learners from 11-52, Hispanic from 32-62, and African American from 35-62.

 Talking Points for Public Education:

v     The national recession and tax cuts caused state receipts to fall, while the costs of education, health care and other programs continued to rise.

v     There has been an impact in school funding. Over $200 million has been cut from  K-12 state aid so far this year after November allotments.

v     There are potential future cuts to K-12 education. Cuts adopted in school district budgets could be doubled or tripled. The Federal stimulus expires in FY 2012.

v     Adequate education funding is important. Economic prosperity and quality of life are strengthened by educational attainment, which depends on adequate funding. “You earn what you learn”.

v     It costs more to increase educational attainment. In the past it was economically and socially acceptable for many students to leave schools with low skills. Getting all students to high standards is much more difficult and expensive.

v     Additional funding was added for K-12 education. Much of the new funding was targeted to special needs students. Districts used those funds to improve educational programs and support. As a result student achievement increased.

v     Over half the general fund budget accounts for K-12 education. When funding for universities, community colleges, etc., is added, two thirds of the general fund is allocated. Avoiding deep cuts to education without additional revenue will cause deeper cuts to other important state programs. Cash balances school districts have at the beginning of fiscal year are restricted, already committed or would be one-time funding, at best.

v     Kansas schools rank among the best in the nation comparing academic results with dollars spent per pupil More cuts will harm students, families and local economies.

v     Education and other public services are more important to prosperity than low taxes. Educational attainment matters far more than tax rates for state income levels.

Kevin Yoder, Representative, 20^th District

            Chairman of House Appropriations Committee

The State of Kansas has a $13 billion budget. The House Appropriations Committee has been watching the revenue/expenditure picture since last session. Governor Parkison made some further necessary cuts but the budget has about a $400 million deficit that must be managed before June 31, 2010. The Appropriations Committee is comprised of twenty-three members. There are fourteen Republicans and nine Democrats.

It will be a challenge to cut spending again after many years of excessive increases. All agencies spend every dollar that has been allocated. They ask for a 5%-7% increase. If they don’t receive it, it is counted as a cut. This time of crisis is a good opportunity to make government more efficient. Everyone wants to be prosperous, to have a good education and live a good life. Spending money to achieve those objectives seems to be the highest priority. Now is a time to do more with less.

The Governor’s approach is different than many in the Legislature. He has said the budget has been cut too much. He said that the taxes in Kansas are lower than the public thinks they are. The Governor must realize that if costs are increased people will go elsewhere.

Last year the audit team offered free audits to all Kansas school Districts. Four districts accepted the offer. The audit team found $1 million in savings for the Derby School District. Another school district is in the process and two other districts are waiting. Two hundred eighty-nine districts did not accept the offer citing the time and money they would have to spend. Currently seventy school districts have jointed to sue the state for funds based on the Montoy decision. The Appropriations Committee has decided schools must accept an audit or be consolidated.

Schools need to change to more efficient budgeting and use the same accounting system. Schools report only their spending and rarely talk about revenue except for revenue from the state. The median enrollment for school districts in Kansas is 500 students. Whole school districts are as large as some elementary schools in Johnson County. It is understood that smaller districts are closer to the people but very small school districts cannot be cost efficient or sustainable. Charter schools would offer more alternatives to parents without including the private sector. School management needs to strive for academic achievement with the most cost efficiency.

 All levels of government must make do with less. As an example, every county has a full time judge. In many cases one judge could cover more than one county. There are those in the state who want to cut spending and there are those who want to raise taxes.

Raising taxes in this economic climate is not the answer. Education is a priority of the Kansas Legislature. Graduates with a good education need to have jobs if they are to stay in the state. Otherwise our population will continue to decline and so will opportunities for young people. The private sector lost 10,000 jobs while the number of public sector jobs has increased. Even the Governor included one hundred fifty-three full time positions in his budget. We don’t want to miss this opportunity to make government more efficient.