Kansas road builders are upset over a proposal in the state House to withhold $351 million from state highway projects in order to help cut state income-tax rates for families and small businesses.
“There has got to be a better way to reduce personal and corporate income taxes than taking it out of highway construction,” said Brian Hansen, of Dustrol Inc., a major state highway contractor in Towanda.
“Kansas legislators in the last 20 years of highway programs already have ‘borrowed’ more than $1.5 billion, which they’ve never paid back,” Hansen said. “This would decimate our business.”
State Rep. Richard Carlson, R-St. Mary’s, this week introduced a proposed state tax overhaul plan he and other House leaders say addresses problems with a competing plan proposed by Gov. Sam Brownback in January. Carlson is chairman of the House Taxation Committee.
Both plans propose to reduce the income tax rates that most Kansans pay — by as much as 24 percent in some cases — and to hold Kansas government spending growth to no more than 2 percent annually to allow further cuts that will abolish state income taxes eventually.
Brownback’s plan would make permanent a temporary state sales tax increase due to expire this year and wipe out home mortgage and other popular deductions and tax credits to make state tax codes, in his words, simpler, flatter and fairer.
Carlson’s plan keeps the deductions and credits, which cut taxes for lower-income taxpayers instead of raising them slightly as Brownback’s plan, and allows the sales tax increase to expire on schedule.
The reduced sales tax is at the root of the road builders’ anger.
The reduction of what originally was a 1 percentage point sales tax increase — to 6.3 percent — passed in 2010, is scheduled July 1 to drop to 5.7 percent. The remaining 0.4 percent, or about $160 million annually, would be dedicated permanently to the Kansas Department of Transportation, or KDOT.
But Carlson’s plan calls for Kansas to keep the first two years of that money, or about $351 million, to pay the costs of tax reduction. KDOT would get the sales tax money after that, along with an additional $50 million yearly until the $351 million from the first two years is repaid.
“They get regular funding as time goes on,” Carlson said Friday before the plan was introduced in his committee. “I’m sure they would prefer it not be done.”
That is an understatement, said Kip Spray, president of Venture Corp., a 40-year-old, family-owned road building contractor in Great Bend.
Kansas legislators historically have turned to KDOT for help in balancing state budgets with money the transportation department sets aside for long-term construction projects, Spray said. Most recently, Kansas used $200 million in planned road construction money to help put the state’s 2011 budget on solid footing.
“They’ve borrowed money before, and we did not get it back,” he said. “This time (when the 2010 sales tax increase was passed) we were told they wouldn’t take the money, either.”
Many of the biggest users of Kansas highways are leery of pulling money out of highway funds, even with the promise of lower taxes and eventual repayment, said Norita Taylor, spokeswoman for the Owner-Operator Independent Drivers Association in Grain Valley, Mo., near Kansas City. The association represents more than 150,000 independent truckers throughout the United States.
“We believe that money collected for highways should only go to highways and not be diverted,” Taylor said.
Kansas transportation officials are worried that temporarily diverting $351 million from T-WORKS – an $8 billion decade-long highway, air and mass transportation plan passed by the 2010 Kansas Legislature — could prevent completion of projects in the works now, said Steve Swartz, KDOT’s chief spokesman. T-WORKS seeks to improve highways and transportation facilities in each of Kansas’ 105 counties.
“It’s a question of cash flow,” Swartz said. “We need to be sure we have sufficient funds on hand for major projects under way now and, without the $351 million, we may have to delay others we’ve promised to start.”
Kansas’ highways were ranked best in the nation by Reader’s Digest in a 2010 survey and third best by the Reason Foundation, a nonpartisan research group in Los Angeles that advocates choice, competition and free-market approaches to public policy issues.
Both studies are based on 2008 federal Department of Transportation evaluations of statewide road conditions, safety records and infrastructure investments. Federal officials haven’t yet published statistics needed to update the rankings, said Adrian Moore, the Reason Foundation transportation expert who compiles the rankings.
Kansas was rated highest for the condition of its urban and rural interstate highways, which are tied with more than 10 other states for being in the top condition measured. The state’s total highway spending, about $112,000 a mile when the most recent federal numbers were published, ranks 19th in the nation, the Reason report said.
“I’m a big believer in tax cuts, but building infrastructure is one of the most important things government must do,” Moore said. “This is not a typical approach to the problem.”
Despite the state’s strong showing in the two surveys, “Kansas’ roads are in decent shape, but they are not in great shape,” said Mary Lou Reece, president of Reece Construction Co. Inc., an 80-year-old, road building contractor in Scandia.
And many of the T-WORKS projects being scheduled now are for preserving roads not expanding them, Reece said.
“Kansas has done a good job with its highways, but you have to keep them going,” she said. “This would be devastating.”
Road builders blast House plan that withholds funds for highway projects