A Practical Solution to Aid in the Effort to Lower Property Taxes
A few weeks ago, I wrote an article about property taxes and quoted author Adora Svitak who said, "The first thing anyone can do about any issue is get informed." I chose this quote for two reasons: Property tax is the most criticized and misunderstood source of local government revenue, and in the past ten years, I've seen very little public participation during the budget process. I can only speak to the City of Russell's process, which begins in April and ends in August. April begins with a look back at how we've performed in the past, where we can improve, and begin discussing priorities for the next year's budget. Then we begin reviewing and discussing different budget segments at each meeting, which concludes in August with the final budget recommendations. You can attend in person or virtually, or you are welcome to come to the city building and discuss the budget proposals. Remember, you can access the city council agenda and all supporting documents the week before the meeting by visiting the city website at www.russellcity.org
Property taxes are an issue and challenge to many folks in our community, and my parents taught me a long time ago to stay informed and provide solutions. I have a solution that may help with property taxes. The solution is not a novel idea or a stroke of genius; rather, it is part of an agreement between the state and local governments. The agreements involved the loss of local revenue sources in exchange for establishing the Local Ad Valorem Property Tax Reduction fund (LAVTR), County City Revenue Sharing (CCRS), and Special City-County Highway fund (SCCHF). Revenue sharing in this manner dates back to the 1930s, with the current LAVTR statutory framework established in 1965 and the CCRS established in 1978.
According to the December 2022 issue of the Kansas Government Journal, cities and counties in Kansas have lost at least $3,470,603,394 as the result of the State's decision not to fund demand transfers. Some state officials refer to the LAVTR, CCRS, and SCCHF as "state aid," yet the history of these funds does not support that classification.
In 1997, the legislature created the Local Ad Valorem Tax Reduction Fund (LAVTR). The LAVTR program is supposed to share State sales tax dollars with local governments to lower property taxes. Under current law, the LAVTR transfer to cities and counties consists of 3.63% of the State's sales and use taxes. From 1997 to 2003, the legislature partially funded LAVTR, yet since 2004 the legislature has chosen not to support this property tax reduction tool. The City-County Revenue Sharing fund (CCRS) is supposed to transfer 2.823% of state sales and use taxes to cities and counties. The CCRS was established in 1978 as an agreement between the State and local governments where the local share of cigarette and liquor enforcement tax revenues went to the State to establish the CCRS. The State partially funded the CCRS from 1997 to 2003 and, like the LAVTR, quit funding the program in 2004. The loss in revenue to local government exceeds $3.4 billion, which the State of Kansas has kept.
During the last legislative session, the City advocated for legislative leadership and our local legislators to fund, even in part, the LAVTR to help reduce the property tax burden, as intended.
Some legislators told me that funding LAVTR is a great idea to lower property taxes. Yet, none of the demand transfers discussed earlier received funding, despite the introduction of House Bill 2606 in February 2022 in the House Appropriations Committee, and the bill died in May 2022. The Kansas Government Journal estimates that the total demand transfer losses for cities and counties in 2022 exceeded $250,000,000.
The City has begun advocating with legislative leadership and our local representatives to fund the LAVTR and CCRS this legislative session. Understandably, the state legislature has a full plate of issues, and I posit that property taxes should be at the forefront of their discussions. If high property taxes are an issue, do your representatives know? What is the plan to help local units of government lower property taxes?
The solution I spoke of earlier; is for the state legislature to fund the Local Ad Valorem Tax Reduction fund, County City Revenue Sharing, and Special City City-County Highway fund. Depending on which report you read, Kansas has a $2 billion budget surplus, with some estimates projecting that surplus exceeding $3 billion in surplus cash at the end of June 2024.
The feedback from Topeka is that the GOP tax plan and the Governor's tax plan and budget do not have provisions for funding these demand transfers; there's no support. Let's look at the cost of funding the LAVTR, CCRS, and SCCHF. The fiscal note associated with House Bill 2606 and prepared by the Kansas Department of Budget indicated that funding these three demand transfers would decrease State General Fund revenues by $235.2 million. The breakdown is $124.4 million for LAVTR, $98.6 million for CCRS, and $14 million for SCCHF. The cost to the State according to the fiscal note? $2,260 to provide notice to 2,000 motor fuel customers.
Property taxes remain an issue for many folks in our community and across Kansas. Funding these three demand transfers would reduce the State's $2 billion budget surplus by $235.2 million – or 11.7%. Will that have an immediate impact on property taxes? That depends on each taxing entity's governing body and the public's involvement. I would suggest that now is the time for funding these demand transfers to lower property taxes or, at a minimum, letting the full legislature debate the issue publicly.
Is the state legislature fulfilling a decades-old agreement, the silver bullet for lowering property taxes? No. I would suggest that it is a start. We should not allow us versus them relationships pervasive in Washington to permeate Kansas. Broken promises in Washington are damaging our union. We should not accept broken promises from Topeka. We are all Kansans, working to make the best life for our families and communities. Many Kansas communities are not retail hubs or urban areas, relying more on property taxes to fund services. A vast majority of the towns and cities in Kansas are agriculture and oil producers and are a significant part of this great State's fabric, contributing to the economy, values, and future. I am sure other solutions are available to lower property taxes. I would argue that these three demand transfers are already written in statute – no need to reinvent the wheel. Fund the local ad valorem tax reduction fund and provide relief to many Kansans, who work daily to provide for their family and community.
The legislature is in session now, and now is the time for decisions that help everyday Kansans. I cannot imagine a better time to help lower property taxes than funding the local ad valorem property tax reduction fund while sitting on a $2 billion-plus surplus. If you have a solution to lower property taxes, reach out to your local and State representatives. I have and will continue to advocate for the State Legislature to fund the Local Ad Valorem Property Tax Reduction Fund as one of many solutions.
Every decision made today, this month, and this legislative session has an immediate short-term effect and impacts every community's long-term stability. We can no longer wait to see what happens.