By Matthew Kelly and Jonathan Shorman/Kansas City Star
TOPEKA – Kansas Gov. Laura Kelly opened the door to property tax cuts this year, a top Republican priority, during her State of the State address on Wednesday, but demanded that any changes must pay for themselves and not endanger the state’s fiscal health.
The Democratic governor’s overture to GOP lawmakers came as Kelly insisted she wouldn’t support any proposal that “robs our schools” of needed funds. Kansas must “stay on the path to prosperity” as it moves through the rest of the 21st century, she said.
The outreach came amid a sweeping address framed as a progress report on Kansas a quarter-way through the 21st century. Halfway through her second term, Kelly again pushed for Medicaid expansion, urged lawmakers to approve free school lunches for thousands of students and called for more funding to address the state’s long-term water supply.
But property taxes are expected to dominate much of the 2025 legislative session. Republicans have been calling for property tax changes after the Legislature passed a tax cut package last year that included only a single property tax provision. Property taxes are among the most dreaded forms of taxation, irritating homeowners and business operators across the state.
Kelly has less leverage over the Legislature than she did a year ago. Voters bolstered the Republican supermajorities in both the House and Senate, making it easier for GOP lawmakers to override the governor’s vetoes.
For the past several months, Kelly has said repeatedly that she wanted lawmakers to hit pause on any further tax cuts until the effects of last year’s cuts became apparent. While Kelly made clear she remains highly skeptical of additional tax cut proposals this year, she allowed on Wednesday that she wouldn’t reject every proposal out of hand.
“With all that said, let me add a caveat: While I would prefer that we postpone discussions about taxes until next session, when we’ll have a better handle on the full impact of the tax cuts we passed last year, I will consider proposals to modify our tax structure that pay for themselves and don’t threaten the state’s long-term financial health,” Kelly said.
The Legislature passed, and Kelly signed into law, a package of tax cuts last year that included a modest reduction in income tax rates with expanded tax deductions and exemptions. They included only a single substantial property tax provision, which exempted the first $75,000 value of a home from the statewide mill levy. Previously, the first $40,000 was exempt.
Viewpoints on responsible relief
As an example of how tax reform could be undertaken responsibly, Kelly alluded to her signature policy priority, Medicaid expansion, suggesting that its enactment could offset generous tax relief. Expansion would provide health coverage to upwards of an additional 100,000 Kansans, with the federal government picking up 90% of costs and the state handling the remaining 10%.
Kelly has proposed expansion each of her first seven years in office but GOP leadership has never allowed it to advance through the legislative process. The governor added up a running tally on how much she says not enacting Medicaid expansion has cost the state — $280 million in Kansas taxpayer dollars.
“Imagine the property tax relief we could have given Kansans,” Kelly said.
Republicans are expected to welcome Kelly’s opening on property taxes but may clash with the governor over what kind of plan is affordable and sustainable. Her renewed call for Medicaid expansion will likely receive a frosty response.
Senate President Ty Masterson, an Andover Republican, has promised the Senate will work on a constitutional amendment to “put a lid on the outrageous processes that drive the tax hikes” – a likely reference to an amendment the chamber has previously passed that would limit annual valuation increases on properties.
Critics say it would distort home values within neighborhoods over time because the valuations would typically reset to market value whenever a property is sold.
Any amendment would take a two-thirds supermajority vote in the House and Senate, and would then face a statewide vote. Kelly would have no role in signing or vetoing the measure.
Kansas property taxes are driven by three major factors – the property’s appraised value, the percentage of the appraised value that’s taxed (the assessed value) and the mill levy. Counties, cities, and school districts each set their mill levy, with one mill constituting $1 per $1,000 of a property’s assessed value.
Kansas also has a statewide levy of 20 mills that helps fund public education, which generates upwards of $800 million annually. Some GOP lawmakers have called for a reduction in the statewide mill levy and then making it revenue-neutral in future years.
After Kelly’s address, Masterson said he was heartened by the governor’s apparent willingness to entertain tax reform proposals.
“I was actually encouraged by that. I felt like she was saying she’s open to some structural changes.”
Speaker of the House Dan Hawkins, a Wichita Republican, cautioned that finding common ground with Kelly on reform may still be an arduous process. “She said she would support a reasonable tax cut. But whose eye is the beholder of that?” Hawkins said.
“In our eyes, we think that we will be very reasonable in what we do. But it may not be in her eyes.” He dismissed the governor’s notion that Kansas’ status as one of 10 states that has still not expanded Medicaid is costing it money that could have gone towards tax relief.
“She undoubtedly hasn’t looked at what’s happened in other states,” Hawkins said, asserting that states with expanded Medicaid programs are paying on average 50% more than what they expected to.
Public schools and child care
During the speech, Kelly touted the state’s progress toward fixing its once-underfunded public school system.
Safeguarding education, she said, means rebuffing efforts to enact a private school voucher system that would take money out of public schools.
“Simply put, I will continue to reject any attempt, no matter what it looks like, to re-route public taxpayer dollars to private schools,” Kelly said.
Masterson said Republicans look forward to fully funding public schools “while moving to a student-focused system that maximizes opportunities for parents.”
Noting that roughly 49% of Kansas children live in low-income households, Kelly said her budget for next year will include funding for 35,000 students to receive free school lunches. It wasn’t immediately clear from the speech who would qualify for the free lunches.
More than 505,000 children currently attend Kansas public schools.
“Children born today will live to see the 22nd Century,” Kelly said.
“How we invest in those children now will determine our state’s trajectory for the rest of this century.” She proposed the creation of a new state agency — the Office of Early Childhood — which would combine services currently provided by a range of existing state departments.
“If a family is searching for care for a newborn, that family must navigate among three different agencies to figure out which program is the right fit,” Kelly said.
The new office would be a “one-stop shop” for families, providers and businesses hoping to access early childhood services, Kelly said.
“Governor Kelly has once again demonstrated her unwavering commitment to moving our state forward,” said Senate Minority Leader Dinah Sykes, a Lenexa Democrat.
“In her address, she laid out ways we can create more opportunities for working families — making child care more affordable, supporting our small businesses, and providing free school meals to low-income children,” Sykes said. “She also made it clear that she will not risk Kansas’ financial stability by implementing any form of a reckless tax experiment.”
Entering the final stretch
Wednesday’s address came as Kelly embarked on her final two years in office. Would-be successors will begin jockeying for attention in the months ahead, and the 2026 session will likely be consumed by electoral politics.
Already, Kansas Secretary of State Scott Schwab has announced his Republican campaign for governor. Masterson is also widely believed to be preparing a run
“I’m honored to be considered in the conversation. But we have a 90-day session and a lot to do, and it’s nothing more than a distraction,” Masterson said after Kelly’s speech when asked if he would run next year.
The 2025 session offers Kelly perhaps her single greatest remaining opportunity to shape the future of Kansas through legislation.
But it won’t be easy. After Kelly threw herself into helping Democrats win statehouse elections last fall, even forming a political action committee to aid candidates, the results were disappointing.
Republicans emerged with a stronger supermajority, controlling 88 of 125 House seats and 29 of 40 Senate seats. Kelly had hoped to break the supermajority, an accomplishment that would have increased her leverage in legislative negotiations with Republicans.
Instead, Republicans continue to have the power to override her vetoes if they stay united. Republicans have also undercut Kelly’s influence in the budget process.
Typically, the governor releases a budget proposal in tandem with the State of the State speech in January that serves as a baseline for a process culminating in the passage of a budget in the spring.
But this time lawmakers developed their own proposal – their own starting point budget document. Kelly will release her budget proposal on Thursday.
How much attention lawmakers pay to the plan will be an early sign of the extent the old process has been upended.
Building on the Legislature’s 2023 commitment to bolster investment in the water supply, Kelly said her budget will include funding for an additional $30 million allocation, which would bring the state’s annual investment to $90 million a year.
She said the dwindling water supply poses an existential threat to the state that cannot be ignored.
“Forget making it 75 years down the road,” Kelly said. “Some parts of western Kansas don’t have the groundwater to last another 25 years.”
Matthew Kelly and Jonathan Shorman cover the Statehouse for the Kansas City Star and The Wichita Eagle.
This article was republished here with the permission of: The Wichita Eagle