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Out on a Limb

Conservative Republican lawmaker Mark Hutton went against the grain – and some of his political allies – in pursuing a fix to the state’s budget woes last year. But he struggled to  bring enough of the Legislature’s splintered factions together on a plan. His story provides leadership lessons for this year’s session as lawmakers again try to keep the state’s budget in balance.

 

It was May 7, 2015, and Rep. Mark Hutton was about to unveil what would become the Kansas Legislature’s most talked-about tax plan. The House Taxation Committee meeting had been moved to a larger room, but it was still overflowing. Legislators, lobbyists and journalists who couldn’t get a seat stood in the doorway.

Until that day, Hutton was basically a face in the crowd – a generally conservative Republican in a generally conservative Legislature.

But the second-term legislator from Wichita would soon rise to prominence in a legislative session marked by a prolonged standoff over a $400 million budget gap.

Legislators had known since the session began that the budget was in bad shape. Gov. Sam Brownback had already initiated a series of fund transfers and spending cuts to get through the current fiscal year.

For the next fiscal year that began July 1, Hutton and the rest of the tax committee had to fill an even bigger hole. State worker furloughs and a government shutdown loomed if they failed.

Despite the stakes, little had been accomplished publicly for four months, in part because of the elephant in the room: an income-tax exemption for about 300,000 businesses passed three years earlier.

Some legislators wanted to add the businesses back to the tax rolls, but few were willing to be the one to bring it up. The 2012 tax plan was a centerpiece of Brownback’s legacy and the Kansas Chamber of Commerce, one of the state’s heavy-hitting lobbying groups, was protective of it.

Hutton would get the public debate started.

The room was hushed as the bespectacled Hutton, charts in hand, explained why he was breaking ranks with fellow conservatives and asking for the business tax to be reinstated.

In his mind, it was a matter of both fairness and practicality. The tax exemption, he said, was not the jobs driver it had been promised to be.

“I’ll go so far today as to say it never will,” Hutton said.

As the chairman of the House Commerce Committee and the founder of one of the state’s largest commercial construction firms, Hutton knew how to take control of a meeting. He could be fiery at times, but now he was calm, almost professorial.

Rep. Tom Sawyer, a veteran Wichita legislator and the committee’s top Democrat, scanned the other members to gauge their reactions. He had been surprised when Hutton told him what he planned to introduce. It was something the Democrats
had wanted for years, but Hutton was presenting data the committee had not seen before.

Rep. Tom Phillips, a moderate Republican from Manhattan, was also impressed. Hutton was considered close to Brownback and was sticking his neck out by casting doubt on the governor’s signature tax policy.

Rep. Jerry Lunn, a conservative Republican from Johnson County, respected Hutton but disagreed with what he was proposing. Lunn believed the tax exemption was working, as evidenced by the steady churn of new business filings, especially in his county. He thought the jobs would come eventually. Meanwhile, it would be disruptive to pull the tax exemption out from under business owners who were counting on it.

Five days later the committee passed Hutton’s bill 13-8.

But the fight over tax policy was just beginning.

 

Plan fails

The tax committee’s chairman, Rep. Marvin Kleeb of Overland Park, had supported the business-tax exemption when it passed in 2012.

He and Hutton usually voted similarly, but Kleeb was not surprised to see Hutton break ranks on the exemption. The budget difficulties had forced the Republican supermajority into difficult decisions about where to find revenue. The future of the business exemption would have to be hashed out as part of that discussion, and Kleeb thought Hutton was showing leadership in starting the conversation.

Hutton was well-positioned to do it. He wasn’t in the Legislature in 2012, so he wasn’t politically invested in the plan. He had a reliably conservative voting record that would make it difficult for a primary election opponent to come at him from the right. And he had a successful business,  so he didn’t need a legislative job.

He believed his tax plan was the state’s best option, but if voters disagreed, he’d happily return to the private sector.

Some of his colleagues cheered him on. Others asked if he was worried about ending up on the wrong side of the Kansas Chamber or businesses such as Koch Industries, the powerful Wichita-based industrial conglomerate.

Hutton was not particularly worried.

 

 

Most of his friends in the business community told him they were willing to pay some income tax again if that’s what it took to fix the budget.

But he fielded some calls from business owners who asked if he was trying to “ruin” them. He went over the numbers with them and asked if the small amount of income tax he was proposing would really end their businesses.

No one within state government, including Brownback, told him to back off. But the governor had veto power, and even if Hutton could get something through the House, there was no guarantee it would ever make it through the Senate.

Senate President Susan Wagle of Wichita was open to revisiting the business tax exemption, but many other Republican senators were not. Tensions rose under the dome as the tax debate wore on with little progress.

House Republicans fractured into four factions: one that rejected the idea of raising taxes based on principle, one that would grudgingly accept some new taxes but was not willing to touch the business exemption, one coalescing around Hutton that wanted some rollback of the business tax and one on the party’s moderate wing that wanted a larger reversal of the 2012 tax plan.

One of the first to join Hutton was Rep. Steven Johnson, a Republican from Assaria who is one of the House’s foremost fiscal wonks. Hutton and Johnson huddled, sometimes late into the night, trying to develop a compromise plan to balance the budget.

Johnson says that Hutton’s leadership was key to fueling a better debate about tax policy within the Statehouse. “He was willing to be the first one to step out,” Johnson says of Hutton. “He studied the data, he knew the state, he knew the impact and he knew the issue from being a participant in the real world, from having a small business and having a large business.”

Yet Hutton and Johnson quickly found that the staunchest conservatives wouldn’t budge on the business tax, no matter the numbers. If any of it was restored, they were a “no.” The moderates were more receptive, but Hutton’s offerings did not go far enough toward undoing the 2012 plan for many of them.

By then, the governor had threatened to veto any reversal of the business-tax exemption, which Johnson would later describe as a “major squelch” for changes to the policy. Some of the moderates told Hutton there was no point in making a tax increase vote that could be used against them in future elections, when the bill had no hope of becoming law.

 

“Some people have told me that I may not be here next year if I vote for this tax plan,” Carpenter said, his voice breaking with emotion.  “That’s a chance I’ll take.”

 

Hutton’s conservative record and his professional ties to Koch and its politically active owners prompted at least a couple of people within the Statehouse to voice suspicion about his motives. After all, Hutton seemed an unlikely prospect to sit opposite from Brownback and his allies on such a prominent issue. One of Brownback’s key goals as governor is fostering a “march to zero” on the state’s income tax rate, and removing the exemption could be seen as retreating from that objective.   

Hutton had received the endorsement of the Kansas Chamber in both of his campaigns for office and counted Koch and the Chamber – whom moderate Republicans and Democrats quite often view as their political nemeses – among his campaign donors. Hutton’s company had also been chosen to manage an expansion of Koch’s headquarters in Wichita. But several House members would later dismiss rumors that Hutton was anything but sincere in his efforts.

As the session dragged into June, the budget crisis became more urgent and Hutton decided to push a version of his plan to the House floor. It added back about half of the business taxes and mixed in some other tax increases to balance the budget.

The bill needed 63 votes to pass.

As a lengthy debate on the measure drew to a close, Rep. Will Carpenter, a Republican from El Dorado, said he was ready to face the potential political consequences.

“Some people have told me that I may not be here next year if I vote for this tax plan,” Carpenter said, his voice breaking with emotion.  “That’s a chance I’ll take.”

The voting rolls opened and heads turned to stare up at the two voting boards at the front of the room. A smattering of “yes” votes lit up green in a sea of red “no” votes. Hutton’s plan was overwhelmingly defeated 82-27.




The last effort

A week passed. Other tax plans went to the House floor and got even fewer votes. The budget situation became increasingly desperate.

A legislative session traditionally lasts 90 days, but this one had rolled past that on its way to being the longest in Kansas history. On June 11, the Legislature’s 112th day, the governor called a rare joint caucus of House and Senate Republicans and pleaded with them to approve a tax increase.

His budget director outlined a series of consequences if one wasn’t passed within days. They included cuts to state hospitals or pulling all state funding for higher education.

From where Hutton sat, things looked bleak. Brownback had been willing to talk with him about tax policy but never backed off his veto threat. Hutton thought there was little more he could say. Getting the House to pass something could ramp up the pressure.

Hutton had 27 precious votes, but had to get at least one other voting bloc to agree to a compromise to have a prayer of reaching 63.

Democrats had largely pulled back from the talks. Sawyer told the Topeka Capital-Journal that Republicans had made the budget mess and they would have to clean it up. Hutton intensified talks with the moderate Republicans.

 

A legislative session traditionally lasts 90 days, but this one had rolled past that on its way to being the longest in Kansas history. On June 11, the Legislature’s 112th day, the governor called a rare joint caucus of House and Senate Republicans and pleaded with them to approve a tax increase.

 

His plan was more palatable to them than others, but some of them still said it was an incomplete fix – it would only postpone the state’s budget crisis, not solve it. None of them formally introduced an alternative. Hutton hoped he might be able to get the moderates on board if he could break down the Senate’s resistance. 

Late that night he met with Wagle and a few moderate leaders to see if they could coalesce behind something. But Wagle saw no path to 21 Senate votes for any plan that significantly changed the business tax exemption.

At that point Hutton’s coalition had nowhere to go for votes but their right flank – and it was going without much leverage because it did not have the moderates.

By the next day a bill had emerged that raised sales and cigarette taxes, mandated more budget cuts while projecting a razor-thin margin of error for the budget. The only nod to Hutton’s business tax proposal was a small levy on guaranteed payments, which several legislators said any savvy accountant could avoid.

Hutton felt like the plan was being rammed down his throat, but it was the only option that could keep the state from going into default. If he held out for a plan that he thought was better for the state in the long term, it could be devastating in the short term.

He emerged from the negotiations to address a gaggle of reporters who had gotten word that a deal had been struck. Exhausted from stress and long nights, his tone was more resigned than triumphant.

“We’ve kind of hit a tipping point where if we keep pursuing this, we’re going to hurt people – the people of Kansas, the very people we were working hard to get some equity to and some parity for on the tax policy,” Hutton said.

 

The commentary

The plan passed, and business owners kept nearly all of their tax exemption.

On social media, Kansans who wanted to see the governor’s tax policy crash and burn ripped Hutton’s group for caving. Meanwhile, anti-tax groups criticized legislators who raised taxes rather than cut spending. Hutton was frustrated with the way things had ended, but could not see what he could have done differently.

He had examined a budget problem, proposed a solution, made an evidence-based case for it and gathered as much support as he could. After it failed, he used what leverage he had to shape the final product, which, though disparaged in some quarters, kept government running.

He had wanted an open discussion about tax policy. Politics and ideology, he thought, had hampered that discussion, and he wanted the public to know it.

So he started writing an op-ed article, despite receiving advice not to. Five days later the opinion piece landed with a thud in The Wichita Eagle.

It criticized the governor for being beholden to ideologues, moderates for being afraid of election-year postcards, no-tax-hike conservatives for being willing to crater the state budget and Democrats for focusing on the political gains they might be able to make from the dysfunction.

Moderate Republicans, in particular, took umbrage with how he characterized them. They said they were not scared of postcards (a popular and sometimes incendiary form of campaign communication used by interest groups) but were waiting for a more comprehensive tax reform plan.

Sitting in his fifth-floor Statehouse office months later, Hutton leaned back and contemplated the piece.

He stood by what he had written about the “power of the postcard” and said his intention was to lessen some of that power by warning the electorate of the impact of skewed and misleading mailers.

He still has no regrets about voting for the tax plan that finally passed, though it was a bitter pill to swallow. “If people want to say I caved and backed up on the whole business exemption thing, then I guess they can say that,” Hutton says.

 

“I can honestly say it was a very hard decision, but it was one that I made with a clear conscience. I did it, maybe not in the best long term for Kansas, but it was certainly the best decision for the short term. Sometimes in politics that’s what you get.”

 

In the run-up to this year’s session, Brownback told reporters that he wouldn’t be proposing further tax increases in 2016. He contends the state budget is in good shape and that his signature tax cuts are boosting the economy. But a months-long stretch of unexpectedly weak tax collection has left the state’s budget with almost no cushion.

As a result, the existence of the business tax exemption figures to still be an issue for some under the dome. But it remains to be seen whether Hutton will continue leading the debate.

“The issue has certainly not gone away,” Hutton says. “There remains a large contingent of people that believe it’s not just a revenue issue; it’s an equity or fairness issue. It’s an image issue for
our state.”

Johnson, the Assaria lawmaker, says the Legislature will need more leadership like Hutton showed last session. There are “good people on both sides” that Hutton and the coalition can try to persuade, Johnson says, but they are also increasingly dug in and unwilling to compromise on major issues.

It’s the kind of situation where leadership among lawmakers can only carry things so far. Breaking the gridlock would require elected officials to engage the electorate and get people outside of the Statehouse discussing solutions in an open, serious way.

“I don’t just see compromise decreasing in Topeka and Washington,” says Johnson, a 2010 alumnus of the Kansas Leadership Center. “I see it decreasing on a lot of streets across the country. I think government may now be thought of by many of us as a class that we have to take, where 200 years ago it was an active way of thinking and discussing that a free democracy relied upon to become established and flourish.”

If the atmosphere in Topeka doesn’t change, Hutton says, the state could find itself in a Washington-esque mode of governing crisis-to-crisis, doing just enough at the last minute to stave off government shutdowns and leaving little energy for long-term planning.

“The paralysis that I’m concerned about is the fact that once again our state’s revenues are not meeting estimates … and I believe we’re going to be significantly underwater,” Hutton says. “Where do we go from here?”

Andy Marso is a reporter for the KHI News Service in Topeka, an editorially independent initiative of the Kansas Health Institute and a partner in the Heartland Health Monitor reporting collaboration. The news service provides in-depth reporting on health issues in Kansas and the public policy debates surrounding them at www.khi.org/news. 

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This article was originally published in the Winter 2016 issue of The Journal, a publication of the Kansas Leadership Center. To learn more about KLC, visit http://kansasleadershipcenter.org. For a subscription to the printed edition of The Journal, visit klcjr.nl/amzsubscribe

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