What will Laura Kelly's next four years look like as Kansas governor?
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Yard signs are being picked up, mailers have stopped coming and TV and radio airwaves are no longer filled with the bickering of political ads.
The 2022 election is over — minus a few races where provisional and late-arriving mail ballots could sway the outcome — and politicians are starting to transition from campaigning to governing.
Gov. Laura Kelly outlined a slate of new priorities during her victory over Republican nominee Derek Schmidt, accompanied by the expectations that come with new campaign promises.
Conservative legislators, however, will have their own set of priorities, as well as a new relationship with a Kelly administration that no longer faces a reelection hurdle.
More:Laura Kelly won a second term as Kansas governor. This part of the state was key.
Either way, when Kelly and Kansas lawmakers are sworn in in January, they are expected to have no shortage of money to work with: a projected $2.3 billion budget surplus to work with as they explore funding priorities and tax cuts.
Hours after Kelly was declared the winner of Tuesday's gubernatorial election, economists projected state revenues would exceed expectation by $794 million in the current fiscal year, fueled in large part by inflation. They also raised revenue projections for fiscal year 2024 by $423 million.
The state analysis of revenue and expenditure expectations puts budget surplus projections at $2.3 billion for 2023 and $3.2 billion for 2024. Those surpluses would be in addition to approximately $1 billion in the rainy day fund.
Adam Proffitt, the governor's budget director, said the healthy consensus revenue estimates will likely mean Kelly proposes eliminating the sales tax on groceries and hygiene products, fully funding special education and eliminating the Social Security income tax cliff.
The governor's team will start putting the budget together in a few weeks, with Kelly's proposal to be released in January.
But Republicans ultimately will still hold the purse strings.
"There are no electoral consequences that would be holding them back. But the Legislature will have the final say on an array of issues," said Rep. Troy Waymaster, R-Bunker Hill, chair of the House Appropriations Committee. "The second floor can propose anything that they want, but it has to pass the Legislature."
Laura Kelly and Kansas Legislature seek more tax cuts. Can they compromise?
A top campaign promise of Kelly's has been eliminating the state's 6.5% sales tax on groceries. Past projections suggest such a substantial tax cut would save taxpayers — but reduce state revenues — upwards of $500 million a year.
After Republicans rejected a more immediate cut last year, legislative efforts culminated in a gradual reduction, cutting the rate to 4% on Jan. 1, 2023, then to 2% in 2024 and 0% in 2025. Kelly held a hatchet while pitching to voters that she axed the food tax, despite grocery bills showing no savings until next year.
More:Survey shows Kansans optimistic despite economic worries. How will that affect governor's race?
She promised to push for a more immediate cut this spring, and Proffitt said it could be in effect as early as April 1.
That would require Republican legislators to make it a priority early in the session.
"Once you see the surplus numbers and the amount of money that we've added to the budget, you'll see that mathematically there is absolutely no reason not to be able to pull that policy forward into early 2023, especially with the inflation numbers that you're seeing related to food," Proffitt said.
Proffitt said two other tax cuts Kelly would likely propose are eliminating the retirement income tax cliff on Social Security and ending the sales tax on diapers and feminine hygiene products.
Republican budget writers are expected to be cautious, however, long worried about the future impact of decisions made during a fruitful period of state revenues. Waymaster said he was interested more in paying off debt and saving money, rather than taking actions that might have to be rolled back in a recession.
"Yeah, you might have an immediate impact," he said. "But a long-term impact, it could actually be detrimental because you'd have to cut those services in the future."
Efforts to cut taxes on retirement income have long been a priority of top Senate Republicans, but they have been unable to find support among House GOP leadership. A special legislative tax committee is scheduled to discuss the issue this week.
One tax proposal Kelly has previously pushed for is not as likely to show up in this year's budget: a one-time $250 income tax rebate. It went nowhere with Republicans last year, who widely ridiculed it as an attempt to buy votes.
Proffitt said he couldn't comment on whether a rebate was in the mix, saying the governor would focus on her other tax priorities.
More:Is Kansas Legislature underfunding special education? Advocates say the state is falling far short
Education issues set to define relationship between Laura Kelly and Legislature
Kansas law requires state special education funding to cover 92% of excess costs — a mark that Kansas has been missing for several years and hitting that benchmark, schools believe, would require at least $155 million more in funding.
Kelly is expected to try again this year, and Proffitt said the governor has also talked about fully funding special education and that "it's something that we'll sit down and talk about later this month and early December," he said.
Without increased funding, school officials say they are forced to use general education monies to cover their costs, particularly as more students are requiring special education services.
"I think this is the right time to talk about it because of the financial health of the state," Shannon Kimball, president of the Lawrence Unified School District 497 board, said at a news conference on the issue Thursday.
Some of the blame has been placed on the federal government for essentially creating an unfunded mandate. Attempts to get increased federal funding have not been fruitful.
Meanwhile, there is a potential push to narrow the definition of "excess costs" to exclude costs legislators deem extraneous or not appropriately specific to special education.
A special legislative committee met two days after the election to discuss special education funding. Its chair, Rep. Kristey Williams, R-Augusta, seemed skeptical of the need for increased funding and instead called on Kelly to petition the President Joe Biden's administration for more federal aid.
"It's easy to just hand out some dollars you have," Williams told reporters. "I think we all have to be responsible and do what's best ultimately for the kids."
Republicans have also maintained they will be looking to pursue an expansion of the state's school choice offerings, something that has long been anathema to Kelly and even some members of their party.
More:As education debate dominates governor's race, school choice battle looms in Kansas
"I think that the call for parents to have options won't ever go away," Williams said. "Will we have across the board buy in from the governor's office all the way down? That would be interesting. But we will continue to have conversations about it and try to persuasively bring more people to the table on an issue that impacts us all."
Another run at a ban on transgender athletes in women's sports, as well as legislation that would lay out a "parents' bill of rights" are also likely.
But Rep. Stephanie Clayton, D-Overland Park, said she was optimistic Kelly's re-election and the current makeup of the Legislature would allow Democrats to block some of those efforts.
"There are some things where, especially on the major education issues, we will be able to sustain vetoes, if needed," she said.
Will Kansas seek to bring in a second economic development megaproject?
After Kelly campaigned on economic development, highlighted by the Panasonic electric vehicle battery plant, Commerce Secretary and Lt. Gov. David Toland is pushing to secure a second megaproject for Kansas, even though the first one engendered controversy.
A sweeping rewrite of the state's economic development incentive law authorized a second megaproject in 2023, subject to lawmaker approval, where private companies get taxpayer-funded incentives for a private capital investment above $1 billion.
"We have nine leads right now," Toland said earlier this month. "The question is going to be which one do we use the last APEX bullet on."
He declined to elaborate on the possibilities, but Department of Commerce officials told legislators in September that two of the projects involved semi-conductor plants, one in a rural area and one in Wichita.
Another battery manufacturer was looking at the state as a whole, while other projects were primarily concentrated in the eastern and south-central part of the state.
The new revenue estimates project the corporate tax cut via the Panasonic project will total about $100 million over the next two fiscal years, and the APEX legislation also provides for a 2.5% reduction in corporate income tax rates for each megaproject.
The Panasonic project has not been without criticism, particularly on the deal's transparency controls and a lack of contractual guarantees for the number of jobs created.
The size of the incentive package for Panasonic could also create concerns about what a second deal could do for revenues, though Proffitt declined to comment on what a second APEX project would do to corporate tax revenues.
"It just all depends on exactly who the company is, how much they're going to be investing in the state of Kansas, what the package would look like," Waymaster said.
What should Kansans expect from Laura Kelly's second term?
Kelly spent much of her campaign talking about being "middle of the road," illustrated in TV ads by standing in the middle of a road.
Now without another reelection in her future, would Kelly move to the left?
"I would not expect her to change her temperament, change her behavior, very much," said Nathaniel Birkhead, a Kansas State University political science professor. "I mean, she stuck her neck out by closing public schools earlier than any other governor did for the year, and that was when she was up for reelection. So the willingness to take a vulnerable position that she thought was right, even with reelection looming, indicates that that's kind of who she is and her approach to government. So I would expect more of the same from her."
But there would likely be little opening for Kelly to change tact, even if she wanted to, with a Legislature that won't give much ground.
"In terms of policy, the Legislature is simply not going to give her any liberal policies to sign," Birkhead said.
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Indeed, former Democratic Gov. Kathleen Sebelius said a "very hostile Legislature" was a core difference between her tenure and Kelly's.
"She had far fewer allies and helpers than I had when I was governor," Sebelius said of Kelly. "So I have been extraordinarily impressed with her ability to actually, you know, get things done. To get the school finance issue resolved, to move ahead on economic development, to get incentives teed up for people. So I have been very impressed by that."
After millions of dollars spent on both the governor's race and state legislative seats, the power dynamic between Kelly and the Legislature will effectively remain the same.
Legislative Democrats did pick up three seats in Johnson County and defended other incumbent lawmakers thought to be vulnerable. But losing races in Wyandotte County and Wichita likely means they will fail to break the Republican supermajority, despite gaining at least one seat.
There could yet be some movement on this front; Democrat Ace Allen trails Rep. Carl Turner, R-Leawood, by 80 votes. But even if the party wins that seat, they would still be one vote shy of the 42 needed to halt the supermajority.
And the Legislature appears to have missed out on another potential tool of curbing Kelly: a proposed constitutional amendment that would have allowed legislators to block rules and regulations implemented by state agencies. The amendment was losing by 9,800 votes as of Friday afternoon.
That means the Republican caucus would still have some power in attempting to override Kelly's veto, particularly given that a handful of moderate lawmakers who could serve as potential Democrat allies lost in primary contests to more conservative opponents or opted against seeking reelection.
But second terms can often grow contentious between governors and legislators.
For Sebelius, the fight centered on a budget standoff, as well as legislation to revive the construction coal power plants in southwest Kansas. For her Republican successor, Gov. Sam Brownback, the tussle was over whether to repeal his signature, ill-fated tax plan.
What defines Kelly's second term, however, remains to be seen.
"No two sections are identical because of the dynamics of the people involved and the issues that surface," said Senate Vice President Rick Wilborn, R-McPherson. "I don't expect any better working relationships, she will now be a lame duck. But I don't expect it to be any worse. You know, we'll have to let it develop and see how it goes."
This article originally appeared on Topeka Capital-Journal: What will Kansas Gov. Laura Kelly do in second term after reelection?
