Senate Bill 410 contains many important policy changes in the state's income tax laws and I fully support the intent of this bill's provisions.

    Unfortunately, the provisions of the bill in section 32 do not reflect the intent of the legislature and have a significant negative impact on the state budget. The intent of the legislature was to limit the carry back provisions for net operating losses to farm income. The version of the bill I am presented with, however, would allow the net income operating losses to be carried back for all corporate taxpayers.

    It is estimated that the provisions in this section would reduce State General Fund receipts by $5.9 million in FY 2001 and in subsequent years. The clear intent of the legislature was for this section to have a negative impact on receipts of only $400,000 on an annual basis.

    If this bill were to become law the state would not have the required State General Fund ending balance requirement of 7.5 percent. Maintaining the required ending balance continues to be one of my priorities.

    The reduction in receipts that would occur in FY 2001 and FY 2002 if this bill were to become law as is would total $12.4 million. This would make it extremely difficult to fund education and other priorities for the state.

    I encourage the legislature to pass the provisions of Senate Bill 410 in another measure during sine die which accurately reflect the intent of the legislature, and I stand ready to approve such a measure if it reaches my desk.

                        Bill Graves
                        Governor of Kansas

Dated: May 18, 2000