KEPC UPDATE: KU bball impact, tax conference, other details

  • KU Final Four game will impact end-of-week legislative activities
  • Tax conference moves slowly but surely
  • Other happenings

KU Final four game will impact end-of-week legislative activities

Legislators will try to get as much done as possible today (Thursday), aiming for a light day Friday.

Many have plans to travel to New Orleans for the University of Kansas Final Four basketball game Saturday against Ohio State.  That includes über-fan Mike O’Neal, Speaker of the House.

The House debate schedule includes:

  • House bill 2789, which creates a KanCare Joint Oversight Committee.  Composed of eleven members of the Legislature, the committee would monitor and study the implementation and operations of the Governor’s plan to reshape Medicaid and other services.  A strong bipartisan majority of lawmakers are very concerned about the speed with which the Administration is embarking on the changes, particularly the move to managed care.  However, they have little leverage to slow it down.
  • Senate Bill 102, which makes a number of changes to ethics laws, including reporting of contributions to candidates and gifts to elected officials.  Lobbyist reporting procedures and rules are also changed.  There are also new prohibitions on anyone with a city contract in Kansas giving gifts or hospitality over $100 a year to a mayor or member of a city governing body.
  • House Substitute for Senate Bill 40, having to do with the Kansas Bioscience Authority. The original Senate Bill 40 had to do with infrastructure bidding, but was gutted by the House to insert the new language on appointments and length of term to serve on the Authority.  In addition to making some changes to member terms and appointments, it now requires any member of the Authority with a direct interest in any contract or transaction with the authority to either resign or divest themselves of such interest.

Meanwhile, the Senate takes on changes to alcoholic beverages laws in House bill 2689.  This bill is actually several bills having to do with liquor combined into one.  It allows tasting samples, eliminates background checks for employees, provides for microdistillery licenses for small producers, and allows happy hour to return to Kansas after being outlawed for over 23 years.

 

Tax conference moves slowly but surely

The six-member conference committee looking at the House and Senate income tax reduction bills will hold its third meeting this afternoon.  Yesterday, the group agreed to work off of Senate Substitute for House bill 2017.  They did not reach agreement on any specific items, but seemed to agree about what they wanted to further explore.

The items they would explore include:

  • The House proposal to phase-in the elimination of certain non-wage business income from income tax.  All non-wage business income would become exempt from tax by tax year 2018 under the current House plan. The Senate eliminated it all at once.
  • Keeping the House version of the Earned Income Tax Credit.  The House version cuts the credit in half.  The Senate version keeps current law.  The EITC is designed to help the working poor.
  • Repeal of many tax credits for individual filers.
  • Keeping the historic site tax credit but eliminating its sunset
  • Both the House and Senate versions had increased the standard deduction.  The House wants to talk about not including that benefit, but wants to tie it to what happens with the Earned Income Tax Credit.
  • The House had eliminated the sales tax on food, but House Tax Committee Chairman Richard Carlson (R-St. Marys) indicated that costs the state too much and he’s willing to keep the sales tax on food.
  • Removing renters’ eligibility for receiving homestead property tax benefits.

The conference committee members have asked legislative staff and the Department of Revenue for specific information on the cost of all of the above.  Staff cautioned that many of these elements work in tandem, so if one is changed, the entire fiscal picture is changed.

Both sides did not agree in other areas, but want to talk further.  Those include:

  • The “trigger” or “spending lid,” where all revenue growth over three percent goes into tax reduction.  The House wants it.  The Senate has strong opposition.
  • The new pool severance tax provision.  The House bill has no change to current law, which provides a two-year exemption from the severance tax for new pools.  The Senate version exempts the first 50 barrels a day from the tax.  Major oil interests moving into Kansas do not want any change.  They want the current law exemption to remain.

There is also the possibility that other tax bills that have passed either the House or Senate might be included in what has come to be known as a Mega-bill.

For example, the Senate is interested in including elements of Senate Substitute for House bill 2157.  That authorizes an optional single-factor (sales) income tax formula for certain corporations that relocated to Kansas and employ ten or more full-time employees.

They must have no employees, nor own or rent any real or tangible personal property in Kansas prior to January 1 of 2013.  They would be prohibited from claiming PEAK or HPIP benefits.

This legislation was suggested in the Senate Tax Study Group that met earlier this session and the concept has been supported in the past by the Kansas Economic Progress Council.

 

Other happenings

 

Here’s a brief summary of what else is going on.

  • The conference committee on the budget continues to meet.  It’s not clear if they will reach agreement by the end of this week.
  • Immigration legislation appears stalled in the House, with no clear majority to move forward on anything.  House Speaker Mike O’Neal (R-Hutchinson), does not want anything coming up that does not have broad agreement.  A business coalition (which includes KEPC) has been working behind the scenes on compromise legislation, but the House appears too fractionalized to accept anything at this point.
  • It continues to look like school finance may not change.  A Senate plan tweaking the formula and sent to the House has been declared materially altered and sent to a committee.
  • STAR bonds legislation to continue the economic development program has passed the House and the Senate in House Bill 2382.  However, there are differences and a conference committee is expected to be appointed.
  • The dispute over what constitutes real property and what is machinery and equipment (stemming for actions of the Montgomery County Appraiser) has not moved forward.  Some business groups are warning that neglecting this issue in the session will result in more disputes across the state as other counties adopt similar procedures for deciding what is taxable.  Newly acquired machinery and equipment in Kansas has been exempt from property tax since 2006.  Real property continues to be taxed.  The issue seems to be certain fixtures that may or may not be deemed part of the real property, or part of the machinery and equipment.
  • Voters represented by Moderate Senate Republicans have received elaborate postcards in the mail this week urging them to contact their senators to support elimination of the state income tax.  The postcards come from the group Kansans For No Income Tax.  Senators who have been subject to the mailing are suspicious because it urges mailing voter contact information to an Overland Park post office box.
  • The Kansas City Star recently reported that Kansans For No Income Tax is partially supported by Missouri billionaire Rex Sinquefield, who is promoting elimination of Missouri’s state income tax through a petition drive to put the question on the ballot.