KEPC UPDATE: Winding down, K-12 fix, tax cut bill, eco devo left hanging, April revenue

In this issue …

  • Legislature winding down for Friday ending
  • K-12 funding fix now on Governor Colyer’s desk
  • Tax cuts bill attempts to mitigate federal tax cut impact
  • Economic development programs still hanging
  • April revenues exceed expectations


Legislature winding down for Friday ending

The Kansas Legislature was winding down to a final adjournment Friday (known as sine die) with passage of a final budget bill.

Lawmakers were also working on a complicated tax bill that attempts to mitigate the impact of federal tax cuts on Kansas revenues.

Here’s a link to the 68 page explanation of what’s in the budget bill that was given to legislators prior to debate.

The school finance “fix” passed earlier in the week and is now on Governor Colyer’s desk.

Legislators are still working on the possibility of making changes to some economic development programs.

This newsletter is just a “snapshot” of where the legislature stands as of Thursday evening.  I will provide a more comprehensive update, probably sometime next week.


K-12 funding fix now on Governor Colyer’s desk

Legislators passed the school finance fix this week: the House on Saturday of last week and the Senate this past Monday.  That has slightly changed the funds available to local school districts.

Click on the link that says computer printout to see how each individual school district does with the legislation by looking at column 8.

Now, it’s up to the Kansas Supreme Court to decide if the fix is really a fix.  A hearing to hear arguments on the bill is scheduled for later this month.  If the Court decides the funding is unconstitutional, lawmakers could be back at the Statehouse in June for a special session.


Tax cut bill attempts to mitigate federal tax cut impact

On Thursday night, House and Senate negotiators had agreed on a bill that tries to neutralize the impact of federal tax cuts passed in December on Kansas revenues and Kansas taxpayers.  The agreement is contained in House Bill 2228.

One of the problems with the bill is that legislators don’t know what impact it will really have on state revenues.  The Kansas Department of Revenue and others don’t have a handle on that number.

There are three major elements of the bill.  Two have to do with returning the so-called “windfall” to business.

Global Intangible Low-Taxed Income (GILTI) – Under the new federal law, there could be an incentive for companies to shift profits abroad without generating any U.S. tax.   GILTI is a provision that hopes to discourage this by imposing tax on foreign sourced intangible income.

Deferred foreign income – Federal law aims to encourage “repatriation” back into the U.S. of profits and assets held overseas by multinational corporations and their shareholders.  Under the old law there were large tax incentives to keep corporate assets abroad to avoid paying U.S. taxes.  Bringing those assets back to Kansas would provide tax revenue to the state.  The legislation is designed to prevent that windfall.

Increasing standard deduction – The third piece of the legislation increases the standard deduction for individual taxpayers.

There are several other moving parts to the legislation that are difficult to understand.  There’s also the problem of not having a good handle on how much the bill cost the state in lost revenue.


Economic development programs still hanging

The same tax conference committee that worked the federal mitigation bill is also considering some economic development legislation.  It’s unclear if they will all be put into one bill or somehow split up.

Ad Astra Rural Jobs Act –passed the House 97 to 22 last year but not the Senate  It creates the Ad Astra Rural Jobs Act, which authorizes nonrefundable income tax credits for taxpayers who contribute to an approved investment company to fund a rural business concern in a rural area.  The bill was sent to the Senate Commerce Committee where it was never taken up.

HPIP- the High Performance Incentive Program provides tax incentives to employers that pay above-average wages and have a strong commitment to skills development for their workers. It creates a substantial tax credit for investments in Kansas as well as a related sales tax exemption.

Because so many companies have not yet claimed hundreds of millions of dollars in tax credits yet, the legislation would limit how much can be claimed, while extending the time the credits can be used.

STAR bonds – A new proposal puts limits on STAR bonds (Sales Tax Revenue Bonds) beginning January 1 of 2019.  Local governments would have to dedicate 2 percent of their local sales tax to STAR bonds projects to put some “skin in the game.”  However, many cities don’t have a sales tax and their legislators are opposed.  For example, Sedgwick County has a one-cent countywide sales tax, but the City of Wichita has no city sales tax.  We are told that Governor Colyer opposes STAR bond changes and is privately saying he might veto any bill that contains STAR bond limitations.

ROZ – Three counties would become eligible for the ROZ program (rural opportunity zones).  They are Cowley, Crawford, and Seward Counties.  However, out-of-state residents who move to those counties would only be eligible for tax credits, not the other benefits available through the program.

Incentives review – There is interest by the Senate in having some sort of review board to look at all the economic development incentives offered in Kansas and make recommendations for changes to the legislature.


April Revenues exceed expectations

The state collected $66 million more in revenue than expected in April.  That’s after April’s consensus revenue report came out with new estimates.  April was the eleventh month that money collected by the state has been higher than anticipated.


Bill tracking

Here’s our latest bill tracking on measures we think are of interest to our readers.  All of these bills are held over from 2017.  As new bills of interest are introduced, I will add them to the list.

You should be able to click on the bill number and be taken to the Kansas Legislature’s web site page for that particular bill.  You will be able to see all actions taken, read the bill, and read any supplemental notes (layman’s descriptions) and fiscal notes (how much does the bill cost the state) that have been prepared.