KEPC UPDATE: School finance verdict, economy recovering with warning about ag, correction

In this issue …

  • Waiting on the school finance verdict
  • Kansas economy is recovering but economists warn about ag
  • Correction
  • BILL TRACKER

 

Waiting on the school finance verdict

Legislative observers will be watching Friday to see if the Kansas Supreme Court issues a ruling on the constitutionality of the latest legislation on school finance.  The court’s decisions usually come out on Friday.

At stake is whether the court allows school funding for next year to go forward.  In its ruling last October, the court said:

“…while we stay the issuance of today’s mandate through June 30, 2018, after that date we will not allow ourselves to be placed in the position of being complicit actors in the continuing deprivation of a constitutionally adequate and equitable education owed to hundreds of thousands of Kansas school children.”

That could mean the court will issue an order that school funding for the new fiscal year, which begins July 1, cannot take place if funding is not constitutional.  That would force the legislature to return in special session.  July 1 is only about 22 days away.

Oral arguments were held before the court in May, where justices seemed disinclined to accept the legislature’s actions as constitutional.

The lawyer for the school districts suing the state said in that hearing that the legislature’s action is far short of constitutional.  The lawyer for the Kansas Attorney General, who is defending the lawsuit, said funding will have increased more than a billion dollars over six years.

 

Kansas economy is recovering but economists warn about ag

Kansas tax revenues for May were over $100 million above estimates.  Receipts for the current fiscal year are now $168 million above estimates issued in April by the state’s official estimating group made up of economists and state officials.

The so-called “long form” of those estimates has now been published and contains good news and bad for the economy.

The report says jobs are being added and they adjusted their economic growth predictions upward.

Here’s part of the report:

“Most economic variables and indicators have been adjusted slightly upward since the Consensus Group last convened in November. While the U.S. and Kansas economies continue to grow, uncertainty remains as a number of economic indicators are estimated to show only modest improvements over the next few years. Significant concerns exist for the economy as a whole relative to volatility in energy prices, tariffs or possible trade war effects on agricultural commodity prices, and consumer and business demand for products and services subject to sales taxation.”

The report included this warning about agriculture:

“However, crop prices have continued to struggle, even as above-average yields have supported overall cash receipts. Agricultural lending has been increasing since last fall. This added debt, coupled with increasing interest rates, could signal added stress and repayment issues down the road. Net farm income throughout the forecast period is expected to remain significantly below levels seen as recently as 2014. Current drought conditions and the potential of a developing trade war could cause a downside risk to the current net farm income projections from the Department of Agriculture.”

You can read the entire long form revenue estimate document here.

 

Correction

In our story about the budget in a newsletter last month, we provided incorrect information because that’s what we received.  The budget story said the legislature had added funds to advance the 23 Kansas highway projects that were delayed a few years ago due to severe budget problems.  That statement is untrue.

The legislature added some minor funding but certainly not enough the pay for the millions of dollars in delayed projects.

 

Bill tracking

Here’s our bill tracker list of where legislation we have been following ended up this session.  This should now be complete with any bills signed or vetoed by Governor Colyer.

KEPC UPDATE: Tax cuts, ROZ, STAR Bonds & HPIP, school finance, cuts restored, transpo task force, bill tracker

In this issue …

  • Tax cut that failed contained ROZ and expensing expansion
  • STAR bonds and HPIP changes fail along with Ad Astra
  • Governor signs school finance measure
  • Budget restores some previous cuts
  • Lawmakers create transportation task force
  • KEPC BILL TRACKER

 

Tax cut that failed contained ROZ and expensing expansion

The big tax cut measure worked for hours by a legislative conference committee failed by the thinnest of margins on the final day of the legislative session.  It barely passed the Senate and failed in the House on a 59 to 59 tie.

One estimate of the bill’s cost put it at $78 million for Fiscal Year 2019.

Along with changes that would provide that tax cut, the failed legislation also contained two economic development measures.

An expansion of the Rural Opportunity Zone Act would have extended the program to Cowley and Seward Counties.

The ROZ program provides for incentives to attract out-of state residents who move from other states.  They include tax credits equal to income taxes paid essentially wiping out any income tax liability.  The program also includes a component to help finance higher education but lawmakers purposely eliminated that from the expansion in this bill.

The bill would have extended the expensing program, currently only available to corporations, to all businesses.  The expensing program would have given those businesses the option of deducting expenses over a brief period of time, providing an economic benefit.

Both of those programs failed along with the tax cut bill.

The tax cut bill would have enacted certain benefits for Kansas businesses.

  • 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.

 

STAR bonds and HPIP changes fail along with Ad Astra

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.

A late session bill that would have reduced benefits for STAR Bonds projects, as well as extended benefits past 16 years for companies receiving High-Performance Incentive Program credits, passed the House, but failed to receive a vote in the Senate. A year moratorium on new STAR Bonds projects expires on June 30, 2018.

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 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 (like Wichita) and their legislators were 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.

Incentives review – There was 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.

 

Governor signs school finance measure

This week, Governor Colyer signed the controversial school finance bill that puts additional funds into K-12.  It’s now up to the Kansas Supreme Court to decide if it’s enough and if the bill fixes constitutional problems with school funding.  If it does not, the Court could force a special legislative session.

 

Budget restores some previous cuts

In one of its final acts, the legislature put the finishing touches on the budget.  It leaves a comfortable ending balance of $447 million for the rest of this year and $375 million for Fiscal Year 2019.

The bill restores many of the cuts from previous years.

Here are some of the highlights:

  • Adds $5 million for the National Institute for Aviation Research at Wichita State
  • Adds $1.7 million for Wichita State’s National Center for Aviation Training
  • Adds $15 million to restore 64 percent of the four percent reduction to the Board of Regents
  • Gives state employees a pay raise
  • Funds 23 highway projects that were delayed
  • KPERS payments for FY 2019 and 2020 are fully funded. In a previous budge they were delayed
  • After weeks of haggling, House and Senate negotiators agreed on membership for a transportation task force. Here’s a link to a description of the task  force and its membership.

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
  • BILL TRACKER

 

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.

KEPC UPDATE: Monday return for education and budget, school finance fix, budget to senate, tax cut, adoption

In this issue …

  • Legislature returns Monday for education and the budget
  • House passes school finance “fix”
  • House sends budget bill to the Senate
  • About that tax cut
  • Adoption bill draws fire from high tech businesses
  • BILL TRACKING

 

Legislature returns Monday for education and the budget

The Kansas Legislature returned to Topeka April 26 to work on education and the budget.  After tackling both of those issues in the House, lawmakers plan to return Monday morning.  Then it will be the Kansas Senate’s turn to work those issues.

They hope to end the session by Friday, May 4th.

 

House passes school finance “fix”

Working a rare Saturday, the House passed a “fix” for school finance by a vote of 92 to 27.  The bill, Senate Bill 61, corrected an $80 million error in a bill lawmakers passed in early April before taking their First Adjournment.

In an attempt to satisfy the Kansas Supreme Court, which has ruled the current school funding law unconstitutional, the bill does the following:

It provides a statement of public policy that requires a Local Option Budget (LOB) of at least 15 percent of a school district’s total foundation aid from the state.  That required LOB would be included in determining the adequacy of the amount of total funding.

Beginning in school year 2018-2019, the bill provides the following funding.

  • School year 2018-19 – $4,165 per student
  • School year 2019-20 – $4,302
  • School year 2020-21 – $4,439
  • School year 2021-22 – $4,576
  • School year 2022-23 – $4713

Here’s a link to the Legislative Research explanation of what’s in the bill.

Attempts to put more money into the formula failed during House debate.  Those who want to add more say the current funding is inadequate and will be rejected by the Kansas Supreme Court, which will hear oral arguments in May.

The bill now goes to the Kansas Senate.

 

House sends budget bill to the Senate

The Kansas House of Representatives also passed a bill that puts the finishing touches on the budget for next year. The vote was 92 to 24.

Often called the Omnibus bill, House Bill 2465 is sort of a catch-all spending bill that cleans up the budget.  The bill takes into account the April 20 consensus revenue estimates, which have been adjusted upward by over $500 million over the next two years.

The House version is HB 2365.

The Senate worked its version of the budget earlier in the session.  A conference committee will likely be appointed to work out differences between the House and Senate.

 

About that tax cut

A bill that began in the Kansas House as legislation dealing with appraisers has developed into an income tax bill in the Kansas Senate.  House Bill 2228 is now in a conference committee.

The major part of the bill allows individual income taxpayers to itemize deductions whether or not they itemize for federal income tax purposes.

Here’s a link to an explanation of the Senate version of the bill.

Although the Senate wants the bill, the House is reluctant to pass it because the cost is unknown.  Estimates range from $30 million to $90 million, but no one is certain.

 

Adoption bill draws fire from high tech businesses

A controversial bill having to do with who can adopt is currently in a House-Senate conference committee.  Many in the LGBTQ oppose the bill because they consider it discriminatory.

Now some big national technology companies are weighing in on House Bill 2481.

The bill was amended on the Senate floor to prohibit the Kansas Department for Children and Families and other state agencies from denying contracts to agencies that refuse placement on religious grounds.

The companies, including Apple and Google, have written to legislative leadership with their opposition, which has garnered national attention.

Here’s a link to an Associated Press story on the controversy that appeared in the New York Times Thursday.

 

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.

KEPC UPDATE: School finance fix, revenues up, tax cuts, labor force declines

In this issue …

  • School finance fix waits for legislators this week
  • State revenues are up
  • Senate wants more tax cuts
  • Kansas labor force declined over the past year
  • BILL TRACKER

 

School finance fix waits for legislators to return

As Kansas Legislators return to the Statehouse for the clean-up session on Thursday, they will have to put the finishing touches on the state’s budget.  Those are usually contained in the omnibus appropriations bill at the end of the session.  It’s clean-up, catch-all measure that looks at everything that’s passed, how much it costs, and adjusts funding.

But the big work will be fixing the $80 million error in the school finance bill and hoping the Kansas Supreme Court will accept it.  There’s disagreement on whether that will be the case.

After legislators held their first adjournment late on April 7th, the Kansas State Department of Education noticed an error in the bill, Senate Bill 423.  $80 million lawmakers thought was included in the bill was not included.  Here’s a link to a summary of the bill prepared by the Legislative Research Department.

The bill barely passed with the exact number of votes for a majority in both the House and Senate.  Even with the error that was discovered afterward, Governor Jeff Colyer signed the legislation and called for lawmakers to add the $80 million for quick fix.

Once a follow up bill has been passed and sent to the Governor, he’s expected to sign it, setting up a hearing before the Kansas Supreme Court in May. If the court rules the legislation unconstitutional, it has said it will not allow state funds to be spent on an unconstitutional formula after July 1.  That means schools will not get their state aid and will not be able to stay open.

If that happens, a special legislative session is a certainty.

 

State revenues are up

There was some good news for the state in April when expected state revenues were adjusted upward.  Fiscal Year 2018 revenues were adjusted upward $217.1 million, or 3.2 percent.  Fiscal Year 2019 revenues were adjusted upward $316.7 percent, or 4.7 percent above the previous estimate.

The biggest change came in individual income tax collections, which are now expected to be 36.5 percent over the actual individual income tax collected in 2017.

Here’s a link to the estimating document released April 20th. 

A more detailed explanation of why the consensus revenue estimating group made the upward changes is expected to be released later this week.

 

Senate wants more tax cuts

Working against using that new revenue for schools and other state needs is a bill that returns a lot of money to taxpayers in the form of several tax changes.

House bill 2228 started as a property tax measure that passed the House.  Senators rewrote the measure to turn it into a tax cut bill.  Senate President Susan Wagle (R-Wichita) and Senate Majority Leader Jim Denning (R-Overland Park) want the tax cuts.  It appears that leadership in the Kansas House of Representatives is willing to allow House members to vote on the concept.

Here’s a link to a description of the bill as it passed the Senate: http://www.kslegislature.org/li/b2017_18/measures/documents/supp_note_hb2228_03_0000.pdf

 

Kansas labor force declined over the past year

The March labor report from the Kansas Department of Labor shows unemployment is down over the past year, from 3.7 percent in March, 2017 to 3.4 percent in March of 2018.  It also shows job growth is up slightly over the period.

What’s particularly troubling in the report is that the labor force is shrinking. Over 5,900 people are no longer in the workforce over the year (seasonally adjusted).  The labor force participation rate stands at an estimated 63.3 percent, down 0.4 percent from a year ago.

The labor force participation rate is a measure of the active portion of an economy’s labor force.  It refers to the number of people who are either employed or are actively looking for work.

Here’s a link to the full March report.

 

A note about our next newsletter

Because the legislature returns on Thursday afternoon, there will likely be nothing to report by the usual publication time of the KEPS News on Thursday evening/Friday morning.  I will probably send something out Monday or Tuesday of next week.

 

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.

KEPC UPDATE: School finance, constitutional amendment, broadband task force, food sales tax

In this issue …

  • Senate and House pass different spending on school finance
  • Constitutional amendment passes committee
  • Broadband Task Force expected to pass
  • Transportation Task Force in conference
  • Food sales tax reduction might not move forward
  • BILL TRACKING

 

Senate and House pass different spending on school finance

School finance legislation broke loose from its moorings in the legislature this week as both the House and Senate passed different versions of a new school finance bill in an effort to satisfy the Kansas Supreme Court.

On Thursday, the Senate passed SB 423 by a vote of 21 to 18.  The bill spends about $275 million additional on K-12 education.  Here’s a link to how senators voted.

Here’s a link to what’s in the senate version of school finance.

Earlier in the week the House passed HB 2445, which spends about $520 million more on public education.  The vote was 71 to 53.  Here’s a link to how representatives voted.

Here’s a link to an explanation of what’s in the house bill.

As for what the bills do for individual school districts, the Kansas State Department of Education has prepared computer runs showing the amounts.  This will take a little effort to find the correct printout. Follow this link and then:

  • Click on SF 18-085 – Computer Printout to see an Excel spread sheet showing the impact of SB 423.  Column 8 is the increase in state general fund aid.
  • Click on SF 18-078 – Computer Printout (providing effects on school districts) to see what the House bill does to individual school districts.

The House of Representatives goes in at 1:30 Friday afternoon.  The senate returns at 10 a.m.  The plan would be to appoint a house-senate conference committee to iron out differences between the two bills.  That could not formally happen until the afternoon when the house returns.

There has been some discussion that lawmakers might work into the weekend, or even a few days next week.  However, it’s also possible that they might begin their spring break and return at the end of April to finish their school finance work.  But, that provides little time for a bill to pass and be prepared for presentation to the Kansas Supreme Court, which has set a hearing for April 30.

 

Constitutional amendment passes committee

There was some drama this week as senate leadership said they would not run a school finance bill until a constitutional amendment passed the House of Representatives to prevent the courts from ordering more spending on education.  In the end, the senate leadership capitulated.

Still, the House Judiciary Committee passed out HCR 5029 by a vote of 12 to 10.  The original version of the constitutional amendment would declare that the power to appropriate funding for education is exclusively a legislative power and not subject to judicial review.  There were strong objections to that from Democrats and Moderate Republicans.

If 2/3 of the House and Senate approve the constitutional amendment, it would go to a vote of the people.

The legislation was changed by the committee.  The explanatory statement that would appear on the ballot would read:

The purpose of this amendment is to provide that suitable provision for the financing for public education means that the provision is adequate and equitable.  Questions of adequacy of total funding of public education shall be determined by the legislature.

A vote for this proposition would require suitable provision for the financing of public education to be both adequate and equitable and would reserve the power to establish and resolve any question of the adequacy of the funding to the legislature.

A vote against this proposition would make no change in current law and maintain the current provisions regarding suitability of the provision made for the finance of education.

It appears the change would mean the courts could still take up the equity (or fairness) of school funding, but not the amount of money spent.

After the legislation passed out of committee, many were saying they were hearing overwhelmingly from Kansans that opposed the change, with little or no contact from anyone who supports it.

 

Broadband Task Force expected to pass

Both the House and the Senate have now overwhelmingly passed a bill creating a Broadband Expansion Planning Task Force.  The bill passed the Senate this week 40 to zero.

Because the House and Senate versions of the bill are different, a conference committee of three Senators and three Representatives has been named to try to work out the differences of opinion.  They are expected to come to an agreement and send the bill to Governor Colyer for his signature.

 

Transportation Task Force in conference

Another Task Force is also in a conference committee, which is reportedly having some difficulty coming to agreement.  It’s establishes the Joint Legislative Transportation Vision Task Force for Evaluation of the State Highway Fund and the State Highway Transportation System.

The conference committee has been disagreeing on whether to have subcommittees and what organizations should be included in the Task Force.  It is seen as a prelude to coming up with a new transportation program and continuing to finish the 2010 T-WORKS Program.

 

Food sales tax reduction might not move forward

Last week, a Senate committee passed out a bill that reduces the sales use tax rate on food and food ingredients.  Senate Bill 444 has not been scheduled for debate in the full Senate and it is unclear if and when that will happen.

The bill defines food and food ingredients to include substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value.

Bottled water, candy, and soft drinks would be specifically included.  Sales of alcoholic beverages, dietary supplements, food sold through vending machines, tobacco, and certain prepared foods would b excluded and would not qualify for the tax reduction.

The bill may not come up because of its cost to the state general fund.

It reduces revenue by an estimated $152 million in Fiscal Year 2020, eventually growing to $317 million by Fiscal Year 2023.

 

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.

KEPC UPDATE: Education – $520M for schools, constitutional amendment, inspector general; one more week; STAR Bonds; HPIP; transpo task force; broadband

In this issue …

  • Committee proposes $520 million for public schools
  • Education constitutional amendment introduced
  • Attempt to create education inspector general fails
  • Legislature has one more week before break
  • Budget bills becomes STAR bonds debate
  • HPIP changes pass Senate
  • Transportation Task Force bill advances in Senate
  • Broadband changes pass Senate
  • BILL TRACKING

 

Committee proposes $520 million for public schools

What everyone at the Statehouse has been waiting for finally happened Wednesday night.  A school finance bill passed out of committee that puts significant dollars into the education formula in an effort to pass a funding bill that will satisfy the Kansas Supreme Court.

House Bill 2445 was amended by the House K-12 Education Budget Committee and is expected to be debated by the full House of Representatives on Monday. It passed out of committee without recommendation.

The bill would increase school funding by about $520 million.  That’s on top of the money directed to schools by last year’s education funding measure.

Representative Steve Johnson (R-Assaria) proposed the amendment.  Some lawmakers expressed hope that the plaintiffs in the school finance lawsuit will agree with the action.

 

Education constitutional amendment introduced

Meanwhile, a constitutional amendment to change the way schools are funded was introduced this Thursday.

A copy of the measure was not available as of this writing.   However, the title is, “constitutional amendment to declare the power to appropriate funding for education is exclusively a legislative power and not subject to judicial review.  This is seen as a way to prevent future school finance lawsuits.  It must pass both houses of the legislature by a 2/3 vote and approved by voters.

 

Attempt to create education inspector general fails

A school finance measure that makes some changes to the formula passed the Kansas Senate this week.

Senate bill 422 makes changes to:

  • Local Option budgets
  • At-risk weighting
  • The use of capital outlay

During debate, the Senate rejected some controversial amendments.

Senator Ty Masterson (R-Andover) tried to include language creating an Office of Education Inspector General, which would be part of the State Treasurer’s Office.  It would have added $228,300 to the budget to pay for it.

Masterson said education takes the largest amount of dollars for the state budget, so it needs regular audits.

Masterson’s amendment failed on a vote of 12 to 27.

 

Legislature has one more week before break

The Kansas Legislature is scheduled to end its regular session by Friday, March 6.  This normal break usually lasts at least a little over two weeks before the veto session begins.  This year, it’s scheduled for April 26.

There has been some discussion about cutting the break short this year to continue work on school finance.  Lawmakers are facing an April 30 deadline to pass a constitutional school funding measure.  That deadline was set by the Kansas Supreme Court.

Both the House and Senate have gone home for the week, choosing not to work over a three-day Easter weekend.

 

Budget bill becomes STAR bonds debate

Discussion of a budget bill in the Senate turned into a STAR bonds debate this week.  Senate Bill 269 eventually passed the Senate 34 to 6, but not after a lengthy debate on a couple of amendments to restrict STAR bonds, the controversial economic development program.

The program provides municipalities the ability to issue bonds to pay for the development of major commercial, entertainment, and tourism areas.  The revenue generated by the development is used to pay off the bonds.

Senator Tom Holland (D-Baldwin City) offered an amendment that would give municipalities until the end of June to have a development plan approved by the Commerce Department.  After that STAR bonds could not be used to construct new arenas, sports facilities or stadiums, including facilities to support amateur or professional sports activities.

Holland said STAR bonds have become a way to subsidize projects by certain local governments and developers.  The Senate Commerce Committee has been working on STAR bond legislation for many weeks but has been unable to agree on changes.

Holland’s amendment failed on a voice vote.

Senator Mary Pilcher-Cook also offered an amendment that failed.  It would say no Kansas state or local government official can enter into any financial arrangement in which they would benefit from a STAR bonds project.  Senators thought it was too vague and unworkable.

 

HPIP changes pass Senate

Another economic development bill has passed the Kansas Senate.

Senate Bill 430 makes changes to HPIP (High Performance Incentive Program).  It reduces the amount of HPIP tax credits earned by businesses.  The credits earned are reduced by 50 percent.  In return, they would continue to be available from 16 years to 25 years.

After the 16th year, only 10 percent of the credit could be claimed on tax returns.

 

Transportation Task Force advances in Senate

A special task force to come up with a new transportation program passed the Kansas House this week by a vote of 123 to one.

House Substitute for Senate bill 391 establishes the Joint Legislative Transportation Vision Task Force.

It would be made up of 27 members, including six members of the House and six Senators.  The rest of the group would come from various organizations.  Their mission is to evaluate system conditions, use of the State Highway Fund, current transportation funding and additional projects.

The Task Force must submit a report to the legislature on or before January 1, 2019.

 

Broadband passes Senate 40 to 0

The bill creating the statewide broadband expansion planning task force (Senate Substitute for House Bill 2701 passed the Senate this week 40 to zero.

A final report would be due in January of 2020 with a status report to the legislature in January of 2019.

 

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.

KEPC UPDATE: School finance, property tax, STAR Bonds, rainy day fund, HPIP, eco devo, broadband task force

In this issue …

  • House committee begins work on school finance
  • Bill would require more property tax for education
  • STAR bonds changes suspended
  • Rainy day fund passes committee
  • HPIP changes pass committee
  • Eco devo review bill is out of committee
  • Broadband task force bill moves forward
  • KEPC BILL TRACKING

 

House committee begins work on school finance

The House K-12 Education Budget Committee began work Thursday on a new school finance bill, despite not knowing how much money to put into the formula.  The bill is HB 2445.

The bill address equity issues identified by the Kansas Supreme Court; changes some Local Option Budget provisions currently in law; removes the minimum at-risk student weighting; and says the capital outlay fund can no longer be used for utilities or property and casualty insurance.

The committee ran out of time and will pick up their activity again next week.  At the same time, the Senate Education Finance Committee began work on some of the changes that the Kansas Supreme Court did not like.

Meanwhile, still trying to understand the school finance study commissioned by the legislature, lawmakers are now waiting for some cost estimates from the Kansas Department of Education.

Texas A & M professor Dr. Lori Taylor was hired to conduct the cost study.  Dr. Jesse Levin of the American Institutes for Research was hired to was do a peer review of Taylor’s study.  They both appeared before lawmakers on Monday to discuss the findings.

A first look seems to indicate it will take between $600 million and $2.1 billion to satisfy the Kansas Supreme Court, which has ruled the current funding formula unconstitutional.

The study says that, on average, for every one percent increase in the graduation rate, school funding needs to increase 1.5 percent.  This reinforces the argument by education supporters who have said for many years that money matters in educational outcomes.

It appears the state needs to agree on what levels of performance it must set before it can agree on a funding level.

The next step is to come up with school finance runs that show what each district would get at different levels of funding.

According to a March 20 story in the publication  Hawver’s  Capitol Report:

“Senate Majority Leader Jim Denning, R-Overland Park, said it might be Friday  before lawmakers receive the cost estimates in the study by former Kansan and now Texas A&M researcher Dr. Lori Taylor in a form that can be converted into the ‘runs’ that are the heart of Kansas school finance legislation.  Those runs show how much money each school district will receive from a school funding formula.”

“Nothing firm, but it looks like sometime next week to marry the Taylor information to actual school district enrollments and makeup of districts and even individual school buildings to come up with a formula-influenced or not by the new study – and figure out weightings for students who have learning handicaps, live in poverty or aren’t English language speakers.”

Here’s a link to the updated Taylor study.

 

Bill would require more property tax for education

Meanwhile, the Senate Education Finance Committee has been looking at a possible revenue source to help pay for new school spending.  The Committee held a hearing Tuesday on SB 422, which requires more property tax for education.

Under current law, school boards are allowed to set the Local Option Budget (LOB) at  maximum of 33 percent of their general fund budget.  SB 422 would require school districts to set their LOB at 30 percent of the general fund budget.

The bill also requires local school districts to allocate the LOB to at-risk programs in proportion to how much of their state aid goes to their at risk fund.

The committee has not taken any action on the bill as of this writing.

 

STAR bonds changes suspended

The Senate Commerce Committee has run out of time and has suspended discussion of any changes to STAR bonds.  Local governments and economic development officials did not like the proposal, saying it essentially would kill the ability to use STAR bonds in most cases.

It’s unclear if and when the issue will come up again.

STAR bonds are sales tax revenue bonds that provide Kansas municipalities the opportunity to issue bonds to finance the development of major commercial, entertainment, and tourism areas.  The sales tax revenue generated by the development are then used to pay off the bonds.

 

Rainy day fund passes committee

The Ways and Means Committee of the Kansas Senate has given approval to a bill creating a budget stabilization/rainy day fund.  The fund would use money coming to the state when personal income taxes exceed certain revenue estimates.

Many states have a rainy day fund to help with violent swings in state revenues.

The measure, HB 2419, has already passed the Kansas House.  It now goes to the full Senate for debate.

The bill now declares that excess revenues would go 50 percent to the rainy day fund and 50 percent toward the Kansas Public Employees Retirement System (KPERS) unfunded liability.

The bill requires the Director of the Budget to consult with Legislative Research to certify the average estimated tax receipts from the three previous fiscal years.  The amount transferred to the fund is the excess of the average for the three years.  But the transfer cannot take place if the revenues are lower than the immediately preceding fiscal year.

The bill appears to say that the rainy day fund cannot be greater than eight percent of the preceding year’s state general fund receipts.

 

HPIP changes pass committee

Tax credits available through the Kansas HPIP (High Performance Incentive Program) would be extended to 25 years under Senate Bill 430, which came out of the Senate Ways and Means Committee this week.

Lawmakers have been concerned for several years that a large number of unclaimed credits that are allowed to be carried forward might be used by businesses in one year, leading to severe budget problems.

Senate Bill 430 reduces the HPIP credits that are unused from 16 to 25 years for those taxpayers who claimed a credit prior to January 1, 2018.

After the 16th year, the amount of tax credits used is limited to ten percent of the reduced amount.

HPIP provides a ten percent nonrefundable income tax credit for eligible capital investments that exceed either $50,000 in non-metropolitan counties, or one million in the five metro counties of Douglas, Johnson, Sedgwick, Shawnee, and Wyandotte.

 

Eco devo review bill is out of committee

A committee to review and evaluate economic development programs of the state is created by Senate Bill 448, which moved out of the Senate Commerce Committee on Wednesday.

The Joint Economic Development Incentive Review Committee would be required to develop an inventory of all Kansas economic development incentives, to be updated annually.  Incentives are to be evaluated at least once every five years by the Legislative Post Auditor and a public hearing would be required on the Post Auditor’s evaluations.

 

Broadband task force bill moves forward

Access to broadband, especially in rural areas, has been a growing hot issue for Kansas lawmakers and communities.  In order to get a handle on needs and how to pay for them, House Bill 2701 establishes the Broadband Expansion Plan Task Force.

It passed the Senate Utilities Committee this week.  It had previous passed the Kansas House of Representatives 117 to zero.

The Senate Committee made several amendments to the bill before passing it:

  • The Task Force would look at access to public right of way for setting up broadband in an area
  • The Task Force would also look at price caps for broadband service providers
  • Also to be considered, developing criteria for a statewide broadband map; and involving the aerospace industry as well as the Farm Bureau.
  • A wireless carrier would be included in the task force membership
  • Kansas municipal utilities would be included in the membership
  • A final report would be due in January of 2020 with a status report to the legislature in January of 2019

 

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.

KEPC UPDATE: Ed funding report, tax reaction, enterprise zones, Rural Opportunity Zones, labor report

In this issue …

  • Slow week as lawmakers wait for education funding report
  • House Taxation tackles reaction to federal changes
  • Lawmakers consider reinstating enterprise zone
  • Committee reviews Rural Opportunity Zone results
  • Monthly labor report

 

Slow week as lawmakers wait for education funding report

Many legislative committees did not meet this week, but activity will pick up next week as lawmakers review an education study that is expected to guide them through how they react to the Kansas Supreme Court decision that the current K-12 funding formula is unconstitutional.

Texas A and M professor Dr. Lori Taylor has been hired to conduct the cost study.  Dr. Jesse Levin of the American Institutes for Research has been hired to do a peer review of Taylor’s study.

On Friday afternoon, attorneys Jeff King and Curt Tideman will present an overview of the Taylor study to the Senate Select Committee on Education Finance and the House K-12 Education Budget Committee.

The Chair of the Senate Education Committee, Senator Molly Baumgardner (R-Louisburg) announced in the Senate Thursday that the study will be released at one p.m. Friday to the entire legislature in an e-mail.

 

House Taxation tackles reaction to federal changes

Two bills designed in response to the new federal income tax changes were heard in the House Taxation Committee Wednesday.

House Bill 2569 doubles the standard deduction on Kansas income tax beginning in 2018.  The federal change doubled the standard deduction.  It’s estimated the state change could cost the state as much as $200 million per year.

House Bill 2761 allows Kansas individuals to itemize deductions on their state taxes despite not itemizing on their federal return. Currently, to itemize in Kansas, the taxpayer must also itemize on their federal return.  That’s expected to cost the state an estimated $34 million.

Committee Chairman Steve Johnson (R-Assaria) said the committee will work bills on the concepts next week.

 

Lawmakers consider reinstating enterprise zone

Economic development issues continue to be reviewed in some legislative committees.

The House Appropriations Committee has scheduled a hearing on HB 2767 next Wednesday, which reinstates the enterprise zone program in Kansas.  The program was eliminated by a previous legislature, but is important to local economic developers.

The bill was introduced just last week.  Appropriations is a committee that is exempt from deadlines, so the bill could pass yet this session.

The bill would provide tax credits and certain sales tax exemptions to businesses that expand.  However, it only applies to designated nonmetropolitan counties.

 

Committee reviews Rural Opportunity Zone results

Some lawmakers are interested in expanding the Rural Opportunity Zone (ROZ) program to more areas of Kansas. That discussion came as the Senate Assessment and Taxation Committee reviewed the program on Wednesday.

The program is designed to attract new residents to rural areas of the state by forgiving individual income taxes for five years and, in some cases, help pay off education loans up to $15,000.

To qualify, the new resident cannot be a current resident of Kansas.

The program has grown steadily since it began in 2012.  In 2016, 494 people took advantage of the program.

The biggest category of professions that have applied is education.  Many school districts have used the program to attract teachers.  The second-highest category was health care.

The largest numbers are coming from Nebraska (171) and Colorado (170).

 

Monthly labor report

Kansas continues to grow jobs at a slow rate, according to the latest Department of Labor report.

Total nonfarm jobs grew 0.6 percent from January of 2017 to January of 2018.  Information jobs declined 3.0 percent.  Construction jobs declined 2.4 percent.

The strongest growth was in transportation, warehousing and utilities with a 7.3 percent growth rate.

Here’s a link to the job growth information.

 

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.

KEPC UPDATE: School funding, property tax, review of eco devo plans, convention of the states, internet sales tax, STAR bonds, income taxes

In this issue …

  • School funding delayed until studies are released
  • No support for property tax increase for schools
  • Tax Committee votes for regular review and disclosure of economic development programs
  • Convention of the states debated in Senate; fails
  • Proposal to collect more internet sales tax moves forward
  • Lawmakers question STAR bonds expansiveness
  • Hearings on income tax increases and cuts scheduled for next week

 

School funding delayed until studies are released

This week, the Chairman of the House K-12 Education Budget Committee said he will delay working the bulk of the school budget until later on in the session.

Representative Fred Patton (R-Topeka) said he plans to work on other parts of the school budget, such as special education, and teacher professional development.  The big part of the budget will be worked in a separate bill later.

The legislature is waiting on a report from Texas A and M professor Dr. Lori Taylor.  She’s been hired to conduct a cost study.  This week, Dr. Jesse Levin of the American Institutes for Research , who has been hired to do a peer review of Taylor’s study.  This week, he testified via Skype about previous school finance studies.

The two reports are due to the Legislature on March 15.  That’s a Thursday, so it seems likely that the lawmakers will take the weekend to digest the information before beginning committee discussion on Monday, March 19.

 

No support for property tax increase for schools

No one showed up to support a bill that would increase property taxes to support K-12 education, but several opponents testified against House Bill 2740 in the House Taxation Committee.

Opponents included:

  • Steve McCloud of the Kansas Farm Bureau, who said agriculture taxpayers prefer to pay income and sales taxes
  • Ken McCauley of the Kansas Corn Growers Association, who said property taxes are not a fair way to fund education
  • The Kansas Chamber’s Eric Stafford, who cited of poll of the organization’s members that indicates they prefer property taxes to be reduced
  • Daniel Heady of the Kansas Wheat Growers and the Kansas Ag Alliance, who said the farm economy is struggling and property tax increases would hurt farmers more
  • Kansas Association of Realtors’ Patrick Vogelsburg. He said a property tax increase will impact the housing market
  • Randy Stuckey, Agribusiness Retailers Association
  • Lucas Heinen, Kansas Soybean Association
  • Mandy Roe of the Kansas Cooperative Council
  • Dan Murray of the National Federation of Independent Business
  • Mike Beam of the Kansas Livestock Association
  • Jeff Glendening of Americans for Prosperity
  • Dave Trabert of the Kansas Policy Institute
  • John Donnelly of the Kansas Farm Bureau

 

Tax Committee votes for regular review and disclosure of economic development programs

The House Taxation Committee has passed out a substitute bill that requires public disclosure of certain economic incentive data.  The measure is HB 2572.

The substitute bill was proposed by Representative Kristey Williams (R-Augusta).

The original bill required the Secretary of Administration to publish selected economic development program data on the KanView website.  It also established a new Joint Committee on Taxpayer Transparency, which would advise the Secretary of Commerce.

After discussions with the Commerce Department and others, Representative Williams offered the substitute bill.

The new bill does not create a joint committee and gives the Commerce Department the responsibility to publish the information (not the Department of Administration).  It now also applies to many more programs.

The House Tax Committee passed another transparency bill this week.  HB 2753 sets up a periodic review for certain tax credits, incentives, and sales tax exemptions for the Insurance Department, Commerce Department, and Department of Revenue.

Each review would be required to provide a description of each incentive and an estimate of the economic and fiscal impact of each.  The report is required to be on the website of each agency on or before March 1st of every year.

 

Convention of the states debated in Senate; fails

A measure calling for a convention of the states to amend the U.S. Constitution has failed in the Kansas Senate.  SCR 1611 required a 2/3 majority (27 votes), but the final vote was 22 to 16.

If three-fourths of state legislatures would ratify changes to the Constitution, they would take effect.  Supporters of the constitutional convention want to add a requirement that prevents deficit spending and debt by the federal government.  Opponents are concerned that a constitutional convention cannot be limited to a specific topic and that anything in the U.S. Constitution could be changed, added, or eliminated.

 

Proposal to collect more internet sales tax moves forward

House Bill 2756 creating the Kansas Main Street Parity Act has passed out of the House Taxation Committee.

It requires some out-of-state retailers and “marketplace facilitators” to begin collecting Kansas retail sales and use taxes on sales to Kansas.  The bill is primarily aimed at internet sales.  Some collect Kansas sales tax.  Others do not.

Businesses with at least $50,000 in Kansas internet sales in the current year or last year must begin collecting the tax if the bill becomes law.

Here’s a link to a description of the bill as it came out of the committee.

 

Lawmakers question STAR bonds expansiveness

The Senate Commerce Committee continued hearings this week on bills dealing with STAR bond changes and restrictions this week.  There has been no progress moving the bills forward yet, and more discussion is planned.

The restrictions are contained in Senate Bill 434, which was supported by the Kansas Speedway.  That was a surprise for many local governments and economic development organizations.  Opponents included economic development organizations.

Here’s a link to the fiscal note on the bill, which includes a description.

There was a lot of questioning by Senators concerning projects in Johnson County.

 

Hearings on income tax increases and cuts scheduled for next week

Some income tax bills will be heard in the House Taxation Committee next week:

  • HB 2761 allows an individual to itemize deductions in Kansas despite not itemizing on their federal return. As of this writing, there is no estimate on the impact on the budget.
  • HB 2661 changes the corporate income tax rate and surtax.  The changes would bring in an estimated $117 million more in FY 2019 and FY 2020.  Here’s a link to the fiscal note that describes the changes.
  • The bill was introduced by Representative Tim Hodge (D-Newton)
  • House Bill 2569 would double the standard deduction on individual income tax in Kansas.  It would cost the state $208.8 million. Here’s a link to the fiscal note.
  • House Bill 2618 would increase Kansas income taxes for those with income over $500,000 and for those with income over a million dollars.  It would raise an estimated $307.5 million next year and the year after. Here’s a link to the fiscal note.

 

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.