KEPC UPDATE: school finance, Medicaid expansion, income tax, recission, senate cmte budget, gas tax, STAR Bonds, property tax, early break

In this issue …

  • Lawmakers and educators try to understand House school finance bill
  • Medicaid expansion goes to the full Senate
  • House Tax Committee may move ahead on income tax
  • Rescission bill in conference
  • Senate Committee passes a budget
  • House holds hearing on 11 cent gas tax increase
  • STAR Bonds out of House committee
  • Property tax lid changes
  • Will lawmakers break early?
  • KEPC Bill Tracking

 

Lawmakers and educators try to understand House school finance bill

A long-awaited school finance bill was unveiled this week by the House K-12 Education Budget Committee.  The bill was not available in print until Wednesday and hearings were held Thursday and will continue today (Friday) and Monday.

The quick timing has caught many school officials off guard because it came during Spring break.

Committee Chairman Larry Campbell (R-Olathe) wants the committee to begin working the bill Monday and hopes to have something voted out of committee by Thursday.

Although similar to the previous formula, House Bill 2410 also has differences.

Lawmakers and education groups are trying to understand how it works and what it does.

Here are some of the highlights:

  • 107 of the 286 school districts lose money, mainly because of declining numbers of students
  • The state would only spend an additional $75.6 million next year. Many education groups and lawmakers say this number is too low and will not satisfy the Kansas Supreme Court
  • It appears this formula relies more heavily on local property taxes to fund schools, depending on the will of local school boards
  • School boards could raise property taxes for local enhancements and extracurricular activities
  • School districts would receive $5,320 per student. About 80 percent ($4,170) would come from the state, while about 20 percent ($1,150) would come from local property taxes that would be required to be levied
  • Any school district whose enrollment declines more than five percent from the previous year would base their budget on 95 percent of the preceding year’s enrollment
  • Beginning in the 2018-19 school year, the September 20 and February 20 enrollments would be averaged for budget purposes
  • All day-kindergarten would be phased in by 2019-20
  • Vocation weighting would be eliminated and $100 per full-time equivalent student would be transferred from the general fund to pay for vocational education
  • Virtual state aid remains the same as it is now
  • At-risk weighting remains the same as it is now
  • Transportation state aid is reduced $4.3 million
  • High density at-risk and bilingual state aid are included

Want to know what this means for your school district?

Here’s a link to the Kansas State Department of Education spread sheet. To see whether your school district gets or loses from the state, look at column 14 in the SF17-091 (State Foundation Aid) spreadsheet.

If you really want to delve into everything about the bill, here’s the link to the full KSDE web page on it.

This is not an easy review and not for the faint of heart.

The committee chairman, Representative Larry Campbell (R-Olathe) says this is just a starting point.  It is widely believed there are enough votes on the committee to significantly change the measure.

 

Medicaid expansion goes to the full Senate

After only brief discussion Thursday, the Senate Public Health and Welfare Committee passed out a bill that expands Medicaid in Kansas by a vote of 6 to 2.  The bill is House Bill 2044.

Supporters of Medicaid expansion are confident the bill will be passed by the full Kansas Senate.  The question is whether Governor Sam Brownback will veto the measure.  He continues to say he opposes it.  The question then becomes whether there are enough votes to override his veto.

Complicating the situation is the legislation in Congress to repeal the Affordable Care Act (Obamacare).  As proposed, the legislation would freeze Medicaid.

House Bill 2044 is currently exactly the same bill that came over from the House of Representatives. There were no amendments. That means if the Senate passes it without amendments, it will go directly to the Governor for his consideration.

 

House Tax Committee may move ahead on income tax

The House Taxation Committee may be weary of waiting on the Kansas Senate to come up with a new income tax bill and appears to be poised to come up with another plan of its own. However, one representative deeply involved in the issue tells us the House will let the Senate struggle a bit longer.

Committee Chairman Steven Johnson (R-Assaria) told the committee this week he would like the members to consider looking at perhaps four income tax brackets in a new bill. Johnson said the committee would use the bill vetoed by Governor Brownback (HB 2178) as a base.

The 2012 income tax cuts moved Kansas from three brackets to two. HB 2178 returned to three brackets.

There is another bill currently in the Tax Committee similar to HB 2178 that could be used for a new income tax measure.

The committee may also put forth a flat income tax with one rate, somewhere around 5 percent.

 

Rescission bill in conference

The budget bill that reconciles the current state budget is in a conference committee of House and Senate members. They will try to iron out differences in each version. The bill does not cut K-12 or higher education.

It is House Bill 2052. The bill essentially relies on internal borrowing to balance the budget and leaves an ending balance in the bank of about $50 million.

The current budget year is FY 2017.  It ends on June 30.

 

Senate Committee passes a budget

Meanwhile, the Senate Ways and Means Committee passed a budget Thursday for the next two years with little fanfare.

It’s Senate Bill 189, the so-called “mega budget” bill. The guts of the bill contain a state budget for Fiscal Years 2018 and 2019. Because school finance and income tax increases are still in the works, the budget does not contain K-12 funding or some other items. Those will be added later once the revenue and education pictures become more focused.

The bill now goes to the floor of the Kansas Senate. The house and senate have very few committee meetings next week and are expected to be spending most of their time on the house and senate floors debating bills.

 

House holds hearing on 11 cent gas tax increase

The House Taxation Committee held a hearing Thursday on a bill to increase the motor vehicle fuels tax by 11 cents a gallon.  It’s House Bill 2382.

A bill raising the tax by five cents a gallon had a hearing a week ago in the Senate Assessment and Taxation Committee.

 

STAR Bonds out of House committee

A bill that extends STAR Bond financing until 2022 has passed the House Appropriations Committee and will be debated in the full House of Representatives.  Without the bill, STAR Bonds could no longer be used as an economic development tool.

STAR Bonds provide Kansas municipalities the opportunity to issue bonds to finance the development of major commercial, entertainment and tourism areas and use the sales tax revenue generated by the development to pay off the bonds.

The bill is HB 2184.  It contains some other changes:

  • The bill allows STAR Bonds projects costs to include expenses for the renovation and expansion of an historic theater
  • Language is eliminated in the law that allows a county commission or school board to object to a proposed STAR bond district, if it is determined the district would have an adverse effect on property tax revenues
  • The Secretary of Commerce would no longer be required to approve a city or county option to use all or a portion of transient guest tax revenues to be pledged for principal and interest payments on the STAR bonds.
  • The bill eliminates some outdated language about the NASCAR facilities in Wyandotte County.

Meanwhile, reliable legislative sources tell us the Senate Commerce Committee has ended its look at economic development incentives and may not make any changes to programs like HPIP and PEAK.  A quick check of next week’s agenda shows no committee meetings scheduled.

 

Property tax lid changes

Here’s one of those crazy things that happens in the final weeks of a legislative session.

The Senate Assessment and Taxation Committee held hearings last week on a bill to repeal the local property tax lid.

Senate Bill 167 was completely gutted in committee Thursday of any mention of the tax lid.  It has now become a bill that requires County Appraisers be elected to four year terms, beginning in 2018!

There are also several provisions in the bill having to do with how appraisals will be conducted.  Attorneys familiar with government appraisal of property believe some of those provisions are probably unconstitutional.  The bill is still in the Senate committee.

The committee has an 8:30 a.m. meeting scheduled this morning (Friday) to hear from the Revenue Department’s Property Valuation Division (PVD).  PVD may inform them of problems with the bill.

The House Taxation Committee has held hearings on a House Bill 2376, which changes the local property tax lid from requiring an election to only requiring an election when 10% of the voters sign a protest petition asking for an election.

Our best guess is that this bill will be passed out of the committee, but with changes that lower the number of signatures needed on a protest petition.  It will then probably sit on the agenda for debate in the full house until some of the other major issues of the session (school finance, taxes, and the budget) have some movement.

 

Will lawmakers break early?

Next week’s schedule indicates the Legislature will NOT meet on Friday.  Lawmakers were originally scheduled to be in session the next week (the week of April 3).  There are rumblings around the Statehouse (usually reliable) about how that week could be a short one.  Depending on how much has been accomplished, legislative leadership may decide to hold the First Adjournment early to save more days for the veto session.

The veto session is scheduled to begin May 1 this year.

 

Bill tracking

Here’s our latest bill tracking on measures we think are of interest to our readers.

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: Budget cuts, taxes & ed, gas tax, TABOR, eco devo, property tax, rural jobs, Medicaid, sales tax, upcoming

In this issue …

  • Senate rejects budget cuts
  • Taxes and education: where are we?
  • Hearing on gas tax increase for transportation is today
  • TABOR constitutional amendment hearing is held
  • Economic development under the magnifying glass
  • Property tax lid hearings
  • Rural jobs bill gets okay from House
  • Medicaid expansion hearing Monday and Tuesday
  • Bill would put sales tax on some services
  • Some bills of interest for next week

 

Senate rejects budget cuts

The Kansas Senate overwhelmingly rejected across the board cuts to the current year state budget, including proposed cuts to education.

Senate President Susan Wagle proposed the two percent across-the-board cuts.  They excluded debt service and caseload obligations.

Wagle argued that school districts could use their reserve funds to fill the void.  She said education cuts would be confined to non-instructional activity.  That would have meant positions like school counselors, librarians, and school nurses could be affected, but not football coaches.

Wagle said it was apparent that the legislature was going to pass an income tax increase this year.  She said the size of that tax increase would be less if there were some cuts.  The Wagle Amendment would have cut $104 million from the budget.  That would have included a $64 million cut from schools.

On a recorded vote, Wagle’s amendment failed 7 to 33.

Here’s a link to how senators voted on the Wagle amendment.

Two other amendments to cut the budget also failed.  They were proposed by Senator Dennis Pyle (R-Hiawatha).

The bill was House Bill 2052, designed to balance the Fiscal Year 2017 budget.  Fiscal Year 2017 ends on June 30.  This is the so-called rescission bill.

About 9:15 Thursday night, the Senate passed the entire bill (HB 2052) by a vote of 27 to 13.  The bill has already passed the House.  It will now likely go to a conference committee to iron out differences between the House and Senate.

 

Taxes and education: where are we?

Here’s a quick update on where we are on tax and education spending, as we understand how things are going at this time.

  • The Kansas House of Representatives passed an income tax bill and overrode Governor Brownback’s veto. The Kansas Senate passed the bill, but fell three votes short of an override.
  • The ball is now in the Senate’s court. The House will wait for the Senate to pass an income tax bill and send it over.  However, hearings on a couple of “flat tax” income tax bills that have only one rate for everyone will be held next week.
  • Senate President Susan Wagle has said the Senate won’t begin work on a new income tax bill until after the rescission bill is passed.
  • The Kansas Supreme Court decision on school finance will likely require any income tax bill to raise more than the bill that passed the legislature but was vetoed by the Governor.
  • Meanwhile, the House K-12 Education Budget Committee has been working to build a “consensus bill.” Listening to discussions, Committee Chair Larry Campbell (R-Olathe), working with House Education Committee Chair Clay Aurand (R-Belleville) will attempt to write a school finance bill built on the previous formula’s idea of a base budget and weightings.  Campbell says when the bill is introduced, he will hold hearings. The bill is expected to be introduced next week.
  • Senate President Wagle has formed a Senate Select Committee on Education Finance. Its first meeting was Thursday afternoon.  Four more meetings are scheduled next week.

 

Hearing on gas tax increase for transportation is today

Last week, we told you about the two motor fuels tax increase bills that were introduced.  Hearings have now been scheduled on the bills, which would try to salvage the 2010 T-WORKS program that has been decimated over the past six years by raids to fund other parts of the budget.

Senate Bill 224 is a five cent a gallon increase.  The hearing is Friday morning in the Senate Assessment and Taxation Committee.  Senate Vice President Jeff Longbine (R-Emporia) requested the bill.  It would raise an estimated $100 million.  The increase would be effective July 1 of this year.

House Bill 2382 would raise the motor fuels tax by eleven cents a gallon.  That hearing is scheduled for Thursday of next week, March 23, in the House Taxation Committee.  In addition to the amount of the increase, the House bill would change the formula for distribution.  Cities and counties would continue to get their current distribution, but most of the increase would go to the state’s T-WORKS program.

The current Kansas gasoline tax is 24 cents per gallon.

 

TABOR constitutional amendment hearing is held

Only one person gave stand-up testimony in support of a proposed tax and spending limitation constitutional amendment at a hearing Wednesday.  Senator Ty Masterson (R-Andover) said it was his proposal.

Under his proposal, state tax increases would require a 2/3 supermajority of the House and Senate; state spending and revenue limits would be imposed; and the limits could only be exceeded by a vote of the people.

Supporting the amendment with written-only testimony were the Kansas Policy Institute and Americans For Prosperity (perhaps sensing it has no chance of passage this year).

Among opponents were the Kansas Center for Economic Growth, the Kansas- National Education Association, the Kansas Association of School Boards and me, representing the Kansas Economic Progress Council.

I pointed out that Colorado’s TABOR (Taxpayer Bill of Rights) is being challenged in the federal courts as unconstitutional.  I also pointed out the many problems Colorado is having as the result of TABOR.

My conclusion was, “The danger of spending limitations is they can prevent you from doing what needs to be done.  They take the responsibility away from elected officials, the representatives of the people.

“Decisions will be made through a difficult process, and sometimes decided by the difficulty of that process, rather than by evaluating the issues.”

 

Economic development under the magnifying glass

The Senate Commerce Committee has been delving into the economic development programs and incentives of the state, asking if they work and/or if they need to be changed.

Several days of hearings, including questions and answers, have been held on STAR Bonds, PEAK (Providing Employment Across Kansas), and HPIP (High Performance Incentive Program).

Secretary of Commerce Antonio Soave will discuss the programs on Wednesday.  He will also discuss the ROZ program (Rural Opportunity Zones).

 

Property tax lid hearings

A bill that repeals the local property tax lid legislation from 2015 had a hearing in the Senate Assessment and Taxation Committee Thursday.  The bill is SB 167.

Senator Randall Hardy (R-Salina) introduced the bill.  Hardy testified that as a former Salina City Commissioner, he always had the best interest of taxpayers in mind.  He said he believes in local control and that the property tax lid is imposing an artificial barrier that has saddled local governments.

Eric Sartorius, the Executive Director of the League of Kansas Municipalities, said the bill is contradictory to democracy.  He said the election provision to opt out of the lid doesn’t allow local governments to have actual data to help decide if elections are needed.  He also pointed out the cost of elections is an issue.

The Kansas Association of Counties also supported the repeal.

Americans For Prosperity, the Kansas Chamber of Commerce, the Kansas Association of Realtors, and the Kansas Policy Institute opposed the measure.

A hearing was also held Thursday on House Bill 2376 in the House Taxation Committee.  It changes the local property tax lid from a requiring an election to only requiring an election when 10% of the voters sign a protest petition asking for an election.

The same groups basically testified as at the Senate Committee.  However, the House Taxation Committee hearing was described as much more contentious.

 

Rural jobs bill gets okay from House

On a vote of 97 to 22, the Kansas House passed and sent to the Senate the “Ad Astra Rural Jobs Act,” House Bill 2186.  It offers tax incentives to finance business projects that create jobs in rural areas.  The tax incentives would go through certain types of investment companies.

The Department of Commerce would have to approve the investment companies and their business plans.

 

Medicaid expansion hearing Monday and Tuesday

The Medicaid expansion bill that passed the Kansas House 81 to 44 will have a hearing in a Senate committee on Monday.  House Bill 2044 is expected to draw testimony from many supporters in the Senate Public Health and Welfare Committee.

Proponents will be heard Tuesday, while opponents are scheduled to be heard Tuesday.

The bill is HB 2044.  Here’s a link to the supplemental note describing what’s in the bill.

 

Bill would put sales tax on some services

A bill that puts a sales tax on certain services will have a hearing Tuesday in the House Taxation Committee.  It is House Bill 2384.  Here are the services:

  • Emergency road services (towing)
  • Investigative services (detective agencies)
  • Security guards and patrol services (body guard services)
  • Security system services, except locksmiths (alarm system monitoring services)
  • Certain non-residential cleaning services
  • Dating services

There is no fiscal note available on the bill, so we don’t know how much money it would bring in.

 

Some other bills of interest for next week

The so-called Mega Budget bill will be worked next week in the House Appropriations Committee.  HB 2364 is the big budget bill for Fiscal Years 2018 and 2019.

A bill that institutes a 3.9% flat income tax will have a hearing in the House Taxation Committee.  It is House Bill 2385.

A bill that institutes a 5% flat income tax will have a hearing in the House Taxation Committee.  It is House Bill 2395.

 

Bill tracking

Here’s our latest bill tracking on measures we think are of interest to our readers. 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, income tax, transportation, Medicaid expansion, property tax, TABOR, eco devo programs

In this issue …

  • Slow week as lawmakers consider school finance decision
  • Senate Tax will look at income tax bill next week
  • Bills would find funds for transportation
  • Senate Medicaid expansion hearing March 21
  • Hearing was delayed on property tax lid bill
  • Senate will hold hearing on TABOR constitutional amendment
  • Economic development programs under the magnifying glass
  • BILL TRACKING

 

Slow week as lawmakers consider school finance decision

Kansas lawmakers spent the week pondering the meaning of the Kansas Supreme Court’s decision last week on school finance, trying to figure out how much it will cost the state and how to find the money.

The Court ruled unanimously that Kansas’ block grant system is unconstitutional and it retained jurisdiction of the case, giving lawmakers until June 30 to pass something constitutional.  The court gave lawmakers clues about what it would take.  For example, they pointed out that testing indicates about a fourth of public school students are not getting an adequate education.  That’s telling legislators where to concentrate some attention.

One big concern is the court did not name a dollar amount.  However, the decision did make note of a lower court ruling last year that a constitutional formula might cost over $500 million next year while saying, “Total spending is not dispositive of adequacy.”

That’s got everybody scratching their collective legislative heads.

Now, the committees go to work on the problem.

In the senate, President Susan Wagle (R-Wichita) appointed a Senate Select Committee on Education Finance.  The chair is Majority Leader Jim Denning (R-Overland Park) and the Vice Chair is Ways and Means Chair Carolyn McGinn (R-Sedgwick).

Other members

  • Senator Anthony Hensley (D-Topeka) will be the ranking minority
  • Senator Molly Baumgardner (R-Louisburg), the Senate Education Chair
  • Senator Barbara Bollier (R-Mission Hills)
  • Senator Bud Estes (R-Dodge City)
  • Senator Dan Goddard (R-Goddard)
  • Senator Dan Kerschen (R-Garden Plain)
  • Senator Pat Petty (D-Kansas City)

Work has been underway in the house where the K-12 Education Budget Committee will continue meeting, likely using a proposal by Representative Melissa Rooker (R-Fairway) as a base, although many are concerned about its cost right now.

 

Senate Tax will look at income tax bill next week

Having successfully passed an income tax increase and overturned a veto by Governor Sam Brownback, the Kansas House of Representatives will wait to see what the senate comes up with.  The senate also passed the bill, but fell three votes short of overriding the Brownback veto.

It seems very clear from discussions with senators that changing the effective date from January 1, 2017 to January 1, 2018 would cause three no votes to shift to the yes column.  However, that leaves a bigger hole in the budget until the income tax increases starting flowing to the state treasury.

There’s also that pesky school finance decision and balancing the need for unknown funding against the ability to get enough votes.

The Senate Assessment and Taxation Committee will hold a hearing Tuesday on Senate Bill 192.

This bill is a little different from the one vetoed by the Governor.

It keeps the two current income tax brackets at the same rates, but adds a third bracket for single people making $35,000 a year and over; and married people filing jointly who make more than $70,000 a year jointly.  That rate would be 6.1 percent.

The bill also eliminates the “March to Zero” trigger mechanism that automatically lowers rates in the future and it allows a 100 percent itemized deduction for medical expenses.

The bill would raise an estimated $578.5 million for FY18.

This bill, like the one vetoed by Brownback, is retroactive to January 1, 2017.

 

Bills would find funds for transportation

Things are starting to move on the transportation front as lawmakers try to salvage the 2010 T-WORKS program that has been decimated over the past six years by raids to fund other parts of the budget.

Here’s the shorthand:

  • Senate Bill 224 was introduced Tuesday and sent to the Senate Assessment and Taxation Committee. It raises gas taxes five cents a gallon.  Senate Vice President Jeff Longbine (R-Emporia) asked for the bill, which would raise an estimated $100 million.
  • House Bill 2382, which contains an eleven cent a gallon gas tax increase, was introduced Wednesday and sent to the House Taxation Committee. That raises in excess of $200 million.
  • After a spirited debate Thursday, the House Appropriations Committee approved the use of $400 million in additional bonding authority for KDOT. It is seen as a temporary “bridge” for work in FY18 and FY19.  The subcommittee had considered a gas tax increase but could not agree.
  • The legislature would have to remove the 18 percent bonding cap in current law. KDOT is at $1.1 billion in bonding.  The original T-WORKS bill was built on $1.7 billion in bonds.  An attempt to eliminate the bonding authority failed on a vote of the full Appropriations Committee, so it’s still in the budget.

 

Senate Medicaid expansion hearing March 21

Our sources in the medical community tell us hearings will be held on Medicaid expansion in the Senate Public Health and Welfare Committee on March 21.  The Kansas House already passed the bill a few weeks ago by a vote of 81 to 44.

Supporters believe the vote will be closer in the Senate.  They estimate they have between 22 and 24 votes right now.  A majority needed for passage is 21 votes.

 

Hearing was delayed on property tax lid bill

A hearing was delayed this week on a bill to change the local property tax lid from requiring an election to exceed the lid.  House Bill 2376 is now scheduled for a hearing Thursday in the House Taxation Committee.

It changes the current law to say an election will not be held unless a ten percent protest petition is turned in within 21 days of a local government publishing a notice they intend to exceed the lid.

Meanwhile, the Senate Assessment and Taxation Committee will hold a hearing on the same day on Senate Bill 167, which totally repeals the property tax lid.  Local government lobbyists say they will support the bill, but don’t think it has a realistic chance of passage right now.

 

Senate will hold hearing on TABOR constitutional amendment

A constitutional amendment to enact a TABOR spending and revenue limitation in Kansas will have a hearing Wednesday in the Senate Assessment and Taxation Committee.  The measure is SCR 1602.

TABOR stands for Taxpayer Bill of Rights.  Colorado enacted TABOR in 1992, but voters approved suspending many of its requirements in 2005 due to problems it caused.

The latest problem in Colorado is a conflict with the state’s legalized marijuana legislation.  The money raised for government by marijuana is supposed to go to schools, police, and drug education.  However, the TABOR constitutional amendment is in conflict with that intent and the pot money is prevented from being used for those purposes.

Meanwhile, a long-standing lawsuit challenging TABOR continues in a federal appeals court.  Those bringing the lawsuit include current and former legislators, educators, and parents of school children.  In 2011 they filed suit, claiming TABOR stripped them of legislative powers regarding taxation, which violates the guarantee clause of the U.S. Constitution.

Colorado’s TABOR is also in conflict with another portion of that state’s constitution, which requires a certain level of spending on public education.

Meanwhile, local Colorado chambers of commerce and economic development organizations are telling lawmakers there’s a $9 billion gap in funding roads that needs to be addressed.  That gap is hindered by Colorado’s TABOR.

Here’s what’s in the Kansas TABOR constitutional amendment.

  • State tax increases or extensions would require a 2/3 supermajority of the house and senate
  • State spending and revenue limits would be imposed
  • The legislature could only exceed the spending limit if approved by a vote of the people at a general election
  • Excess state revenues would be reserved for economic downturns and reducing state debt (or to be refunded to taxpayers)
  • State borrowing would be limited

A constitutional amendment takes a 2/3rds vote of the Kansas House of Representatives and Kansas Senate before it is put to Kansas voters in an election.

 

Economic development programs under the magnifying glass

For the past few weeks, the Senate Commerce Committee has been holding hearings on STAR Bonds (Sales Tax Revenue Bonds) and the projects they fund.  STAR Bond legislation will expire without the legislature voting to continue the program, which has been used for projects like the Kansas City NASCAR Track and Village West.

The Senate Assessment and Taxation Committee held a long hearing Thursday on the PEAK Program.  PEAK stands for Providing Employment Across Kansas.

Enacted in 2009, PEAK provides benefits to companies to relocate or expand operations and jobs in Kansas.

Approved companies can receive up to 95 percent of the Kansas withholding of PEAK eligible employees that are paid at or above the county median wage.  The incentive can be approved by the Kansas Secretary of Commerce for up to ten years.

Hearings were held on two bills. Senate Bill 222 would impose a one year moratorium on PEAK.  Senate Bill 223 puts limitations on how PEAK can be used.  Most notably, it could not be used to attract a business from less than 250 miles away!

Supporters of the bills were the Kansas Policy Institute and Americans For Prosperity.  The Kansas Chamber of Commerce, often aligned with those groups on tax issues, was on the other side this time, opposing the bills.

Local chamber of commerce and economic development officials also appeared in support of PEAK.

Tom Robinette of the Overland Park Chamber of Commerce said, “…it makes little sense to tie the hands of those professionals (economic developers) for an entire year, taking away what has been demonstrated to be a very successful and effective economic development tool.”

Robinette also produced a statement from 21 local chambers of commerce calling for the preservation of economic development programs, including PEAK, which are “critical tools used to retain and attract businesses and create jobs throughout Kansas.”

Blake Schreck of the Lenexa Chamber said, “an aggressive incentive package is expected” when competing with other states for jobs, adding, “A new job to the state is new revenue to the state.

The Topeka Chamber’s Matt Pivarnik said, “A number of Topeka’s fastest-growing employers have taken advantage of these incentives.  In most cases, these were companies which could have chosen to locate elsewhere.  They chose to relocate to Topeka, or to stay here, for a number of reasons.  Having spoken directly with officials at these companies, we know their ability to utilize PEAK tax credits was an important part of their decision-logic.”

The committee took no action on the bills.

 

Bill tracking

Here’s our latest bill tracking on measures we think are of interest to our readers.

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: June 30 deadline looms – what now?, raise income taxes, new biz filings debunked, blistering attack on bix exemption, hearing on tax lid

In this issue …

  • Court gives legislature until June 30 to fix school funding
  • What now on school finance?
  • Ruling means more pressure to raise income taxes
  • KCEG debunks arguments on new business filings
  • Tax Foundation publishes blistering attack on business exemption
  • Hearing Wednesday on property tax lid

 

Court gives legislature until June 30 to fix school funding

The Kansas Supreme Court unanimously ruled Thursday that the Kansas “block grant” system that was to temporarily replace the school finance formula is unconstitutional.  The Court retained jurisdiction of the case and is giving the Kansas Legislature until June 30 to pass something constitutional.

In its ruling, the Court says about a fourth of all students are not being properly educated:

“Plaintiffs have shown through the evidence from trial-and through updated results on standardized testing since then-that not only is the State failing to provide approximately one-fourth of all its public school K-12 students with the basic skills of both reading and math, but that it is also leaving behind significant groups of harder-to-educate students.”

The Court did not give the legislature a dollar amount that must be spent on K-12.  There is speculation the legislature could return to a form of the old formula and boost spending on at-risk students as a quick way to appease the justices.

The number most mentioned comes from the Kansas Department of Education, where Deputy Commissioner Dale Dennis was saying before the decision he thought it would take about $520 million.

The ruling by the Kansas Supreme Court that Kansas’ block grant system for public education is unconstitutional is no surprise and has been widely expected for months.  The block grants limited public school spending by the state and were a thinly veiled attempt to protect the 2012 income tax cuts by reducing the pressure to repeal them.

Having closely watched the new 2017 Kansas Legislature, it’s clear a strong bi-partisan majority of lawmakers understand the damage done by the income tax cuts because they passed legislation to reverse them.  Unfortunately, that legislation was vetoed by Governor Brownback.

It’s also clear a strong bi-partisan majority support public education and will do what’s necessary to follow the Court’s ruling and correct the funding structure, although that will be a difficult process.

Here’s a link to the 83-page decision.

 

What now on school finance?

Although there have been some hearings on bills introduced to deal with a new school finance formula, none have passed out of committees.  Key committees have been mainly studying the problem and may have been waiting for the direction of the Kansas Supreme Court before proceeding.

Activity is expected to speed up almost immediately when lawmakers return to the Statehouse Monday after a nine day mid-session break.

 

Ruling means more pressure to raise income taxes

The ruling puts pressure on legislators to come up with more revenue, particularly efforts to revisit income tax increases following Governor Brownback’s veto of House Bill 2178, which would have provided $590 million to the state for Fiscal Year 2018.

The House overrode the veto 85 to 40 (84 are needed to override a veto).

The Senate voted 24 to 16, three votes short of the 27 needed to override.

Here’s what was in the bill:

  • The business tax exemption is eliminated
  • A third tax bracket is added of 5.45 percent. It applies to single taxpayers that make more than $50,000 and married taxpayers that make more than $100,000
  • The bill is retroactive to January 1 of this year
  • Medical deductions (which were eliminated previously) are restored at 100 percent
  • The so-called March to Zero trigger mechanism that lowers income taxes in the future is eliminated

One possible path is to re-introduce the measure and see if three more votes can be picked up in the Senate with the knowledge that the Supreme Court has given the legislature a deadline.

Another path is to tweak the legislation to pick up three Senate votes and hope that the rest of the votes in the Senate and House will hold up under another veto.

In a statement reacting to the ruling, Governor Brownback says in part, “The Kansas Supreme Court correctly observes that our education system has failed to provide a suitable education for the lowest performing 25 percent of students.  The old funding formula failed our students, particularly those that struggle most.”

That statement is misleading.  The Supreme Court was talking about the failure of the Governor’s block grant system, not the old funding formula.

Here is Governor Sam Brownback’s complete statement reacting to the ruling.

 

KCEG debunks arguments on new business filings

Our friends at the Kansas Center for Economic Growth, have done some impressive research that strongly challenges Governor Brownback’s claim that his income tax cuts have created new businesses in the state.

The KCEG information using data from the Kansas Secretary of State’s Office shows that new business filings in Kansas are still below pre-recession levels, even with the income tax cuts. That occurs when you subtract the businesses that have gone away during the period.

The study also shows that employment growth at businesses that received the “pass through” income tax break lags the United States and much of the region.

Colorado, Nebraska, Missouri, and Oklahoma all had higher employment growth in pass through businesses.  Arkansas and Iowa had lower growth than Kansas.

Both the analysis of new business filings and employment growth provide no evidence that the 2012 income tax cuts have had an impact.

The charts are particularly illustrative.  Here’s a link to the information.

 

Tax Foundation publishes blistering attack on business exemption

The nonpartisan Tax Foundation in Washington, D.C. was often quoted during and after the 2012 debate over Kansas income tax cuts in efforts by supporters to justify the cuts.

Since then the respected research organization has been very critical of Kansas income tax exemption for business.

On February 21, the organization published online a blistering attack on the exemption, reminding readers that, “We described the pass-through carveout as ‘an incentive to game the tax system without doing anything productive for the economy.’  We acknowledge that pass-through entities face higher tax burdens than C-corporations, but argue that a tax carveout or reduced rate compared to wage income is administratively challenging and difficult to justify.”

The online story continues, “The Kansas pass-through carveout has no place in a good tax code.  It also destabilized the budget and made revenue projections volatile.”

“Kansas prior attempts to resolve its budget issues focused on temporary, short-term solutions – emptying the rainy day fund, raiding program reserve funds, and offering bonds on its tobacco revenue stream.  These were not sustainable fiscal solutions. “

Here’s a link to the entire online report.

 

Hearing Wednesday on property tax lid

There’s no bill number yet, but a hearing will be held Wednesday in the House Taxation Committee on a bill that changes the 2015 local property tax lid process from a mandated election to a protest petition election.

Current law caps cities’ and counties’ ability to raise property tax revenue up to 1.4 percent of their 2018 budget, taking into account some exemptions.  The percentage is calculated via a formula involving the Consumer Price Index and will vary from year to year.  In order to exceed the cap, a local election must be held to decide whether the increased spending takes effect.

Local governments say the current election provisions are incomplete.

The new proposal from the League of Kansas Municipalities (in conjunction with the Kansas Association of Counties) says an election will not be held unless a ten percent protest petition is turned in within 21 days of local government publishing a notice about the increased spending.

The ten percent is based on the number of voters who participated in the last city or county election, depending on which entity is proposing the budget.  If there is no protest petition (or not enough signatures), the increase can be implemented.  If an election is forced and voters do not overturn the increase, it can be implemented.

The protest petition election does not alter the tax lid law, only the election process.

KEPC UPDATE: Unthinkable, taxes & budget, Medicaid expansion, turnaround, surprises

In this issue …

  • Unthinkable?
  • Where we are on taxes and budget
  • Medicaid expansion passes House
  • We are at the turnaround
  • Is a surprise coming?
  • Bill Tracking

 

Unthinkable?

At the halfway point of the 2017 Kansas Legislature, lawmakers have taken actions that would have been unthinkable heresy by the 2016 Kansas Legislature, which was much more conservative.

The turning points were the August and November elections where voters upset with years of state budget turmoil voted for candidates who promised to fix the problem.

Here’s the shorthand.

  • On Wednesday, Governor Sam Brownback vetoed Substitute for House Bill 2178, the income tax bill that would have gone a long way toward fixing Kansas structural budget problems.
  • On Wednesday, the Kansas House of Representatives successfully overrode the Governor’s veto by a vote of 85 to 40. It takes 84 votes to override a veto in the House.  Here’s how they voted.
  • Later that day the Senate vote to override the veto was not successful. It was 24 to 16.  27 votes are needed to override.  Here’s how the senate voted.
  • After a lengthy debate on Wednesday, the House passed Medicaid expansion Thursday by a vote of 81 to 44. That is not a veto proof majority.  Here’s how they voted.

New legislators tended toward discouragement, but those who have been around longer see this as a monumental change from less than a year ago, when such actions would have been unthinkable.

 

Where we are on taxes and budget

With the failure by three votes to override the Governor’s veto of the income tax bill, here’s what’s happening.

Both the House and Senate Tax Committees met briefly “at the rail” on the 3rd floor of the Statehouse Thursday and passed out bills that could be part of a new tax package.

The House Taxation Committee bills:

  • House Bill 2370 is very similar to the vetoed bill.
  • House Bill 2315, which is the Governor’s tax bill with small tax increases (it depends on one-time fixes)
  • A bill requested by Rep. Ken Rahjes (R-Agra) that is basically the vetoed bill with two income tax brackets instead of three
  • A bill by Rep. Erin Davis (R-Olathe) that has to do with non-wage income

The Senate Assessment and Taxation Committee bills:

  • Senate Bill 175, the Governor’s tax bill
  • A suggestion by Sen. Jim Denning (R-Overland Park), the Senate Majority Leader, which is the vetoed bill without retroactivity on individual income tax rate increases. Those increases would take effect in 2018 rather than 2017 and cost the state about $100 million
  • Committee Chair Sen. Caryn Tyson (R-Parker) asked for an income tax bill suggested last year by then-Senate Tax Chairman Les Donovan (R-Wichita). It’s unclear what this bill does.
  • A bill that suspends the PEAK program (Providing Employment Across Kansas) for one year, requested by Sen. Tom Holland (D-Baldwin City)
  • A bill requested by Sen. Holland that includes modifications to PEAK.

Please note that we do not have details of some of these bills and they might not be available for more than a week.

The overall thinking is that if most of the “yes” votes will hold, tweaking the brackets or retroactivity could bring in the three senate votes needed to pass an override.

With the Governor’s veto sustained and bills that raise less money now in the mix, senate budget writers are going to begin to look at where to cut the budget.  They appear to be looking at cuts that assume that some income tax bill will pass, but one that will not cover all of expected future shortfalls for a few years.

 

Medicaid expansion passes House

The Kansas House of Representatives took House Bill 2044, which had to do with programs designed to alleviate emotional and behavior problems, and changed it to include Medicaid expansion, passing it 81 to 44.

The action came after the House Health and Human Services Committee tabled Medicaid expansion by one vote.

Here’s a link to the Legislative Research description of the bill.

The bill would expand eligibility for Medicaid to an estimated 150,000-plus residents of Kansas.

31 states, many with Republican governors, have already expanded Medicaid.  In addition to providing many Kansans with health care insurance (paid largely by the federal government) the measure is seen as relief for overburdened health care providers.  Many painted expansion as a way to help rural health care facilities which are in danger of closing.

Opponents point out that Medicaid expansion is part of the Affordable Care Act (Obamacare) which President Trump and many in Congress promise to “repeal and replace.”

Supporters say it’s unlikely that the president and congress will take health care away from large numbers of Americans.

 

We are at the turnaround

The Kansas Legislature is now on a ten-day unpaid break.  Thursday was the deadline for bills to pass out of their house of origin.

House bills must be passed by the House; Senate bills must be passed by the Senate or they are dead for the session.  However, bills from certain exempt committees are still alive.

This period is called the turnaround and is supposed to mark the halfway point of the legislative session.  The turnaround break is normally only four or five days.  The unusually long break is supposed to help save days for later in the session when difficult decisions might be faced.

 

Is a surprise coming?

Here’s a quick reminder that the Kansas Supreme Court could yet throw a monkey wrench into the proceedings.  Lawmakers know that a decision could come any day now on the school finance lawsuit that challenges the adequacy of state funding for public education.

A court ruling in favor of the school districts that are suing the state could force lawmakers to find an additional $150 million to $500 million.

 

Bill tracking

Here’s our latest bill tracking on measures we think are of interest to our readers.

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: Income tax Friday morning, idle funds, FY17 budget fix, school finance, higher ed, KanCare

In this issue …

  • Senate will take up House income tax bill Friday morning
  • House taps Treasurer’s idle funds
  • Bill to fix FY 2017 budget passes House
  • School finance hearings held
  • Fewer Kansas students pursuing higher education
  • KanCare expansion vote could come soon

 

Senate will take up House income tax bill Friday morning

As the Kansas Legislature approaches the official halfway point of the regular session next week, measures to balance the state budget are beginning to advance.

On a bipartisan vote of 76 to 48 Thursday, the Kansas House of Representatives passed a bill to raise income taxes, add a third tax bracket, eliminate the so-called March to Zero trigger mechanism, and restore the itemized deduction for medical expenses.  The bill raises an estimated $590 million next fiscal year.  It now goes to the Kansas Senate, which has scheduled a debate for Friday morning.

Here’s a link to how lawmakers voted. The bill is Substitute for House Bill 2178.

40 Republicans and 36 Democrats voted for the measure, while 44 Republicans and four Democrats voted no.

Observers noted that a re-established Republican-Democrat coalition worked together to pass the bill and challenge Governor Sam Brownback’s tax plan.  Brownback wanted to use mostly one-time money to shore up the budget while keeping his 2012 income tax cuts.

Brownback has attacked the House measure and threatened to veto it.

On Thursday afternoon the Kansas Senate debated a Democrat-written bill (SB 188), but a motion to advance it to a final vote failed by a vote of 10 to 30.  The Senate Democrat bill would have raised $702 million in FY 2018, significantly more than the House bill that will be debated Friday.

Here’s a link to the explanation of that bill.

 

House taps Treasurer’s idle funds

One proposal by Governor Brownback has been given reluctant preliminary approval by the Kansas House.

House Bill 2161 liquidates the long term investment fund through the Pooled Money Investment Board (PMIB) to raise $317.1 million to fill the FY 2017 budget gap (said to be about $350 million).  Lawmakers express a lot of distaste for this approach, but say it’s the only option to prevent deep budget cuts, especially to education.

Under the bill, the state would make annual loan payments of about $52 million for six years to pay the money back.  The first installment would be due June 30, 2019.

The measure, if passed, would fill most of the budget hole until any income tax increases would start flowing into the state when 2017 taxes are due in 2018.

A final vote on HB 2161 will take place Friday morning in the House of Representatives.

 

Bill to fix FY 2017 budget passes House

In conjunction with HB 2161 (above), the House will also vote Friday morning on House Bill 2052, the rescission bill.

The bill makes adjustments to the current Fiscal Year 2017 budget to make it balance when passed in conjunction with the liquidation of the long term investment fund contained in HB 2161.

Here’s a link to an official Legislative Research explanation of the bill.

If both HB 2161 and HB 2052 pass on Friday, the Kansas House of Representatives will have accomplished something important.  It will have completed a House plan to fix the current year budget and deal with future budgets.

The Senate Ways & Means Committee has passed legislation dealing with the Treasurer’s idle funds and the FY 2017 budget rescission, but it has not been taken up yet by the full Senate.

A word of caution: although the House actions are significant to solving the state’s problems, the crisis facing the T-WORKS transportation program remains unsettled.  With the money taken from KDOT and funds expected to be taken from transportation-designated sales tax, highways and bridges face a bleak future.

Those familiar with KDOT believe significant erosion of roads and bridges will occur within the decade (if not sooner) without restoration of funding.

 

School finance hearings held

The first of three bills competing to be the next school finance formula had hearings this week in the House Committee on K-12 Education Budget.

House Bill 2270 was developed over the past two years by Representative Melissa Rooker (R-Fairway) and Senator Laura Kelly (D-Topeka).

Rooker and Kelly are proposing a new formula that is similar to the previous formula, which was repealed in 2015 for the current block grant system.

Some of the new ideas in the bill:

  • Enrollment count would be based on the previous year’s numbers
  • Kindergarten students are counted as full-time if it’s an all day program
  • The way at-risk weighting is determined changes: based on census information
  • Virtual school aid would be based on the “foundation student aid amount”
  • Capitol outlay budget help from the state would require local districts to levy a minimum of four mills local effort

The Legislative Research Department estimates the state would need to increase K-12 funding by $336.5 million in FY 2018 under the measure, with increases of about $200 million each year afterward for the next three years.

 

Fewer Kansas students pursuing higher education

Handouts compiled by Kansas State University officials for a meeting this week concerning University admissions contained some alarming information.

The percent of Kansas high school students pursuing higher education in Kansas has dropped from 83.6 percent in 2012 to 72.1 percent in 2016.  That an 11.5 percent drop.

The information was compiled by the Kansas State University Office of Undergraduate Admissions using a variety of reports.  The information was assembled for a qualified admissions presentation for the Kansas Board of Regents.

State budget reductions in support for higher education over the past several years have resulted in increased tuition costs.  Some believe that’s one reason that higher education enrollment is down 1.2 percent this year in Kansas.

Respected economic studies have indicated that a higher level of education in the population results in higher economic growth, which makes the latest revelations troubling.

 

KanCare expansion vote could come soon

The House Committee on Health and Human Services held hearings last week on HB 2064, which expands Medicaid in Kansas.

The committee might take a vote on the measure at its meeting Friday afternoon.  The agenda lists “action on bills previously heard.”  The measure takes effect in 2018.

Here’s a link to more information.

One key to passage is that if federal Medicaid funds are ever reduced, the program would be terminated over a 12-month period.  That’s designed to deal with detractors who argue that Medicaid expansion is bad because the federal government will default on its commitment and the state will be left holding the bag.

In previous years, legislative leadership has prevented Medicaid expansion from coming out of committee or even coming up for a vote on the floor.  That may change with many new members and new leadership.

 

Bill tracking

Here’s our latest bill tracking on measures we think are of interest to our readers. 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: Income tax bill, cuts & tax debate, S&P bonds downgraded, economist, Medicaid expansion, STAR Bonds

In this issue …

  • House Tax kicks out an income tax bill
  • Senate delays cuts and tax increase debate
  • S & P moves Kansas bonds to negative
  • Economist questioned about tax policy
  • Medicaid expansion hearings continue next week
  • Intense STAR Bonds review next week

 

House Tax kicks out an income tax bill

By a bi-partisan vote of 13 to 9, the House Taxation Committee has passed House Bill 2178, which is now a tax reform bill that is designed to help Kansas get out of its budget problem.

Here’s what’s in the bill as we understand it:

  • The business tax exemption is eliminated
  • A third tax bracket is added of 5.45 percent. It applies to single taxpayers that make more than $50,000 and married taxpayers that make more than $100,000
  • The bill is retroactive to January 1 of this year
  • Medical deductions (which were eliminated previously) are restored at 100 percent
  • The so-called March to Zero trigger mechanism that lowers income taxes in the future is eliminated

Here’s the committee vote:

Voting for:  Sawyer, Wolf-Moore, Concannon, Ruiz, Burroughs, Proehl, Alcala, Ohaebosim, Francis, Eplee, Gartner, Kelly and Phillips.

Voting against:  Williams, Themesch, Rafie, Mason, Corbet, Davis, Hawkins, Rahjes and Smith.

The bill now goes to the full House of Representatives for debate.

We do not know how much money the bill raises exactly.  However, it appears it will be much more than the proposal the Senate was to debate Thursday, but postponed.


Senate delays cuts and tax increase debate

Meanwhile the Senate’s day was not as productive.

On Thursday, the Kansas Senate unexpectedly postponed debate on a bill to cut the current budget.  Leadership said there are not enough votes to pass the legislation.  Senators are being given the weekend to think things over and talk to constituents.

The legislation, SB 147, would have imposed a 5 percent cut on school districts and 3 percent on higher education.  Support began to falter when senators saw school finance runs that showed what would happen to the school districts they represent.

Statehouse observers and lawmakers had expected a long day of debate.  All Senate committee meetings for the day had been cancelled.  Behind the scenes strategies included reducing the cuts to three percent for schools, but even that failed to gain the 21 votes needed when senators were surveyed.

A second bill that was scheduled for debate would have increased income taxes and eliminated the business income tax exemption.

Senate President Susan Wagle (R-Wichita) and other Republican Senate leaders said because the situation is serious, no bills would be considered for passage until the budget solution is advanced in the Senate.  Kansas faces a $320 million shortage to fund the current year (FY 2017 budget).

In a curious related event, the Senate Assessment and Taxation Committee held a quick meeting afterward where a series of bills were introduced, perhaps to either raise money or put pressure on some senators to support the cuts.

The bills introduced included:

  • A three year moratorium on PEAK (Providing Employment Across Kansas)
  • A three year moratorium on HPIP (The High Performance Incentive Program)
  • A three year moratorium on new STAR Bonds (Sales Tax Revenue Bonds)
  • A bill that returns pass through wages to income tax
  • A bill that allows medical expenses to be deducted on state income tax
  • A bill that taxes Regents employees retirement, an issue that has been floating around in discussions

 

S & P moves Kansas bonds to negative

The bond ratings agency Standard and Poor’s has reportedly revised Kansas’ credit outlook from stable to negative.  The reason given: weak economic trends and “structural budget pressures.”  Standard and Poor’s downgraded Kansas credit rating in July.

According to a story in the Lawrence Journal-World, S & P Global Ratings ranks Kansas bonds as AA-.

The newspaper says, “Only three states – Illinois, New Jersey and Kentucky-have lower S&P ratings than Kansas.”

 

Economist questioned about tax policy

The House Taxation Committee, in an effort to get a handle on good tax policy, brought in Wichita State University economist Dr. Ken Kriz this week for a session of Q and A.

Kriz is the Distinguished Regents Professor of Public Finance at WSU.

During questions and answers, Kriz said there is no tax you can increase and not have a negative effect.  Some are less negative than others.

Kriz also said taxes are usually not a huge part of how people or businesses make their decisions.  It’s more about regulations and quality of life.

 

Medicaid expansion hearings will continue next week

Three days of Medicaid expansion hearings were held in the House Health and Human Service Committee this week.  The bill is HB 2064, the KanCare bridge to a healthy Kansas program.  Supporters packed the hearing for two days.  Opponents were heard Thursday and will continue next week.

It appears likely that the committee will be allowed to debate, amend, and vote on the bill, possibly next week.

 

Intense STAR Bonds review next week

STAR Bonds (Sales Tax Revenue Bonds) will expire this year without legislation to continue to program.

Sales Tax Revenue (STAR) Bonds provide Kansas municipalities the opportunity to issue bonds to finance the development of major commercial, entertainment and tourism areas and use the sales tax revenue generated by the development to pay off the bonds.

The program has been somewhat controversial because some lawmakers fear it is diverting sales tax revenue that would otherwise flow to governments.  Supporters say the developments would not take place without STAR Bonds.  Projects like Village West and the NASCAR Track in Wyandotte County have used STAR Bonds, as well as tourist attractions like Strataca, the underground salt mine museum near Hutchinson.

The Senate Commerce Committee will hold informational meetings next week on STAR Bonds and whether changes need to be made to them before the legislation is renewed.

 

Bill tracking

Here’s our latest bill tracking on measures we think are of interest to our readers.

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: House tax, Senate income tax, transpo, senate cuts, sales tax problems, Medicaid expansion, new Economic Lifelines leader, immigration, watch online

In this issue …

  • House Taxation likely to begin working tax bills next week
  • Suddenly, Senate has an income tax bill
  • What about transportation?
  • Senate leaning toward budget cuts?
  • Problems with sales tax outlined
  • Medicaid expansion hearing is next week
  • New Economic Lifelines leadership announced
  • Immigration issue returns
  • Live streaming: how to watch committees online

 

House Taxation likely to begin working tax bills next week

The House Taxation Committee has held hours of hearings on tax issues during the first four weeks of the 2017 legislative session, exploring potential solutions to the state’s approximately $1.1 billion budget hole over the next two and a half years.

Chairman Steven Johnson (R-Assaria) said this week he hopes to begin working on tax legislation next week.  That would come sometime after Tuesday’s Rise Up Kansas bill has a hearing.

HB 2237 is the comprehensive plan developed by the coalition of organizations that make up Rise Up Kansas.  Here’s a link to the coalition’s web site that describes the legislation.

It includes taxing business pass through income; adjusting income tax rates; increasing motor vehicle fuels tax to replace transportation sales tax that would go to the general fund; stopping the “March to Zero” trigger mechanism that further reduces income tax rates; and reducing the food sales tax.

The committee spent much of this week reviewing sales tax exemptions with an eye toward removing some.  It also took testimony on liquor and tobacco tax increases proposed by Governor Brownback and motor vehicle fuel tax increases.

 

Suddenly, Senate has an income tax bill

SB 147, an income tax bill, was introduced Thursday afternoon in the Kansas Senate with little information available on it until Thursday evening.

On Thursday afternoon, Senate Assessment and Taxation Committee Chair Caryn Tyson (R-Parker) announced a hearing on the bill for one p.m. Monday as lobbyists struggled to understand it to see if they wanted to testify.

Our first reading of the bill indicates it increases some of the existing individual income tax rates this year and eliminates the business income tax exemption passed in 2012.  Penalties for certain underpayments are forgiven for much of this year since, if passed, many will not have had enough withholding or estimated tax paid.

 

What about transportation?

With all the focus on income taxes, the House Taxation Committee heard warnings from contractors and others that the state’s transportation program is on life support and needs attention.  The comments came as the committee discussed motor fuels tax increases on Wednesday.

Bob Totten, Executive Vice President of the Kansas Contractors Association, told committee members $3.4 billion has been taken from the T-WORKS program.  His association believes an eleven cent a gallon gas tax would raise $197 million, which would allow Kansas to have a safe and reliable highway system.  Totten said the KCA likes the fuel tax because it can’t be taken for other purposes. The KCA is part of the Rise Up Kansas coalition (see story above) that also supports the increase.

Kansas Contractors Association President Kelly Briggs of Manhattan said the KCA wants to get Kansas back to normal regarding highways.  “This was an experiment that did not work and we need to stop raiding the Bank of KDOT.”

Mike Shilling of Shilling Construction in Manhattan said, “When we have work, we employ 145 people.  Right now, there is little or no work available due to the loss of funding.”  Shilling blamed the situation o the 2012 income tax cuts and said the raiding of KDOT has to stop.

In my testimony on behalf of KEPC, I said, “As an organization, we do not yet have a position on what revenue source you should use to shore up the T-WORKS program, but it does need attention.  We understand the overwhelming nature of the state’s current fiscal crisis demands your attention, but we urge you not to forget the importance of transportation and the danger of not paying attention to it.”

 

Senate leaning toward budget cuts?

Even though the Senate will have a hearing on an income tax bill Monday, Senators seem to be moving more slowly than the House on the issue.

A host of possible cuts were outlined at a closed caucus of Republican Senators held away from the Statehouse.

One conservative senator talked with me earlier about how cuts might affect K-12 education.  In his scenario, school districts would be forced to use their reserves for the budget.  He said it was estimated that at a 5 percent cut, 24 school districts would not have enough in reserves to finish out their budgets.  At about an 8.5 percent cut, about 64 school districts would lack the reserves.

A solution would be to set aside a pool of funds to distribute to school districts without enough reserves to finish the year.

 

Problems with sales tax outlined

A leading researcher for the Kansas Legislature ran through problems with the state sales tax for the Senate Commerce Committee Thursday.

Chris Courtwright, Principal Economist with the Kansas Legislative Research Department, said Internet sales are a “huge and growing problem” for the state.  “Hundreds of millions of dollars” are lost for state and local governments because of an inability to collect sales taxes on most online purchases.  He said sales taxes lost to the internet are growing faster than expected.

Courtwright expressed two other opinions about what may be affecting poor collections.  The recovery from the recession was not robust for low and moderate income Kansans.  They don’t have the buying power they once possessed.  He added that the high combined sales tax (state and local) in Kansas may be influencing consumer behavior.  They might not spend as much or they might cross state lines for some purchases.

We at the Kansas Economic Progress Council have been arguing in testimony and public presentations that the shift from income to sales tax to fund state government is unwise because of just such weaknesses

A 1995 study by the Governor’s Tax Equity Task Force concluded: “Because all revenue sources have their weaknesses, a balanced tax system will reduce the magnitude of problems caused by over reliance on a single tax source.”

 

Medicaid expansion hearing is next week

The House Health and Human Services Committee will hold hearings on a Medicaid expansion bill on Monday, Wednesday, and Thursday of next week.  Supporters will be heard February 8 (Wednesday).

If you would like to submit written testimony in support of expansion, you can e-mail it to testimony@expandKanCare.com.  It will be included in materials presented to the committee.

Testimony should be addressed to Chairman Dan Hawkins and the House Health and Human Services Committee.  Organizers suggest a people story would be powerful.  Information to help on testimony can be found on the Alliance for a Health Kansas website.

 

New Economic Lifelines leadership announced

The co-chairs of the transportation coalition Economic Lifelines, Dan Watkins and John Koger, have announced a new Executive Director of the organization.  She is Tara Mays.  She is part of the Mays Group headed by former Speaker of the House Doug Mays.

The announcement of her appointment said, “She has broad knowledge of policy development with both the Kansas Department of Transportation and the Kansas Turnpike Authority.  Tara’s work in Kansas government spans more than a decade centered around the development and implementation of the T-WORKS program and the advancement of transportation partnerships.”

 

Immigration issue returns

A business immigration coalition that seems to have been dormant for a few years is getting back together to react to new immigration-related legislation that has been introduced or is expected to be introduced.

The coalition of business and agriculture organizations was very active about five years ago.  The election of President Trump and his proposals to restrict immigration may have encouraged the issue to re-emerge at the state level.

SB 133, introduced Thursday, is one such measure.  The title of the bill is the Kansas employer e-verify accountability act.  E-verify is an Internet-based system that allows businesses to determine the eligibility of their employees to work in the United States.  It is a free service of U.S. Citizenship and Immigration Services.

Under the bill, all state and local government agencies must actively participate in the federal e-verify program to verify the legal status of all new employees. That would begin in 2018.  No contracts for goods or services having a value of over $50,000 can be awarded to anyone who does not verify employees through e-verify.

The program is controversial because legal workers must prove they are eligible.  If not approved, they have to spend their own time and effort to fix any errors in the system in order to be hired.  One audit estimated that about one percent of e-verify subjects have initially been deemed ineligible when they were actually legal.

 

Live streaming: how to watch committees online

You can now watch many legislative committees online as they meet.  Last year’s legislature authorized expansion of live streaming.  Most committees have video as well as audio, but not all.

To listen live, go to the Kansas Legislature’s website committee tab and click on the committee you would like to follow.

Here are the committees you can listen to live:

112-N: House Appropriations (9a); House Commerce, Labor, and Economic Development (1:30p); and House Judiciary (3:30p)

346-S: House Federal and State Affairs (9a); Senate Judiciary (10:30a); K-12 Education Budget Committee (1:30p); and House Taxation (3:30p).  346-S streams both audio and video feed.

548-S: Senate Commerce (8:30a); Senate Assessment and Taxation (9:30a); Senate Ways and Means Committee (10:30a); and Senate Utilities (1:30p)

582-N: House Energy, Utilities, and Telecommunications (9a M/W); House Water and Environment (9a T/TH); House Transportation (1:30p); and House Agriculture (3:30p)

Other rooms are expected to be added later this month or next.

 

Bill tracking

Here’s our latest bill tracking on measures we think are of interest to our readers.

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: Tax options, cut budget, sales tax, KDOT, medicaid, TABOR, ed commissioner, tax lid, bill tracking

In this issue …

  • Committees talk about income tax options
  • What if we just cut the budget?
  • House Taxation delves into controversial sales tax exemptions
  • KDOT talks about delays, transfers
  • Medicaid expansion hearings will be held in February
  • Administration defends against Medicaid action by feds
  • TABOR introduced
  • Education Commissioner wants more counselors, psychologists, social workers
  • Leadership group supports repeal of tax lid, but some warn it won’t be easy
  • Bill tracking

 

Committees talk about income tax options

House and Senate Taxation Committees continued to discuss changes to the 2012 income tax cuts.  They are widely seen as responsible for the state’s current deep budget crisis.

The House Taxation Committee continued its hearing from last week on HB 2023, which eliminates the exemption for business income taxes for most business entities in the state.  Notable opponents included the Kansas Chamber of Commerce and Americans For Prosperity.  Both organizations argued that the 2012 exemption is growing business and jobs despite a lack of tangible evidence.

Official figures show the opposite: that private sector job growth was negative 0.8 percent in Kansas for 2016.  That’s a loss of 9,400 jobs.

Tom Robinette of the Overland Park Chamber of Commerce spoke on behalf of a coalition of local chambers of commerce who represent 13,000 businesses.  On behalf of those chambers, Robinette said the tax cuts went too far too fast and have not helped the economy.  He added that the cuts have not had a positive effect on jobs or growth.

Testifying on behalf of the Greater Kansas City Chamber, Sandy Braden supported the measure, saying it would help return the tax structure to what it was originally and establish a more fair and equitable structure.

I testified on behalf of KEPC as neutral.  Our position is that the business exemption and the individual income tax rates must both be revisited.  I also said the trigger mechanism that cuts rates further in the future must be stopped.

“The idea of shifting the burden of state government finance from income to sales taxes was flawed,” I said.  “It’s not working and we need to begin shifting back to the income tax.

“The decision was made in 2012 without adequate consideration of whether the sales tax could support the burden and especially the affect of the sales tax on business in Kansas.”

In summary, I pointed out, “Government stability in revenue and services is a strong foundation of business growth.  We support a return to income tax to balance our revenue streams.”

Meanwhile the Senate Assessment and Taxation Committee has been reviewing information on the Kansas income tax cuts, but has not held any hearings yet.  There was discussion of various scenarios to change the business exemption and what would happen to revenues with each of them.  The committee also discussed possible rate increases.

Committee Chair Caryn Tyson (R-Parker) said the committee will continue to look at the issue and might be continuing its discussion into next week.

At the Local Government Day activities Wednesday, Senate Vice President Jeff Longbine (R-Emporia) said that he thinks elimination of the business income tax exemption is a foregone conclusion.

There were reports Thursday evening that Senate Republicans will unveil a plan on Monday.

 

What if we just cut the budget?

This week the House Appropriations Committee took a look at what it would take to balance the current fiscal year budget with just budget cuts, as some have suggested.  The answer was not pretty.

It would take 6.95 percent across the board cuts for everything in the general fund.  That raises an estimated $224.5 million.

Here’s just some of what that would do:

  • K-12 public education would lose $225 million
  • The Department of Aging and Disability Services loses $25
  • Kansas Board of Regents loses $13 million
  • Kansas Department of Corrections loses $11 million
  • Kansas Department for Children and Families would lose $9.4 million

Some school district losses:

  • Wichita: $24 million
  • Kansas City, Kansas: $11.1 million
  • Olathe: $10.8 million
  • Shawnee Mission: $10.6 million
  • Blue Valley: $7.8 million
  • Topeka: $6.3 million
  • Lawrence: $4.7 million
  • Garden City: $3.6 million
  • Dodge City: $3.5 million
  • Salina: $3.1 million
  • Manhattan: $2.5 million
  • Hutchinson: $2.2 million
  • Hays: $1.1 million
  • Ottawa: $1 million

It’s basically an $8.5 percent reduction to each school district in Kansas.

The two major budget committees of the legislature, House Appropriations and Senate Ways & Means, have begun going through the governor’s budget agency by agency.  They use a subcommittee system.  Various subcommittees review budget requests, make changes and recommendations, and then present reports to the full committee for action.

 

House Taxation delves into controversial sales tax exemptions

Those who have been around the Statehouse for many years can remember the can of worms that has been opened at least four times in the past 40 years when removal of sales tax exemptions was discussed.

Removing some exemptions was discussed in the House Taxation Committee on Tuesday.  Another idea was to tax some of the exemptions at a lower rate and/ or for a set period of time, after which the change would sunset.

Various committee members asked to look into exemptions.  Here’s the list of what will be considered next week, as we understand it.  These are the items exempt from sales tax in current law that would be considered for imposition of the sales tax.

  • Telephone and telegraph service except certain interstate and international service
  • Labor service on original construction of a building or facility, the restoration, replacement or repair of a residence, bridge or highway
  • Sale of bingo cards
  • Customized computer software
  • Lottery tickets
  • Sale of farm or aquaculture machinery and equipment
  • Services rendered by an advertising agency or broadcast station
  • Lease or rental of films, records, tapes by motion picture exhibitors
  • Modified definition of sales or selling price to not include cash rebates granted by a manufacturer to a purchaser or lease or a new motor vehicle

In all, the committee discussed removing sales tax exemptions that could raise about $400 million.

Groups that support these exemptions are already mobilizing to protect them, much as they have when the subject came up in the past.

 

KDOT talks about delays, transfers

The Kansas Department of Transportation has been explaining what the raids on transportation funds have been doing to the T-WORKS program and it’s not good news.

For Fiscal Year 2018, new road and bridge projects will only total about $28 million.  That’s supposed to cover about 235 miles.

This year’s projects cost $88 million and covered 765 miles.  In FY 2015 new projects totaled $167 million and covered more than a thousand miles of roadways.

Over half a billion dollars in constructions projects continue to be delayed.  Ten are modernization and 13 are expansion projects.  Kansas Secretary of Transportation Richard Carlson was grilled about the agency’s activities at a meeting of the Senate Ways and Means Committee on Tuesday.

The Governor’s budget takes about $530 million a year from KDOT in 2018 and 2019.  Added to previous transfers, that means $3.7 billion will have been diverted from the T-WORKS Program by 2019.

48 projects have been cancelled since April of 2016, according to the Kansas Contractors Association.

At the Local Government Day activities on Wednesday, Senate Vice President Jeff Longbine (R-Emporia) said the state must first stabilize its fiscal situation before it can deal with salvaging the highway program.

 

Medicaid expansion hearings will be held in February

Medicaid expansion supporters are preparing for hearings on KanCare (Medicaid) expansion before the House Health and Human Services Committee on February 6, 8, and 9.  The measure being heard is HB 2064.

Testimony from supporters will be heard on February 8.  As in the past, a large crowd is expected.  Kansas’ major health care organizations support expansion, which would provide millions in federal money under is the Affordable Care Act (Obamacare).

Governor Brownback and the Kansas Legislature have resisted expansion in the past, to the point that any bills that could be amended to include expansion were prevented from coming up for debate in the House of Representatives.  With new leadership and newly elected lawmakers this year, that could change.

Clouding the picture is the election of President Donald Trump, who has promised to eliminate the Affordable Care Act.  Opponents of expansion argue it should not take place since the underlying federal funding may go away.

Supporters argue just the opposite.  They say Trump and Congress might eliminate Obamacare, but allow those states that have already expanded Medicaid to continue to receive the funding.  Kansas, they argue, could find itself without the additional money because it did not act earlier.

 

Administration defends against Medicaid action by feds

Federal officials have declared Kansas’ existing Medicaid program “substantively out of compliance” with federal law.  Brownback Administration officials say it was a political move by the outgoing Obama Administration.

Legislative committees are hearing about the report by the Centers for Medicare and Medicaid Services, which said there is a risk to the health and safety of some Medicaid participants in Kansas.  The CMS has denied Kansas’ request to extend a waiver, which would allow the state’s Medicaid program (called KanCare) to continue to receive funding.

Kansas Secretary of Health and Environment Dr. Susan Mosier discussed the federal action with a Senate Committee this week.  She said the extension was not denied, but delayed, and that Kansas was provided a pathway to approval.  The CMS is requiring the state to come up with a Corrective Action Plan.

Mosier admitted to the committee that public meetings scheduled for December were cancelled, but the agency now understands they are needed.  Mosier said she was alarmed at the tone of the language in the CMS letter and is concerned about the quality of the CMS analysis.

 

TABOR introduced

Constitutional amendments that limit tax and spending increases are on their way to introduction in the legislature.  One such amendment, SCR 1601, was introduced in the Kansas Senate Tuesday.

These are so-called Taxpayer Bill of Rights (TABOR) amendments, promoted by conservative and free market libertarian groups.  TABOR passed in Colorado in 1992.  In 2005, Colorado voters changed TABOR in a way that continues to raise the cap on spending because it was so restrictive.    That cap continues to increase.

One unforeseen side effect was when Colorado passed decriminalization of marijuana, which resulted in a lot of additional revenue for the state.  The money generated was supposed to be used for schools, police, and drug education.  However, there is so much additional revenue that TABOR prevents it from being spent.  The last available estimate for that revenue is $58 million.

Here’s what’s in SCR 1601.

  • A supermajority of 2/3 of the House and Senate would be required to create a new tax or increase an existing one
  • Spending and revenue limits on the state are imposed based on increases in inflation and population, with provisions for economic downturns
  • Expenditures in excess of the limit would have to be authorized by voters in a general election
  • A budget stabilization fund is created for use when state revenue declines
  • A debt prepayment fund is created to be used to redeem state bonds payable from the state general fund to produce debt service savings
  • Excess state revenues (after payments to the budget stabilization fund and debt prepayment fund) would be refunded to state property or income taxpayers
  • State temporary borrowing would be limited

It’s not certain how much support a TABOR amendment would garner these days.  The most recent election produced a more centrist legislature.  Overspending does not appear to be a problem in the past several years as the 2012 income tax cuts have resulted in reduced revenue and reduced state services.

 

Education Commissioner wants more counselors, psychologists, social workers

Kansas Education Commissioner Randy Watson this week told legislators looking at school finance that the state needs more school counselors, more school psychologists, and more school social workers.  That’s not a new position for Watson, who has been promoting school counseling for some time now.

Watson told the Topeka Capitol-Journal last year he thinks there are not enough school counselors in Kansas.  There are currently about 1,100 at Kansas public schools, resulting in a ratio of about 440 students per counselor.  Watson thinks a ratio of 200 to 250 students per counselor would be more effective.

The recommend standard by the American School Counselor Association is one counselor for every 250 students.  To reach that level, Kansas school districts would have to hire about 840 more.

Speaking to the House of Representatives K-12 Education Budget Committee this week, Watson urged lawmakers to consider school counselors, psychologists, and social workers when a new school finance formula is written.

Watson noted that at Atwood, Kansas there is one school counselor for five school districts.  That person spends more time on the road than with students.

 

Leadership group supports repeal of tax lid, but some warn it won’t be easy

A group of legislative leaders supported repealing the property tax lid legislation of 2015, but some think it could be difficult to explain to voters.

The discussion came Wednesday at Local Government Day in Topeka, sponsored by the League of Kansas Municipalities and the Kansas Association of Counties.

Senate Vice President Jeff Longbine (R-Emporia), Senate Minority Leader Anthony Hensley (D-Topeka), and House Minority Leader Jim Ward (D-Topeka) all supported repeal.

House Local Government Committee Chair Kristey Williams (R-August) said it would not be so easy.  Williams said a vote to repeal would be hard for legislators to defend to voters.  She supported other changes mentioned to soften the tax lid.  They include requiring a protest petition before an election is forced and changes that allowed more exemptions to what’s covered in the tax lid.

 

Bill tracking

Here’s our second week of bill tracking on measures we think are of interest to our readers. You will 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. We are in the process of creating a user-friendly web interface, but in the meantime you may click here to open a printable PDF version of the latest bill tracking information. Please don’t hesitate to contact us if you have any questions or need more information.

KEPC UPDATE: Checks bounce in March, KanCare debaucle, biz tax hearing, ROZ, aircraft expansion hinted, STAR Bonds, regents update, new bill tracking service

In this issue …

  • “State checks will start bouncing in March”
  • Kansas “substantively out of compliance” on Medicaid
  • Bill repealing business tax exemption has hearing
  • Suave says ROZ is underutilized
  • Military aircraft expansion hinted
  • What about extending STAR Bonds?
  • Regents update lawmakers
  • A new service –tracking bills

 

“State checks will start bouncing in March”

State legislators wanting to carefully craft a solution to the state’s structural budget imbalance are faced with a timing dilemma.  They don’t want to rush the process too much, but “State checks will start bouncing in March,” according to one lawmaker who understands the situation.  An expert in the field tells me March or April.

Governor Brownback has proposed a plan to fill a $1.1 billion budget hole over the next three years with mostly temporary solutions that have received a cold reception from legislators.

Tax increases would help fill the hole, but any income tax changes would not result in substantial revenue until 2018.  That leaves a current year (FY 2017) budget hold of about $350 million to handle.

So far, the most palatable of the unpopular choices offered by Brownback is liquidating the long-term investment fund of the state.  That would bring in about $317 million.  Even veteran legislators seem to be struggling to understand how that option would work.  In addition, it would likely result in a further reduction in the state’s credit rating.

One legislator on the House Taxation Committee put the current year problem this way: It would take a 4.5 percent budget cut in the current budget to balance the FY 2017 budget.  However, because there are only 5 and a half months left in FY 2017, it would take about a ten percent cut in the remaining budget to balance it.

That’s one reason legislators are so upset with Brownback.  He had the authority to reduce the pain by cutting sooner, when the problem became obvious, but declined to do anything.

It appears that much of the work to fix the revenue side of the problem so far is occurring in the House Taxation Committee under Chairman Steven Johnson (R-Assaria), who has pulled together Republicans and Democrats seeking a solution.  That includes private meetings.  That kind of cooperation has not occurred in the past four years.

Meanwhile, our sources say the Senate is working quietly behind the scenes on a comprehensive tax plan.  It is said to include removing the LLC exemption, adding a third tax bracket for individual income tax, and a five cent per gallon motor fuels tax increase to replenish the highway fund.

Senate leaders don’t want several votes on tax increases that can be used against a legislator running for re-election.  They want one vote.

Here’s a more in depth critique of the Governor’s proposals from former Budget Director Duane Goossen, now with the Kansas Center for Economic Growth.

 

Kansas “substantively out of compliance” on Medicaid

The Statehouse was abuzz Thursday with news first published in the Topeka Capital-Journal that the federal government has rejected an extension of Kansas’ Medicaid (KanCare) waiver, stating in brutal language that the state is “substantively out of compliance” with U.S. law.

The newspaper obtained documents that say the Centers for Medicare and Medicaid Services found serious problems during on-site reviews.

According to the Capital-Journal story: “Limited coordination between state agencies poses a risk to the health and safety of some participants and Kansas didn’t provide sufficient oversight of the managed care organizations, the review found.”

In response, the Brownback Administration says it is preparing a corrective action plan.

You can read the story here.

 

Bill repealing business tax exemptions has hearing

Over 40 people submitted testimony on a bill to repeal the business tax exemption in the House Taxation Committee Thursday afternoon into the evening hours.  Because there were so many wishing to testify and the lateness of the hour, the Kansas Economic Progress Council and a few others have been delayed until Monday..

The bill is House Bill 2023, which ends the so-called LLC exemption for Kansas business income tax as of January 1 of this year.

 

Soave says ROZ is underutilized

Kansas Secretary of Commerce Antonio Soave, speaking to the Senate Commerce Committee this week, said Rural Opportunity Zone (ROZ) legislation is being underutilized by local governments.

Soave said local governments tell him, “there’s a lot of red tape” and requirements are “burdensome.”

The 2012 program designated 77 counties as Rural Opportunity Zones, providing a 100 percent state income tax waiver for up to five years for those who move to the zones for work from out of state.  The legislation also includes repayment of up to $3,000 a year in outstanding student loans.

The student loan repayment program is a state-county partnership that requires counties to join that part of the program for individuals to receive the student loan repayment incentive.

The Committee asked Soave to prepare a report on ROZ and bring it to the committee.

 

Military aircraft expansion hinted

You know you’re about to hear something interesting when a cabinet secretary tells a committee in a public meeting, “I shouldn’t be telling you this.”

At the above-mentioned Senate Commerce Committee meeting, Commerce Secretary Antonio Suave hinted at “important military scenarios” involving the aircraft industry in the Wichita area and possible job expansions.  Suave was responding to a question from a committee member about the health of the aircraft industry.

Suave did not say anything else, but at a later meeting of the South Central Kansas Legislative Delegation, speculation centered on Spirit AeroSystems (the former Boeing Commercial plant) and nearby empty buildings that were formerly part of Boeing Military Division.

 

What about extending STAR Bonds?

Some who follow economic development legislation (including KEPC) are scratching our collective heads about what’s going on with STAR Bonds.  Sales Tax Revenue (STAR) Bonds provide Kansas municipalities the opportunity to issue bonds to finance the development of major commercial, entertainment and tourism areas and use the sales tax revenue generated by the development to pay off the bonds.

The program has been used to attract projects like the NASCAR Track and to lure the American Royal from Missouri.  Several communities have projects on the drawing board.

It will sunset on July 1, 2017 without legislative action.  So far, there has been no bill introduced to extend the program.  Neither the Governor nor the Secretary of Commerce has asked lawmakers to extend it.  Some legislators have become aware of the situation and plan to begin working on legislation.

We are told the Governor was unaware there was a sunset in the law coming up.

 

Regents update lawmakers

The President and CEO of the Kansas Board of Regents told legislative committees this week Kansas has the highest rate of students in the country who started at two-year public institutions and then finished their degrees at a four-year institution.  Only five states had more than 20 percent completion rate.  Kansas was the highest with 25 percent.

Dr. Blake Flanders warned lawmakers that reduced state support for higher education was causing tuition increases.  Those increases are driving up student debt. Flanders said 63 percent of students graduate with student debt.  Of that 63 percent, the average debt is about $25,000.

 

A new service – tracking bills

There’s a lot of legislation introduced during the session in Kansas, too much to report on in depth in this weekly newsletter.  In this newsletter, we will try something new.  We will track bills we think are of interest to KEPC readers. We have a page dedicated to these bills and will add to them each week as new legislation is introduced. You will 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. We are in the process of creating a user-friendly web interface, but in the meantime you may click here to open a printable PDF version of the latest bill tracking information. Please don’t hesitate to contact us if you have any questions or need more information.