KEPC UPDATE: Feb 2, 2019

In this issue…
TAX: SB22 and Fed Tax Windfall
SPEND: Governor’s Budget Introduced in Committees
TRANSPORTATION: Final Report Issued
COMMERCE: Eco Devo Overview, HB 2006, HB 2043
SPORTS GAMING: Two bills introduced in Fed and State
MEDICAID EXPANSION: Governor unveils plan
MARKLEY MUSINGS: Things are starting to heat up

TAX: SB 22 AND FED TAX WINDFALL
The Senate Select Committee on Federal Tax Code Implementation held hearings this week on SB 22. Tuesday, Wednesday, and Thursday of this week were dedicated to testimony from the Kansas Chamber, tax attorneys, and corporations potentially affected by the Federal Tax Cuts and Jobs Act (TCJA), specifically how multi-national corporations during business in the United States and state income taxed owed. TCJA moves business taxes from a worldwide taxation system to a territorial system. Kansas is a rolling conformity  state, meaning that any changes to the Federal Tax code will flow through to Kansas unless the legislature specifically alters statute (often referred to as “decoupling”). Regarding corporations, there are two primary issues:

965 Repatriation of Foreign Funds: the Federal Act provides for a one-time tax at preferential rates on deemed repatriation of certain deferred income of US Owned foreign companies. These preferential rates are anticipated to bring back $34 trillion into the U.S. Current Kansas law allows for a subtraction modification of 80%, so only 20% of the dollars would be taxed. SB 22 allows for a 100% modification. These repatriated funds are a one time thing.  They cannot be relied on as a future revenue source

Global Intangible Low-Taxed Income (GILTI): the new law significantly broadens the scope of foreign earnings that had been subject to current US taxation, effectively imposing a worldwide minimum tax on foreign earnings and subjects US shareholders of foreign corporations to current taxation on most earned income. It is intended to deter taxpayers from locating high-value activities and assets in low-tax countries. SB22 seeks to decouple Kansas from this provision.

Individual Tax Filers: TCJA nearly doubled the standard deduction rate for individual tax filers: married filing jointly increased from $13,000 to $24,000. It is anticipated that almost 88% of federal tax payers will take the standard deduction.  Again, Kansas is a rolling conformity state, so the legislature would actively have to decouple to allow Kansas filers to itemize deductions on their state income tax.

The fiscal note for SB 22 is significant. $192 million for FY2020, $113 million for FY2021 and $118 million for FY2022.

On Thursday, the Committee approved the bills passage as amended (technical amendment). The full senate is anticipated to debate SB 22 this upcoming week.

SPEND: GOVERNOR’S BUDGET INTRODUCED IN COMMITTEES
On Thursday, Governor Kelly’s budget was introduced in the Senate Ways & Means Committee and and House Appropriations Committee. Ways and Means Chair McGinn divided her committee into subcommittees to work the different portions of the budget.

TRANSPORTATION: FINAL REPORT ISSUED
The Transportation Task Force issued it’s final report on Monday. Key recommendations include:
Creation of a new, long-term plan of at least 10 years that includes funding for preservation, modernization and expansion of our transportation infrastructure;
Restoration of funding for preservation to protect previous investment in our transportation system;
Prioritization and completion of 21 modernization and expansion projects that were announced but unfunded in the previous T-Works long-term plan;
Amending statutes to authorize KDOT, working with the KS Turnpike Authority, to modify restrictions on what tolling can pay for and allow exploration of tolling on local projects with appropriate community input and support;
Adding an exemption in the tax lid statute for transportation purposes and modifications to demand transfers and consider other revenue options; and
Supporting KDOT’s current project selection process but adding additional merit for projects identified as priority corridors and/or include local participation.

COMMERCE: ECO DEVO OVERVIEW – HB 2006, HB 2043
On Monday, Acting Secretary of Commerce David Toland gave an overview of our state’s primary economic development tools: Promoting Employment Across Kansas (PEAK), High Performance Incentive Program (HPIP), Rural Opportunity Zones (ROZ), Sales Tax Revenue (STAR) Bonds, Angel Investment Tax Credits, and the Job Creation Fund.

Two bills regarding economic development and incentives heard this week:
HB 2006: requiring the Department of Commerce to compile and disclose on their website data related to various economic incentive programs. The Kansas Economic Development Alliance (KEDA) testified against the bill, citing confidentiality and unfunded mandate concerns.
HB 2043: requiring an inventory and evaluation of all major incentives, tax credits, and exemptions. 

SPORTS GAMING: TWO BILLS INTRODUCED IN FED AND STATE
The House Fed and State Committee heard testimony on two bills related to the expansion of sports gaming in Kansas:
HB 2032: Introduced by Representative Frownfelter, allows for expansion of sports betting solely at racing facilities
HB 2068: The Kansas Sports Wagering Act, Introduced by Representative Kessinger, allowing for the expansion of sports betting conducted by the Kansas Lottery, through lottery retailers, casinos and racetrack facilities managers. It also allows for sports wagering through the internet and mobile apps.

MEDICAID EXPANSION: GOVERNOR UNVEILS PLAN
On Tuesday, Governor Kelly unveiled her plan for medicaid expansion. The proposal to expand to 150,000 Kansans, is almost identical to the plan that  passed the House and Senate two years ago, but was vetoed by then Governor Brownback.  The House failed to override the veto. The plan would cover Kansans under 65 years old who earn less than 133% of the federal poverty level.

MARKLEY MUSINGS: THINGS ARE STARTING TO HEAT UP
First of all, can we all agree that GILTI is a horrible acronym for taxable income? Seriously. Things are starting to heat up as bills are making their way through the committee process.  It looks like there will be some floor action next week, especially in the Senate. One thing I know for sure, the significant pieces of legislation: tax reform, budget, education, Medicaid expansion, etc., will change and look much different when we get to the end of session. Thanks for allowing me to be your eyes and ears in Topeka.  Please call or email me anytime. Until next week.

KEPC UPDATE: Week Two

Week two of the 2019 session is a wrap. Here are the highlights.

House Rules
On Wednesday, by a vote of 104-15, the House approved a package of rules changes, primarily dealing with transparency and increasing from 63 to 70 the number of votes needed to bring a bill “above the line” with one day’s notice. The new transparency rules mirror changes made last year as a matter of policy.

Representative Victors brought an amendment to allow breastfeeding of infants on the house floor. The amendment was approved and included in the package.

Wagle Creates “Special” Tax Committee
Senate President Susan Wagle formed a special committee to study SB 22, the legislation returning the revenue windfall attributed to the change in the federal tax code. Wagle appointed herself Chairman, and the committee is made up of eight members of the Senate Committee on Assessment and Taxation, with one notable exception: Chair Sen. Caryn Tyson. Wagle has scheduled hearings on Tuesday, Wednesday and Thursday of next week, with an anticipated Thursday committee vote on the bill.

KPERS Re-amortization
The Governor’s plan to re-amortize KPERS to free up $145 million has drawn strong opposition from the KPERS Board as well as Senate and House leadership. In presentation to Ways and Means and Appropriations, Alan Conroy, Executive Director of KPERS, noted that extending the current amortization schedule keeps KPERS vulnerable to volatile market conditions for many years.

It’s worth noting that while it’s important to debate KPERS funding, the state of KPERS is generally secure. KPERS has $19 billion in assets, with approximately $1 billion in yearly contributions.

Governor’s Cabinet
Governor Kelly continues to fill out her top administration posts. Posts named to date include:
• Secretary of Administration: Duane Goosen
• Secretary of Agriculture: Mike Beam
• Secretary of Transportation: Julie Lorenz
• Sec of Commerce: David Toland
• Secretary of Corrections: Roger Werholtz
• Secretary of Children & Family and Aging: Laura Howard
• Adjutant General: Lee Tafanelli*
• Budget Director: Larry Campbell*
• Superintendent of Highway Patrol: Mark Bruce*
• State Fire Marshall: Doug Jorgenson*
*Tafanelli, Campbell, Bruce, and Jorgenson are held over from the previous administration

Medicaid Expansion Group
Governor Kelly has created a committee to provide input on expansion of KanCare. There is a short timeline for the committee to meet and provide input, as the governor has stated she wants to have a plan by the end of January. Members are:
• Tom Bell: Kansas Hospital Association
• Rep. Susan Concannon: state representative
• Denise Cyzman: Community Care Network of Kansas
• Cathy Harding: Wyandotte Health Foundation
• April Homan: Alliance for a Healthy Kansas
• Kyle Kessler: Association of Community Mental Health Centers
• Dr. Lee Norman: Kansas Department of Health and Environment
• John Russell: Kansas Medical Society
• Michael Stephens: Sunflower Health Plan
• Suzanne Wikle: Center for Law and Social Policy
• Rep. Kathy Wolfe Moore: state representative

Tax Foundation
This week, the DC-based Tax Foundation, was in Topeka to discuss tax policy and present a well-deserved award. The Tax Foundation is one of the nation’s leading independent tax policy nonprofits. Each year, they recognize state policymakers who take steps to reform taxes to make them more neutral, transparent, stable, and pro-growth. The 2018 Outstanding Achievement in State Tax Reform honored Representative Steve Johnson and Representative Tom Sawyer, Chair and Ranking Minority Member of the House Taxation Committee. In announcing the award, the Foundation praise them for “…deftly handling difficult negotiations on solutions for closing the state’s recurring budget shortfalls and secured the repeal of the state’s decidedly non-neutral pass-through exemption…Its repeal represented the best way for the state to address its revenue shortfall.”

In Committee: Senate Committee on Ways and Means
On Tuesday, the committee held a hearing on SB 9. This bill authorizes the transfer of $115 million from the state general fund to KPERS State/School Group employer contributions for FY 2019. In FY 2016, Governor Brownback ordered $97 million in allotment cuts when he signed the state budget. The $115 million represents the $97 million, plus interest.

House Committee on Appropriations
The Appropriations Committee this week held several informational meetings
• KPERS
• K-State overview of the federal Agricultural Improvement Act of 2018 (known as the farm bill), specifically how it relates to research and extension programming
• Transportation Task Force Update: the committee heard an overview of the task force’s work done the past year, protections in state law for transportation funding, meeting locations and topics, makeup of the task force membership, and information on delayed T-WORKS projects, both modernization and expansion projects. The estimated cost for the 21 delayed projects is $535 million in FY 2020. That number increases to $600 million if spread out over the next five years. The task force anticipates that it will submit its report to the legislature early next week. I will send out a notice with links to the report as soon as it is available.

House Committee on Taxation
On Tuesday, the Department of Revenue gave an informational briefing on internet sales.

Hearings were held on HB 2033 and HB 2040, providing sales tax authority for Dickinson, Finney, Jackson, Russell, and Thomas counties. HB 2040 (Finney County) was incorporated into HB 2033 and passed committee on voice vote.

On Thursday, the committee held an informational meeting on itemized deductions. The Kansas Association of Realtors and the Kansas Society of CPAs testified.

Under current Kansas law, Kansas income tax filers may only itemize deductions on state income tax filings if the itemize on their federal return. The recent changes in federal tax law doubles the federal standard deduction. Because of this, many Kansans will not benefit from itemized deductions as they have done in the past (charitable donations, mortgage interest, property taxes, medical).

House Committee on Commerce, Labor and Economic Development
On Tuesday, the Commerce Committee held an informational briefing on Workers Comp litigation and medical standards. On Wednesday, the Greater Kansas City Chamber of Commerce (GKC Chamber) presented to the committee an overview of their Workforce Development Initiative. The GKC Chamber has made education and workforce development a top objective. They report that the Kansas City area currently has an immediate need to fill 63,000 jobs with qualified skilled workers. Coupled with a 2.7% unemployment rate, the need to train skilled workers and get more people in the workforce is clear.

Markley Musings
Several people commented this week that the tone in the building seems different this year. Some of that is to be expected. This is the first time in eight years that legislative leadership and the Governor are not of the same party. But it seems a bit more than that. People have started retreating to their “corners”, something that tends to occur towards the end of session, not the beginning. We will have to wait and see if and how this affects the body’s ability to craft sound policy and work for the good of our state. As always, please feel free to contact me with any questions, comments, concerns. I can be reached at 913-709-5985 or patty@markleystrategies.com.

KEPC 2019 Membership Survey

KEPC NEWS RELEASE: Kansas Economic Progress Council hires Patty Markley as new lobbyist

CLICK HERE FOR A PRINTABLE VERSION OF THIS PRESS RELEASE

Topeka, Kan. – The Kansas Economic Progress Council (KEPC) has hired former State Representative Patty Markley as their lobbyist in Topeka.

Founded in 2005, the KEPC is a statewide non-profit organization of businesses, trade organizations, chambers of commerce, and others interested in advancing sound public policy in Kansas to enhance our state’s quality of life.

“During my time in the legislature, I supported and voted in favor of legislation important to KEPC members: economic and workforce development, transportation, Medicaid expansion and a stable and predictable tax structure,” said Markley. “In replacing Bernie Koch, I know I have very large shoes to fill and I’m excited to continue his great work advocating for these issues.”

Patty Markley served District 8 in the Kansas House of Representatives from 2017-2018. Prior to serving in the legislature, she was a full-time parent, community volunteer, and member of the Prairie Village City Council. Her previous experience includes work as a not-for-profit executive, and as a staff member for a United States Senator.  She lives in Overland Park with her husband Brian and two daughters.

“Patty not only has direct experience serving in the Kansas House of Representatives but understands the issues as an engaged and involved parent and community advocate,” said Mary Birch, a member of the KEPC board of directors. “A large portion of the business community in Kansas believes in the value of stable tax policy, a new transportation plan, adequate funding of our educational system, and Medicaid expansion. With Patty at the helm, KEPC will be able to leverage partnerships and ensure that these issues are addressed during the coming legislative session.”

#  #  #

The Kansas Economic Progress Council is a statewide business organization whose members include businesses, local chambers of commerce, trade organizations, and individuals. KEPC is a 501(c) (4) not-for-profit organization. The purpose of KEPC is to provide information, research and education on statewide issues that affect the economy of the State of Kansas as well as the quality of life of its citizens.

KEPC UPDATE: Jobs & wages, state budget, Ks Statistical Abstract, tax reform, Ks Bioscience Authority

In this issue …

  • Jobs and wages grow in Kansas but there’s a catch
  • Where we are on the state budget
  • Kansas Statistical Abstract is published
  • Economic Policy meeting will discuss reforming Kansas taxes
  • Should we resurrect the Kansas Bioscience Authority?

 

Jobs and wages grow in Kansas but there’s a catch

The latest labor report for Kansas has been released and shows that jobs have grown in Kansas in August, but with a big catch.

Of the 3,600 new jobs reported, 3,300 were school employees returning to work for the new school year.

A tight labor market has forced paychecks up, according to the Kansas Department of Labor.

“August estimates indicate a tightening labor market in Kansas,” according to Labor Economist Emillie Doerksen. “The number of private sector jobs continued to increase and employers reported over the year growth in average weekly earnings for both goods producing and service providing industries. The household survey also shows a tightening labor market, with the unemployment rate falling to 3.3 percent.”

Manufacturing jobs grew 3.5 percent over the past year. Mining and logging (primarily oil and gas) grew 7.5 percent over the year.

Here’s a link to the numbers in the report over the past year and for the month of August.

 

Where we are on the state budget

The Legislative Budget Committee met earlier this month and took a look at revenues and expenditures for Fiscal Year 2018, which ended June 30.

J.G. Scott of the Legislative Research Department said by the end of the fiscal year, the State General Fund was $267 million ahead. Most was from individual income tax, including $218 million from the 2017 legislation that restored much (but not all) of the Brownback tax cuts.

So far, receipts for the new fiscal year are $13.4 million above estimates.

Scott said he couldn’t really put a trend together from only two months, but the state may have a better idea after September income becomes due.

Scott warned that, beginning in 2020, the profile showed the state will be spending more than it’s bringing in due to school finance, KPERS catch-up, and other obligations.

 

Kansas Statistical Abstract is published

The 52nd annual edition of the Kansas Statistical Abstract is now available online.

The document contains data collected through August for sixteen categories of information on Kansas: Agriculture; Banking and Finance; Business; Industry; Exports; Climate; Communications and Information; Courts; Crime and Public Safety; Education; Employment and Earnings; Energy and Natural Resources; Government; Housing and Construction; Income; Parks and Recreation; Population; Transportation; and Vital Statistics and Health.

The document contains over 500 pages of data, tables, maps, and graphs on Kansas.

For example, with the current debate on trade and tariffs, there’s information on U.S. agricultural exports to the world and Kansas agricultural exports by commodity.

There’s information on total U.S. exports via Kansas by the countries receiving them and commodities being exported from the state.

Here’s a link to the online document.

Economic Policy meeting will discuss reforming Kansas taxes

The Kansas Economic Policy Conference held annually by the University of Kansas Institute for Policy and Social Research will be held October 25 at the University.

This year’s topic is “Pragmatic Policy: Reforming Kansas Taxes.” It features experts from state government, education, and the legislature.

Here’s a link to the program.

 

Should we resurrect the Kansas Bioscience Authority?

In a story this week in the Lawrence Journal-World, Democratic candidate for governor Laura Kelly said she wants to bring back the Kansas Bioscience Authority.

Established in 2004, the program was designed to be the state’s venture capital firm to spur high technology bioscience research and development. It was sold off in 2016 after embarrassing problems with management of the program.

The Authority was the idea of former Republican legislators Senator Nick Jordan of Shawnee and Representative Kenny Wilk of Lansing. It is widely credited with being a major factor in the location of the National Bio and Agro-Defense Facility (NBAF) at Manhattan, a $1.2 billion project.

Here’s a link to the Journal-World story.

KEPC UPDATE: Transpo Task Force, Economic Lifelines Leadership, job growth, revenue up, 2018 legislative summary

In this issue …

  • Transportation Task Force meetings set
  • DeSoignie takes helm at Economic Lifelines for now
  • Kansas grows jobs above national average
  • State revenues up but will they continue?
  • 2018 legislative summary now available

 

Transportation Task Force meetings set

The Transportation Task Force set up by the 2018 Kansas Legislature has organized.

At a recent meeting, members heard about the system’s current condition and the 21 projects approved but now delayed due to lack of funding.  Because of the diversion of revenue intended for highways, there is $2 billion less than the original estimate.

Here’s the schedule of meetings to be held across the state:

  • Salina – September 6
  • Wyandotte County – September 12
  • Pittsburg – September 20
  • Newton – October 4
  • Garden City – October 11
  • Wichita – October 18
  • Hays – October 24
  • Johnson County – November 8
  • Manhattan – November 9
  • Topeka – November 28-29

Those who wish to testify need to follow guidelines.

Here’s a link to those rules about presenting testimony.

 

DeSoignie takes helm at Economic Lifelines for now

Ed DeSoignie, the retired executive of the Kansas City Heavy Constructors, has been named the interim director of Economic Lifelines, the statewide transportation coalition.  DeSoignie will take over for Tara Mays, who is leaving the organization to work for the Kansas Electric Cooperatives.

DeSoignie has headed the Heavy Constructors for 20 years and has been deeply involved in transportation issues, going back to the 1989 Comprehensive Transportation Program.

 

Kansas grows jobs above national average

Kansas may have finally turned things around on one measure of economic recovery.  For the first time in many years, the state’s 1.8 percent employment increase over the past year is outpacing the national average. That’s about 24,800 new jobs.

Kansas Secretary of Labor Lana Gordon said, “Job growth has exceeded the national average and the number of people receiving unemployment benefits is the lowest in ten years.  However, the labor force has shrunk over the past year by 1,500 workers and wages don’t appear to be growing.

The latest employment numbers are expected to be released later this week.

 

State revenues up but will they continue

Kansas revenues were $11 million over estimates for June. That’s less than the revenue above estimate growth of the past several months, which were likely driven up by new taxes, passed in 2017.  Those were a partial reversal of then-Governor Sam Brownback’s income tax cuts.

Also driving the increase may be the U.S. Supreme Court decision that allows states to tax Internet sales.

All that could change, depending on the election for governor and the legislature.  If state government becomes more conservative, the probability of a tax cut becomes more likely.

 

2018 legislative summary now available

Every year after the legislature adjourns, the Kansas Legislative Research Department publishes a summary of the laws that were passed.

The 2018 summary is now available online. The 250 page-plus report contains everything you ever wanted to know (including bill numbers).

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

In this issue …

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

 

Waiting on the school finance verdict

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

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

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

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

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

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

 

Kansas economy is recovering but economists warn about ag

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

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

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

Here’s part of the report:

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

The report included this warning about agriculture:

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

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

 

Correction

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

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

 

Bill tracking

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

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

In this issue …

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

 

Tax cut that failed contained ROZ and expensing expansion

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

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

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

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

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

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

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

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

  • Global Intangible Low-Taxed Income (GILTI) – Under the new federal law, there could be an incentive for companies to shift profits abroad without generating any U.S. tax. GILTI is a provision that hopes to discourage this by imposing tax on foreign sourced intangible income.
  • Deferred foreign income – Federal law aims to encourage “repatriation” back into the U.S. of profits and assets held overseas by multinational corporations and their shareholders. Under the old law there were large tax incentives to keep corporate assets abroad to avoid paying U.S. taxes.  Bringing those assets back to Kansas would provide tax revenue to the state.  The legislation is designed to prevent that windfall.
  • Increasing standard deduction – The third piece of the legislation increases the standard deduction for individual taxpayers.

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

 

STAR bonds and HPIP changes fail along with Ad Astra

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

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

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

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

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

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

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

 

Governor signs school finance measure

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

 

Budget restores some previous cuts

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

The bill restores many of the cuts from previous years.

Here are some of the highlights:

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

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

In this issue …

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

 

Legislature winding down for Friday ending

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

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

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

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

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

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

 

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

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

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

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

 

Tax cut bill attempts to mitigate federal tax cut impact

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

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

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

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

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

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

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

 

Economic development programs still hanging

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

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

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

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

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

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

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

 

April Revenues exceed expectations

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

 

Bill tracking

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

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

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

In this issue …

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

 

Legislature returns Monday for education and the budget

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

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

 

House passes school finance “fix”

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

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

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

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

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

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

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

The bill now goes to the Kansas Senate.

 

House sends budget bill to the Senate

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

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

The House version is HB 2365.

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

 

About that tax cut

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

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

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

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

 

Adoption bill draws fire from high tech businesses

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

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

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

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

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

 

Bill tracking

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

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