KEPC UPDATE: WEEK 7

  • TURNAROUND
  • ON THE FLOOR: House
  • ON THE FLOOR: Senate
  • TAX
  • SPEND
  • TRANSPORTATION
  • MEDICAID EXPANSION

TURNAROUND

Turnaround marks the half-way point of this session and the first real deadline for legislative action. Bills must be heard and passed from their original chamber and turned over to the other chamber.

Bills not achieving passage are considered dead for the remainder of the session. However, there is a famous saying in Topeka that “no bill is ever really dead.” There are exempt committees, such as Taxation, Appropriations, Ways and Means, Federal and State Affairs, etc. Any time a bill is referred to one of these committees, it is exempt from deadlines. House or Senate leadership can refer a bill to one of these committees and then re-refer it back to its original committee, therefore keeping it alive, i.e. it gets “blessed.” In addition to the work done on the floor of the House and Senate this week, the Speaker of the House blessed 25 bills and the Senate President blessed 9, so those bills will live on for consideration.

ON THE FLOOR: House

The number of bills heard this past week was fewer than years past, but there were a few of note from the house side:

  • HB 2006: The House unanimously approved legislation introduced by Representative Kristey Williams (R-Augusta), that calls for the Department of Commerce to create a database revealing who receives state development incentives, the amount of the incentives distributed and calls for an audit every three years. The Kansas Economic Development Alliance and the Kansas Chamber were opposed to the bill, citing concerns about the disclosure of sensitive business information. The concerns were addressed and the bill was amended to protect sensitive information and to not include names of individuals who’ve invested in a project in order to receive tax credits. We will monitor this bill closely to ensure those concerns continue to be addressed.
  • HB 2144: A bill also introduced by Representative Williams, would require community colleges to publish information on their website about tuition, fees, and the total cost of attending the school. The bill passed the House on a vote of 84-40. The bill was a limited version of what was introduced in the Education Committee. The original legislation, which garnered much opposition, would have given voters the power to stop community college spending on construction projects costing more than $250,000 and required community colleges to lower their tax rate equal to 80% of any increase in funding they received from the state.
  • HB 2167: the “deer bill”, was approved by a vote of 63-60 and allows landowners and tenants on at least 80 acres to sell a deer hunting permit. Why is this bill of note? A version of this bill has been hotly debated every year for several years. During the two days of floor debate, the vast majority of bills are introduced by a member of the majority party, the ranking Democrat on the committee speaks in support of the bill, there is little or no debate, then the bill is approved–on average about 3 minutes for each bill. The deer bill was debated for over an hour. Passions run deep on both sides of this issue.

ON THE FLOOR: Senate

  • SB 162: A bill requiring foster care case managers to report to the governor, the legislature, and local newspapers within 24 hours of a foster care child going missing. The bill passed the Senate 40-0.
  • SB 81: Passed by a vote of 34-4, a bill that would allow, if local authority approves, law enforcement to follow suspects at high speed without emergency lights and or sirens.
  • SB 16: Allowing school districts to spend “at-risk” funding for non-school programs aimed at improving student performance. Senator Hensley offered a floor amendment to add a two-year finance bill that accounts for inflation in last years passed education funding bill, a move many believe would satisfy the supreme courts’ ruling to adequately fund K-12 education. The amendment failed 28-12.

TAX

On Monday, the last day of Committee meetings, the House Tax Committee amended SB 22, the bill dealing with the federal tax windfall. On an 11-11 vote that Chairman Johnson broke with a yes vote, the bill was amended to add a 1% reduction on the sales tax on food. The committee also added a tax on out-of-state Internet sales. With the new provisions, the fiscal note of SB 22 is $207 million. House leadership did not put SB 22 on the calendar this week, leading some to speculate whether or not there are currently enough votes for it to pass the House. Governor Kelly has not indicated whether or not, if presented with the bill, she would veto it.

MEDICAID EXPANSION

Next week the House Health and Human Services Committee will hold “roundtable discussions” (not to be confused with hearings) with stakeholders to help lawmakers understand the pros and cons of expansion. On Thursday, March 7 at 10:00 a.m., the Greater Kansas City, Wichita, and Pittsburg Chambers, the Alliance for a Healthy Kansas, and the Kansas Hospital Association are hosting an event at the Capitol: “The Economics of Expansion – Moving Kansas Forward.” A copy of the invitation is available here.

It looks like when the Legislature reconvenes next Wednesday, things will start to heat up.

Until then, please feel free to contact me with any questions or comments. Thanks and have a safe and warm weekend.

–Patty

KEPC UPDATE: Feb. 22 – Week 6

In this issue…

  • TAX: Food Sales, Federal Windfall, Internet Sales
  • SPEND: KPERS, Ways & Means and Appropriations Budget Hearings
  • TRANSPORTATION: KDOT Budget, Revenue Bills
  • HEALTHCARE: SB 32 Farm Bureau “Not Insurance”
  • MARKLEY MUSINGS: Wise Words from Retiring Rep. Greg Lewis

TAX: Food Sales, Federal Windfall, Internet Sales
On Monday, the House Tax Committee held hearing on HB 2261, lowering the state sales tax on food from 6.5% to 5.5%. There were many conferees in favor, including KNEA, KC Healthy Kids, grocery store owners, and food dealers. Opposition included the Kansas Farm Bureau, whose primary concern is that any reduction in sales tax could lead to the creation of Value Added Taxes (VAT). The Kansas Chamber supports the overall goal of reducing food tax, but requested specific changes to the bill dealing with the definition of candy. The Kansas Restaurant and Hospitality Association spoke in opposition to bill. Their position is “food is food,” regardless of where it is prepared, therefore the bill as written is unfair to restaurants. Similar legislation, SB 76, was heard in Senate Tax committee on Thursday. Both bills carry a fiscal note of approximately $60 million.

On Tuesday, Wednesday, and Thursday, the House Committee on Taxation heard testimony on SB 22 related to the tax windfall from the federal tax bill. Testimony was similar to what was heard in the Select Senate Committee two weeks ago – decoupling from federal government allowing individuals to itemize deductions and tax breaks for multi-national corporations doing business in Kansas. As of this newsletter’s deadline, the committee did not take final action on SB 22.

Legislation dealing with sales and compensation use tax (aka taxing internet sales), HB 2352, was heard on Thursday. Several cities, counties, chambers of commerce and the League of Municipalities spoke in favor. The fiscal note indicates that HB 2352 would increase state revenues by $41 million in FY2020.

SPEND: KPERS, Ways & Means and Appropriations Budget Hearings
On Tuesday, House Appropriations approved SB 9, the $115 million KPERS repayment. The full house debated the bill on Thursday, and on Friday approved SB 9 on final action by a vote of 117-0. It now goes to the Governor for her signature, is allowed to become law without her signature, or she can veto.

Senate Ways and Means and House Appropriations began this week hearing reports from various budget committees and approving agency budget requests.

TRANSPORTATION: KDOT Budget, Revenue Bills
On Monday, the House Transportation Budget Committee approved the budgets for FY 2019 and FY 2020. Representative Kessinger brought forth and the full committee approved two amendments, The first amendment added $6.35M to FY2019 to complete one additional T-Works project. The second amendment requested an additional $50 to the Governor’s Budget for FY 2020.

On the Senate side, several bills were introduced related to funding sources for transportation. They include:

  • SB 187: Increase in permit fees for overweight and oversized vehicles
  • SB 188: Increase in motor fuel tax and trip permits
  • SB 189: Increase in registration fees for electric and hybrid vehicles
  • SB 190: Allow for state to share in cost to fund local ad valor tax reduction fund and county and city revenue sharing fund for road construction or bridge improvement.
  • SB 191: Tax lid exemption for transportation construction projects
  • SB 192: Related to authorization of toll projects.

HEALTHCARE: SB 32 Farm Bureau “Not Insurance”
On Wednesday evening, by a vote of 28-11, the Senate passed SB 22, legislation that will allow the Kansas Farm Bureau to offer health care policies to their members. The Farm Bureau, who has predicted that they may sell 42,000 policies in Kansas, is specifically not referred to as “insurance,” as it can deny coverage to those with pre-existing conditions and will likely not require supervision by the Kansas Insurance Department.

MARKLEY MUSINGS: Wise Words from Retiring Rep. Greg Lewis
On Monday, Representative Greg Lewis, flanked by his wife Susan and son Josh, announced his retirement from the Kansas House of Representatives. Representative Lewis was diagnosed with brain cancer in December. In a moving speech, he reminded legislators to keep in mind why they were in Topeka. “This is the House of Representatives. This is not the house of self interest. This is not the house of special interest. This is the people’s house and long may it serve the people in this great state of Kansas.” (Read the full text of Rep. Lewis’ resignation speech here.) A good reminder from a good man. As always, if you have any questions or would like to contact me, please feel free to do so.
— Patty


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.

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

In this issue …

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

 

School finance fix waits for legislators to return

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

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

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

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

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

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

 

State revenues are up

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

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

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

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

 

Senate wants more tax cuts

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

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

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

 

Kansas labor force declined over the past year

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

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

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

Here’s a link to the full March report.

 

A note about our next newsletter

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

 

Bill tracking

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

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

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

In this issue …

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

 

Senate and House pass different spending on school finance

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

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

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

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

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

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

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

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

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

 

Constitutional amendment passes committee

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

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

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

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

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

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

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

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

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

 

Broadband Task Force expected to pass

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

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

 

Transportation Task Force in conference

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

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

 

Food sales tax reduction might not move forward

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

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

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

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

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

 

Bill tracking

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

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