2019 Capitol Review – Week Eight

Week Eight of the 2019 Kansas legislative session was the first week following “turn-around.” The legislature gaveled back in on Wednesday morning and, although it was a short week, quickly set to work on some important issues. Please see below for a few highlights of the week’s activities, as well as bills being teed up for work this coming week.

Corporate Tax Bill Passes House, Moves Back to Senate 
On Friday, the House passed Senate Bill 22, as amended, on a vote of 76-43. The bill decouples portions of the Kansas corporate tax code from the federal corporate tax code following passage of the 2017 Federal tax cuts and jobs act. The committee amended the bill to include language which reduces the state sales tax on food by 1 percent (to 5.5 percent). The cost to the state budget on that reduction is $60 million annually. In order to pay for the sales tax reduction on food, the bill was also amended to require a tax on sales in Kansas conducted over the internet. The sales tax applies to businesses without a physical nexus with the state, and only after the first $100,000 in sales. The bill now goes back to the Senate where it will vote to either concur or not concur with the amendments made by the House. Senate concurrence would send the bill to the Governor. A Senate vote to non-concur would require a House/Senate conference committee to be appointed to decide a final version of the bill. The Governor has hinted she would veto any tax cut bills. The House would need 84 votes to override a veto of the Governor. The amendments by the House were intended to give the Governor a reason not to veto the bill, as lowering sales tax on food has broad support.

Governor Signs First Bill of 2019 – KPERS Funding
On Friday, the Governor signed Senate Bill 9 as the first bill of the 2019 legislative session. The bill transfers $115 million from the state general fund to the Kansas public employee’s retirement system for schools. The bill passed unanimously in both the Senate and then the House.

Utility Rate Bill Alive in Senate Committee 
On Thursday, the Senate Committee on Utilities discussed possible amendments to Senate Bill 69, a bill previously heard by the Committee which would require an independent study of Kansas utility rates. The Chairman had directed proponents and opponents to work toward compromise language on the bill. That compromise language was released on Thursday, and the committee plans to take action on Senate Bill 69 on Monday or Tuesday of next week. The Committee has scheduled additional hearings next week on bills (Senate Bill 124 and Senate Bill 198) concerning utility rates.

City and County Budget Setting Requirements Draws Mixed Feedback
On Wednesday, the House Taxation Committee held a hearing on House Bill 2345, a bill which would allow cities and counties to approve a budget that was no higher than its highest budget within the preceding 7 years, without holding a public election. There was mixed reaction to the proposal. The taxing authorities argued that passage of this bill would allow a local taxing authority to reduce its budget in any given year without the fear of losing its baseline budget, arguably removing a concern of using the current budget margin or losing it.

Transportation Plan Bills Keyed Up For Hearings
This week brought hearings on bills in the House and Senate which propose new funding mechanisms for state transportation projects beyond the current sources of the state sales tax and state motor fuels tax. Additional hearings are set for next week. Here are a few of the bills being considered:

• Senate Bill 192: Authorizing the secretary of transportation to designate toll projects on new and existing highways and changing the requirement to fully fund toll projects solely through toll revenue. A hearing was held in the Senate Transportation Committee on Thursday, March 7th. The Chairman and others on the committee indicated that the bill needs key changes before it could move forward.
• Senate Bill 186: providing for a transportation planning program. A hearing is scheduled in the Senate Ways and Means Committee on Wednesday, March 13.
• House Bill 2370: relating to rates and trip permits and the motor fuels tax. A hearing is scheduled in the House Tax Committee on Tuesday, March 12.
• House Bill 2381: Motor fuels tax; relating to rates and trip permits; distribution of revenues; distribution of sales tax. A hearing is scheduled in the House Tax Committee on Tuesday, March 12.
• House Bill 2367: Relating to new road construction or bridge improvement plans; authorizing transfers from the state general fund to the local ad valorem tax reduction fund and county and city revenue sharing fund. A hearing is scheduled in the House Taxation Committee on Wednesday, March 13.
• House Bill 2368: Relating to cities and counties; approval of budgets and exception from property tax lid exception for transportation construction projects. A hearing is scheduled for the House Tax Committee on Wednesday, March 13.
• House Bill 2371: Relating to permit fees for oversize or overweight vehicles. A hearing is scheduled for the House Taxation Committee on Thursday, March 14.
• House Bill 2372: Providing for an increase in registration fees for electric and hybrid vehicles. A hearing is scheduled for the House Taxation Committee on Thursday, March 14.

Other bills we are monitoring:

• Senate Bill 78, a bill which would establish a framework for the assignment of benefits between a policyholder and a contractor for claim proceeds due under property and casualty policies that insure residential real estate. The bill would require an assignment of benefits to include a statement that the residential contractor has made no assurance that the claimed loss will be fully covered by an insurance contract.  The bill would also list violations by a residential contractor that would void the assignment of benefits. Passed by the Senate, a hearing is scheduled in the House Judiciary Committee on Monday, March 11.
• Senate Bill 90: Extends a tax credit for contributions to financial institutions and increases the annual credit. Passed by the Senate. A hearing is scheduled in the House Commerce Committee on Tuesday, March 12.
• Senate Bill 201: creates a 20-year property tax exemption for land associated with a dam or reservoir and subject to a mitigation conservation easement. The Senate Tax Committee held a hearing on the bill last Thursday.
• House Bill 2006: This bill would create a publicly available examination of economic development incentives for Kansas businesses, including tax credits and property tax exemptions of $50,000 or more annually. The Senate Commerce Committee will review the bill next Monday and Tuesday.
• House Bill 2173: A bill which would establish a commercial industrial hemp program. This bill is still alive in House Ag Committee.
• House Bill 2206 would amend current law concerning cruelty to animals.  Under current law, an entity that has custody of an animal because the owner has been charged with animal cruelty may petition the court for ownership of the animal at any time after 21 days after the owner is notified.  However, the bill would allow the owner or custodian to file and maintain a renewable cash or performance bond equal to, but not less than the cost of care and treatment of the animal for 30 days. A hearing is scheduled in the Senate Judiciary Committee on Tuesday, March 12.
• House Bill 2354: Resolving liability concerns regarding high school apprenticeships and on-the-job training programs. This bill is still alive and has been referred to the House Commerce Committee.
• House Bill 2340: Relating to distribution of property taxes paid under protest. A hearing is scheduled in House Taxation Committee on Thursday, March 14.