29 Jan 2023 Kansas Capitol Review – Week 03
2023 Legislative Session Continues
This week, the governor gave her delayed State of the State, and the legislature introduced a flurry of additional bills. A few hearings are being held, but many more are scheduled for next week. There was continued discussion around the capitol on the recent listing of the Lesser Prairie Chicken as a threatened species in Kansas, which culminated in the introduction of a Senate Resolution pushing back on the listing.
Plastic Container Regulation, State Level Preemption
Last year, legislation was passed and sent to the governor that would have prohibited cities and counties from regulating plastic and other containers designed for the consumption, transportation or protection of merchandise, food, or beverages. Governor Kelly vetoed the bill to the legislature. There were not enough votes to override the veto, and the bill died. A similar bill has been introduced this year as Senate Bill 47. The bill is scheduled for hearing in the Senate Commerce Committee on January 31, 2022.
Water Report
This week, various House and Senate Committees received updates from Katie Durham, Western Kansas GMD No. 1; Shannon Kenyon, Northwest Kansas GMD No. 4.; the Kansas Water Authority; and, Dr. Bill Golden, Kansas State University. The presentations heralded the success of the LEMA (Locally Enhanced Management Area) programs within those districts. LEMAs were created as a 2012 amendment to the groundwater management district act to allow for local control and increase awareness and acceptance of water conservation goals. The GMD’s indicated that a critical component to the success of a LEMA is engagement with the community, hearing their concerns and addressing them through public education and outreach initiatives. It was reported that there has been much success in water reduction with the implementation of LEMAs – from 25 percent in Wichita County LEMA, to 35 percent in the Sheridan 6 LEMA. The GMD’s indicated that in the LEMA program years, revenues were increased along with water conservation which was attributed to implementation of best practices and technologies such as moisture meters. Presenters indicated that a continued, or potentially increased, support of cost-share programs is crucial for the continued success of these programs. It was thought that full funding of the state water plan would require close to $70 million. The funds allow farmers to purchase and implement new technologies that allow them to assess ground conditions and target water application. The Kansas Water Authority reviewed its 2023 Annual Report, which included the following policy on the depletion of the Ogallala Aquifer:
- The policy of planned depletion of the Ogallala Aquifer is no longer in the best interest of the State of Kansas.
- A formal collaborative process is needed to establish data-driven goals, metrics, and actions to halt the decline of the Ogallala Aquifer while promoting flexible and innovative management within a timeframe that achieves agricultural productivity, thriving economies, and vibrant communities – now and for future generations of Kansans.
- The collaborative process should engage state agencies, regional advisory committees, local stakeholders, groundwater management districts, and the Kansas Water Authority.
Retailer Credits
The Senate Tax Committee held a hearing on Senate Bill 41, a bill which would provide a credit for Kansas retailers, up to $300 per month, to help offset, to some degree, the administrative expenses accrued by retailers in collecting and remitting state sales and compensating use taxes for the state. Kansas Agribusiness Retailers Association testified that these administrative costs on behalf of the state are real expenses for Kansas retailers that are not currently compensated. The bill represents sound public policy and is consistent with the practices implemented in many other states. For that reason, KARA joined other business stakeholders in supporting the bill.
KDA Ag Economy Report
The Kansas Department of Agriculture has released its annual economic contribution reports to estimate the impact of agriculture on the Kansas economy. In 2022, the report indicates that 73 agriculture and agriculture-related sectors directly contribute $53.4 billion in output and 136,227 jobs to the Kansas economy. Including indirect and induced effects, agriculture and agriculture-related sectors have a total impact of $76 billion in output, 256,080 jobs and 14 percent of the total Gross Regional Product (GRP).
Prohibiting Foreign Ownership of Real Property
This week, Senate Bill 100 was introduced in the Senate Committee on Federal and State Affairs. The bill would seek to prohibit foreign ownership of real property in Kansas. The bill was referred to the Senate Judiciary Committee. The bill prohibits “foreign business entities” from purchasing or otherwise acquiring any interest in real property in the state. The bill defines the term “foreign business entity” as “[A]ny corporation, limited liability company, partnership, limited partnership, firm or other association in which the majority of the shares or ownership interest is held by one or more foreign nationals, foreign business entities or foreign governments; (2) any corporation, limited liability company, partnership, limited partnership, firm or other association in which the majority of the shares or ownership interest is held by one or more entities described in paragraph (1); and (3) any agent, trustee or fiduciary of an entity described in paragraph (1).
Governor Kelly Gives State of the State Address
In Governor Kelly’s annual State of the State address this week, the governor vowed to “remain in the middle” to accomplish the following policy goals:
- Taxes: Kelly said she would stand against irresponsible tax proposals that drain the state’s budget. She emphasized her desire to end the state sales tax on groceries immediately, enact a sales tax holiday for school supplies and gradually cut taxes on Social Security income.
- Workforce development: Kelly acknowledged a lack of workforce was a serious shortcoming to fostering business development.
- Water: Kelly issued a call to action against the diminishing water supply in western Kansas and said it may be the most important issue facing the state. She noted that last year her administration fully funded the State Water Plan for the first time since 2009.
- Mental health: Kelly proposed expanding mental health funding for adult psychiatric services in the Wichita area and to solve the shortage of mental health workers across the state.
- Medicaid Expansion/Marijuana: Kelly called on the legislature to pass Medicaid expansion and legalize medical marijuana. For their part, Republican legislative leaders suggested they were unlikely to do either this year.
Governor’s Budget Recommendations
Governor Laura Kelly’s FY 2024 Budget Recommendations focuses on “targeted and sustainable tax relief,” and various one-time investments, including:
- $1 billion in various one-time expenses, including: $500 million to the Budget Stabilization Fund; $220 million for an “Infrastructure Hub”; and $53 million to retire state debt owed to the federal government for two state water reservoirs (saving the state $30 million in future interest payments)
- Adding $72.4 million annually for Special Education funding
- Adding $108 million in funding to the state’s post-secondary education system ($66 million in base aid, and $42 million in one-time funds), and
- Setting $20 million aside for use in a Housing Revolving Loan Program for urban housing (in addition to the $20 million set aside last year for rural housing).
Retailer Collection of Credit Card Fees
Kansas law prohibits the seller or lessor in a retail sales or lease transaction or any credit or debit card issuer from imposing a surcharge on a person who elects to use a credit or debit card to make the purchase. House Bill 2133 has been introduced to eliminate this prohibition and allow the imposition of such a surcharge. The bill is scheduled for hearing in the House Committee on Financial Institutions and Pensions on Monday, January 30.
Corporate Income Tax Apportionment
House Bill 2110 would allow certain taxpayers, based on NAICS codes included in the bill, to elect to use a single-factor apportionment formula based on sales in the state to determine corporate income tax liability. The bill is estimated to have a cost to the state of approximately $20 million, and it is scheduled for hearing in the House Taxation Committee on Tuesday, January 31.
Carbon Dioxide Capture and Sequestration
This week, Renew Kansas Biofuels Association introduced a bill in the House Committee on Agriculture and Natural Resources that would allow Kansas industries to pursue carbon capture and sequestration (CCS) projects. The legislation seeks to amend the Kansas Carbon Dioxide Reduction Act to allow for the permanent underground storage of carbon dioxide (CO2) in UIC Class VI injection wells. By capturing and sequestering CO2, the biofuel industry is able to lower the carbon intensity score of their fuels, increasing its value and marketability. Most Midwest states have already adopted this type of legislation allowing long-term CO2 sequestration to be conducted more easily in their state. CO2 sequestration wells require an injection permit issued by USEPA. States can apply to EPA for “state primacy” of the permits, which means USEPA would delegate its authority to the state to regulate the storage facilities. The proposed legislation includes provisions from legislation passed in Indiana in 2022 (House Bill 1209), and Nebraska in 2021 (LB650.pdf). The bill directs the Kansas Department of Health and Environment (KDHE) to apply to USEPA for Kansas primacy. This bill also grants KHDE authority to adopt regulations to assess fees necessary to administer the injection program and for the costs of long-term monitoring of closed storage facilities. In addition, the bill allows the transfer of ownership and long-term liability of the stored CO2 to the state upon certified closure of the storage facility.
Third-Party Funded Litigation
Senate Bill 74 concerns litigation funding by third parties. The bill provides for joint liability of costs and also allows for sanctions in third-party funded litigation. It would also require certain discovery disclosures and payment of certain costs for nonparty subpoenas. The bill is scheduled for hearing in the Senate Judiciary Committee on Thursday, February 2.
Electric Utility Rates
Multiple bills were introduced this week focusing on various ways to address high electric utility rates in our state:
Senate Bill 88 in the Senate, and House Bill 2154 in the House would seek to reform the Kansas Corporation Commission by allowing for the election of KCC commissioners, and establishing a utilities regulation division in the office of the attorney general to represent and protect the collective interests of utility customers in utility rate-related proceedings.
Senate Bill 78 and House Bill 2155 would require the state corporation commission to review the regional rate competitiveness of an electric utility’s rates in electric utility rate proceedings.
Right of First Refusal for Electric Transmission Line Build Out
Kansas has the highest energy rates in our region. In recent years, legislation was introduced to reduce rates while ensuring reliable service. Senate Bill 68 has been introduced in the Senate Utilities Committee to allow energy producers a Right-of-First-Refusal to build out new electric transmission lines assets in the state. The bill is likely to be heavily opposed by commercial and residential utility rate payers.
Lesser Prairie Chicken Resolution
Both the House and the Senate are considering passage of a Concurrent Resolution disapproving the designation of the lesser prairie chicken as a threatened species in Kansas by the United States Fish and Wildlife Service. It was also announced this week that US Fish and Wildlife Service would delay the threatened species listing for 60 days, until March 27.
Sales Tax Exemption on Manufacturer’s Coupons
Senate Bill 53 would exclude coupons issued by a manufacturer, supplier, or distributor of a product from the selling price of a product for the calculation of sales tax beginning on July 1, 2023. The bill is scheduled for hearing in the Senate Tax Committee on Thursday, February 2.
Hemp Grain
This week, House Bill 2168 was introduced which would amend the definition of grain in the to include industrial hemp seed. It is uncertain at this point what other impacts this designation might have, but the Kansas Department of Agriculture is currently reviewing the bill.
Road Usage Charges
This week, the House Committee on Transportation received a presentation from the Kansas Dept. of Transportation (KDOT) on the results of a study is conducting on the feasibility of road usage charges to the fund the state highway plan in the future. Currently, the state highway plan for funding state infrastructure maintenance is funded by state sales tax (38 percent), motor fuel sales tax (20 percent), federal funds, and just recently, increased registration fees on electric vehicles. According to KDOT, by the year 2050, 40 percent of all road vehicles will not be powered by something other than liquid motor fuels. In addition, those that are still powered by liquid motor fuel will have much better fuel economy. As gallons of liquid mobile fuel decline, so will the funding received to pay for road and bridge infrastructure. For this reason, KDOT is studying mileage-based road usage as an alternative funding source. This policy would treat the road infrastructure as a utility – where rate payers pay for the amount of the utility (the road) they used – meaning miles driven. KDOT is implementing its study in three phases: Phase 1: outreach,
Phase 2: design pilot program, and Phase 3: demonstration – which will begin in March of 2023.
Motor Carrier Independent Driver Status
This week, the House Transportation Committee held hearings on two bills concerning independent motors carriers: House Bill 2020, which would clarify that the employment status of a driver of a motor carrier does not change as a result of the inclusion of safety improvements made to the vehicle; and, House Bill 2019 which would clarify the conditions for when a motor carrier driver shall be deemed an independent contractor for a transportation network company.
Solar and Wind Interest Disclosure
Senate Bill 86 would require local governmental officials and candidates for local office to disclose substantial interests in a renewable energy systems and prohibit local governmental officials with a substantial interest from acting on matters relating to the renewable energy system. The bill is scheduled for a hearing in the Senate Local Government Committee on Thursday, February 2.
Other Bills We Are Monitoring:
HB 2160: exempting cotton bales from secured load requirements
HB 2192: creating a Kansas Secretary of State website for grants, applications, and awards