Legislative Wrap Up
The Kansas Legislature wrapped up its veto session at 2:15am, Sunday June 2nd. This concluded a record-breaking session lasting 99 days and the first time the legislature has worked into the month of June. Both chambers will reconvene on June 20 to mark the official, mostly ceremonial, end of the session known as adjournment “sine die” (Latin for "without day" meaning "without assigning a day for a further meeting or hearing"). Please find a summary below of many of the bills approved this session. The Kansas Grain and Feed Association monitored hundreds of bills this session and was successful in sending many of them to the Governor’s desk. KGFA was also successful in sending several bad bills to the policy landfill.
Kansas Restraint of Trade Bill
The Governor signed into law SB 124, legislation that amends the Kansas Restraint of Trade Act (KRTA) to specifically require the Court to weigh alleged violations of the act against a reasonableness standard, following the approach taken by the majority of states and under federal law. The law states that an arrangement, contract, agreement, trust, understanding, or combination shall not be deemed unlawful, void, prohibited, or wrongful under any provision of the act if it is a reasonable restraint of trade or commerce in view of all of the facts and circumstances and does not contravene public welfare. The bill also directs the courts to construe the act in harmony with ruling judicial interpretations of federal antitrust law by the United States Supreme Court, however, the Kansas law is controlling over federal law in any conflicting issue. The law removes full consideration damages as an eligible remedy, bringing Kansas in line with the vast majority of other states’ antitrust remedy provision. The law retroactively ratifies all existing contracts. The law became effective April 18, 2013. The Kansas Grain and Feed Association played a crucial role in the passage of this bill keeping the state of Kansas from becoming a target of frivolous class action litigation.
State Led Immigration Legislation
Several controversial immigration bills remain in House committees. Some bills mandate the use of e-verify (the federal immigrant verification system) for businesses that contract with any government entity within the state, and provides for liquidated damage penalties of 25% of the amount of the contract. Many bills also include laws enforcement provisions similar to a law passed in Arizona empowering local law enforcement to detain individuals suspected of being in the country illegally, and include language making it a felony to harbor 10 or more undocumented workers. Language in previous bills would subject your business to a $1,000 fine the first time you are caught with an illegal employee, $25,000 the second time and a permanent loss of your business license on the third offense. The Kansas Grain and Feed worked with a coalition of 27 other business and farm organizations to make sure that any immigration reform legislation protects businesses and does not unfairly shift the burden of enforcement from the government to employers. We killed the issue for the session. KGFA is on record supporting legislation which allows the state to enter into an agreement with the Department of Homeland Security which allows for a guest worker program.
The Governor signed into law SB 168 , the bill amending the agriculture nuisance laws. SB 168 would allow owners of farmland who conduct agricultural activities on their land to expand the scope of agricultural activities without losing protection from nuisance complaints. The expansion could include: increasing the acreage, increasing the number of animal units, or changing the type of agricultural activities. Any expansion must be in compliance with all applicable county, state, and federal environmental codes, resolutions, law, rules, and regulations. The bill would also allow for the transfer of protection to any successor and could not be waived by temporarily ceasing or decreasing the scope of agricultural activity. SB 168 would clarify that agricultural activity would include activities related to the handling, storage, and transportation of agricultural commodities. The Kansas Grain and Feed Association worked for passage of this law to preempt civil agriculture nuisance litigation. The law becomes effective July 1, 2013.
Grain Warehouse Funding Approved
KGFA was able to again persuade the Governor to include $75,000 in his budget to keep the Grain Warehouse program solvent. Thus far in the legislative process the funding remains in the budget, but the budget has not been approved. KDA has urged KGFA to find a funding source other than from the State General Fund. Our concern is that the State Grain Warehouse program may be eliminated or severely compromised if not fully funded. This would force all licensees to enroll with the federal inspection program.
Historic Environs Bill
The Governor signed into law HB 2249, a bill dealing with property rights and historic environs. Under current law, proposed projects within 500 feet of the boundaries of a historic property located in a city, or within 1,000 feet of the boundaries of a historic property located in the unincorporated portion of a county, are subject to historic design and appearance restrictions in constructing a new improvement or modifying an existing structure on their own properties. Testimony in support of the bill described the adverse effects imposed on those private property owners within the affected proximity of historic properties. This bill deletes provisions of current law related to those environs restrictions from historic property reviews. The bill limits historic reviews conducted under the act to proposed projects that would directly involve, damage, or destroy a property included in the National Register of Historic Places or the State Register of Historic Places. The Kansas Grain and Feed Association worked to secure passage of this bill. The law becomes effective July 1, 2013.
Tax Policy Changes
The House and Senate agreed to the Conference Committee report for HB 2059. Under current law, a 6 tenths of a cent sale tax is set to expire on July 1st, bringing sales tax rate down to 5.7%. The majority of House members favored allowing this portion of the sales tax to expire as a fulfillment of campaign promises, while Senate leadership and the Governor favored extending the sales tax in order to more aggressively buy-down individual income tax rates, described as a “glide-path to zero percent.” After approximately 109 different tax plan runs were evaluated/debated by those in House and Senate Leadership, a viable tax plan (HB 2059) and was agreed to on the last day of the session.
The bill sent to the Governor takes the sale tax to 6.15%, and partially restores a food sales tax rebate for law earners. The plan reduces the total dollar amount of itemized deductions a person can take by 30% in 2013, 35% in 2014, 40% in 2015, 45% in 2016, and 50% in 2017 and each year thereafter. Charitable contributions will remain 100% deductable, however. This reduction in itemized deductions allowed is meant to have a fairly neutral effect as standard deductions are increased from 2011 levels to $5,500 for head of household, and $7,500 for married filing jointly. In addition, the tax plan gradually lowers the individual income tax rates as follows: for the first $30,000 of income, 3.0% in 2013 to 2.3% in 2018; above $30,000, 4.9% in 2013 to 3.9% in 2018. These rate reductions are set out specifically in the statute. Additionally, beginning in 2019, further rate reductions will be applied whenever gross state revenues for a taxable year exceed those from the previous year by more than 102%. The plan has a projected 0.4% negative ending balance in 2018, and could be characterized as a tax increase/shift of $777 million over the next 5 years.
The tax bill included a few clean-up tax items, as follows:
· Expands rural opportunity zones in Kansas to 23 additional counties;
· Defines helium as a natural gas for tax purposes;
· Retroactively eliminates all claims to refunds for wrongful taxation on gas and gas products under the 1983 severance tax imposition;
· Removes a requirement that the title of certain tax-exempt property constructed or purchased with the proceeds of Industrial
· Revenue Bonds (IRBs) be transferred to the city or county issuing the IRBs during the duration of the exemption; and,
· Authorizes counties to grant property tax abatement or credits to owners of homesteads destroyed or substantially destroyed by earthquake, flood, tornado, fire, storm, or other event that the Governor has declared a disaster, taking effect for taxable years after December 31, 2011, and ending before January 1, 2014.
Boiler Inspector Transfer
SB 135 was signed by the Governor effective July 1, 2013. This bill transfers the responsibility to enforce the Boiler Safety Inspection Act from the Chief Boiler Inspector at the department of labor, to the State Fire Marshall. Under the Act, the Fire Marshall will now retain responsibility to perform the initial inspection of all pressurized vessels in Kansas, to include anhydrous ammonia (NH3) bulk storage tanks. The Fire Marshall’s office has stated that it is unknown how many pressurized vessels exist in Kansas, so there may be a learning curve for this office.
Multi Year Budget Approved
The legislature narrowly approved SB 17, the two-year budget bill. Budget expenditures for FY 2013 are $6.163 billion with a $631.4 million ending balance. Total budget expenditures for FY 2014 are $5.964 billion with a $242.5 million ending balance. Total budget expenditures for FY 2015 are $6.121 billion with a $157.1 million ending balance.
Sorghum Research Funding Not Approved
The House and Senate conferees did not include the $2 million in state general fund money for Sorghum research proposed in the Governor’s budget. This money was to be matched by $2 million from Kansas State University and $2 million from the Sorghum Check-off program in order to be implemented.
NBAF Funding Approved
In the budget, the legislature approved the authorization to issue an additional $202.0 million in revenue bonds for a total of $307 million for the purpose of supporting capital improvement projects related to the National Bio and Agro Defense Facility (NBAF). The bill expands authority in existing law to expend bond proceeds for facility construction and improvements. The increased bonding is needed to help ensure the federal government that the state is on board with regard to seeing that the facility is properly constructed to defend against threats natural or manmade.
Real vs. Personal Property Issue Unresolved
The House did not take action on HB 2285. The Kansas Grain and Feed Association supported this bill due to the fact that certain machinery and equipment in our industry and others has been incorrectly classified as real property, and was not classified consistently with similar property in other counties. The purpose of the bill is to amend the Kansas property tax code to clarify the definition of commercial and industrial machinery and equipment (CIME) in Kansas. However, the Kansas Department of revenue produced a fiscal impact study showing the bill is estimated to reduce the assessed valuation of property in the state by a total of $583,640,000 effectively killing the bill this session.
Central Ag Lien Registry Bill Introduced
The Kansas Bankers Association introduced a bill establishing a Central Filing system for Agricultural Liens. They have asked that no action be taken this legislative session but an interim be established and study the issue thoroughly. The Kansas Grain and Feed Association has historically opposed such efforts in the past. We will receive input from our legislative committee, board, and other stakeholders to study our position.
Anhydrous Ammonia Bill Fails to Obtain Approval
SB 147 was sponsored by the Kansas Department of Agriculture (KDA), but failed to be approved by both chambers. This bill would have required each NH3 tank to be permitted through KDA, and would have made it unlawful for any person to fill a tank with NH3 unless it was marked with a new “permit to fill” decal. The bill also required each NH3 tank to be inspected annually, and required tank owners to maintain records of each inspection for a period of five years. The bill further authorized KDA officials to inspect any tank upon receiving a complaint. SB 147 would also have established a new commercial NH3 tonnage fee and an Anhydrous Ammonia Fee Fund. However, all NH3 sold as an ag fertilizer would have been exempt from the new fee. Because SB 147 left many questions unanswered, the bill passed out of the House Ag Committee but was not brought above the line for a full House vote. Without passage of SB 147, the regulatory framework for NH3 in Kansas will remain largely unchanged.