Kansas Legislature Update – Veto Session Preview

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Kansas lawmakers returned to Topeka on Thursday after an almost three-week spring break. Heading into Veto Session, lawmakers were faced with three main tasks before final adjournment: passing a budget, adding the $80 million left out of the K-12 funding bill, and potentially cutting taxes. Friday, May 4 is Sine Die, the official closing of the 2018 Legislative Session.

Needless to say, there is a lot to be accomplished during this short Veto Session, which is why lawmakers worked well into the evening on Friday and again on Saturday morning. The additional weekend work allowed the House to pass their combined mega/omnibus budget, Substitute for House Bill 2365, as well as a school finance “fix” bill, House Substitute for Senate Bill 61.

The Senate is scheduled to work their final omnibus bill, Senate Substitute for Substitute for House Bill 2359, on Monday, followed by budget negotiators hammering out House and Senate positions later in the week. A few other conference committees will also meet, wrapping up any outstanding business for the year.

Status on School Funding Case

Before first adjournment, the Legislature passed Substitute for Senate Bill 423, which spends an additional $525 million on K-12 education over the next five years in response to the Kansas Supreme Court’s ruling that the current school finance formula is constitutionally inadequate. The Court is expected to rule on the Gannon vs. Kansas lawsuit by June 30, potentially forcing Governor Colyer to call a July special session should the judges rule the new money is still not enough. Should that be the case, expect to see a more organized push toward a constitutional amendment vote, House Concurrent Resolution 5029, which would remove the jurisdiction of the Kansas Supreme Court over whether the legislature has made “suitable financial provision for public education,” while retaining jurisdiction over the issue of equitable distribution of funds, as a due process issue. A 2/3 majority of both legislative chambers is necessary before the question can be placed on the next state-wide election ballot.

Federal Windfall or Tax Cuts for Kansans?

The Senate passed Senate Substitute for House Bill 2228 before spring break, which gives $135 million back to Kansas taxpayers as a result of Congress passing the Tax Cuts and Jobs Act last December. The bill gives back the “windfall” to Kansans in the form of an increased standard deduction, reinstating small business expensing, and other provisions. Also in the bill, however, is conformity with federal tax law through repatriation provisions, Global Intangible Low Income, interest expense limitations, capital contributions, and FDIC premiums.

Since passage of the bill, many multi-national companies, banks, and national business organizations have encouraged Kansas to decouple on certain items from the federal tax code. As states are beginning to understand the implications of the federal tax changes, several are changing course to avoid substantial tax increases on funds which have never been subject to state tax before. Some are even arguing that trying to tax foreign income in Kansas could be challenged in court as unconstitutional, for a number of reasons.

Several business organizations participated in a meeting on Thursday with House and Senate leadership to educate on the unintended consequences of HB 2228 and what changes the Legislature should make during the Veto Session. House and Senate leaders have communicated their support in fixing the bill. However, some Legislators see this as an opportunity to capture additional revenue for the state coffers, while helping to pay for education funding mandated by the courts.

Still Pending…

REINS Act

: House Bill 2526 requires state agencies to perform a number of steps before proposing a rule or regulation to the Legislature. Modeled largely after Wisconsin’s REINS Act, agencies must research surrounding state’s approach, consult with the regulated entity, and obtain approval of their economic impact statement from the state budget director. Also, if the proposed regulation is estimated to cost more than $3 million over a two-year period on the business to implement and comply, then a public hearing is required.

Noxious Weeds

: House Bill 2583 gives authority to the Secretary of Agriculture – with input from an advisory committee on which the Kansas Agribusiness Retailers Association will have a seat – to designate a plant as noxious. It requires county weed directors to check a designated online database for nearby specialty crops prior to applying pesticides to control noxious weeds.

HPIP Extension

: Senate Bill 430 allows companies to carry forward unused High-Performance Incentive Program tax credits at 50% value after the 16th year, expiring completely after 25 years. The bill also caps the annual amount that can be claimed at 10% of the reduced amount, as well as limits the extension to credits claimed prior to January 1, 2018.

Flint Hills Trail

: Senate Bill 331 designates the Flint Hills Trail as a state park. The bill establishes an advisory committee to study and assess the development, staffing, maintenance and promotion of the state park, and include members who own land along the nature trail. The Kansas Department of Wildlife, Parks and Tourism must carry out the requirements outlined in state law as the responsible party after a transfer of a deed for land pursuant to federal law on railroad rights-of-way. As the Flint Hills Trail covers six counties, it is exempt from separation distances for swine confined animal feeding operations.

Scrap Metal Delay

: Senate Bill 429 allows for a one-year extension to implement and fund through the Attorney General’s office the Scrap Metal Theft Reduction Act passed in 2015. It also requires a progress report to the Legislature by February 1, 2019. A conference committee report agreement (CCR on SB 261) has been reached and awaits adoption by both chambers this week.

Here is a link to all of the 2018 bills being tracked on your behalf. You can read a brief summary, history, upcoming actions, and the actual text of the bill. If you have any problems using the Bill Tracker, please contact Shahira Stafford at shahira@kansasag.org.