Kansas Legislature Update – Session Wrap-Up

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2018 Kansas Legislative Report

The Kansas Legislature adjourned Sine Die its 90-day legislative session on Friday, May 4. Your government affairs staff worked day and night watching for your best interests in Topeka so you didn’t have to. Take a moment to recap on the highlights, victories, and a few defeats…

Tax Cuts

After days of debate and negotiation between House and Senate leaders during the Veto Session, lawmakers failed to pass a mega tax cut bill that would have returned an estimated $85 million back to Kansans. The Conference Committee Report on House Bill 2228 died on a 59-59 vote in the House, just four votes shy of the 63 needed for passage. The Senate passed it 21-19 just hours before.

In short, the bill would have allowed Kansas to decouple from several provisions of the federal Tax Cuts and Jobs Act, returning the “windfall” to both individual and corporate taxpayers rather than the state coffers. The main provisions of the tax cut package were:

  • Permanent decoupling on repatriated foreign income, which has never been taxed in Kansas before.
  • One-year decoupling on global intangible low-taxed income, interest expense limitations, capital contributions, and FDIC premiums.
  • Allowing individual taxpayers the option to itemize on their state tax forms – even if they claim the standard deduction on the federal level – reducing their tax liability.
  • Restoration of 100% deductions for medical expenses, property taxes, charitable contributions, and mortgage interest deductions.

Staff, along with other interested parties, is continuing discussions with the Governor’s office and the Department of Revenue asking for regulatory guidance on how repatriated income will or won’t be taxed in Kansas this year.

School Finance

The Governor signed into law 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.

If that is the case, expect to an 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, protecting rural schools. A 2/3 majority of both legislative chambers is necessary before the question can be placed on the next state-wide election ballot.

KGFA has joined the Kansas Coalition for Fair Funding to support the constitutional amendment. Additional dollars toward K-12 education would most certainly come from an increase in property taxes, which are already burdensome on our industry.

Rules and Regulations Oversight

The Conference Committee Report on House Bill 2280 creates a new requirement for state agencies to submit an economic impact statement to the State Budget Office when proposing or amending any rule and regulation. The bill requires the economic impact statement to include a description of businesses that would be directly affected, the benefits of the proposed rule and regulation, and measures taken to minimize the impact on businesses and economic development. In addition, if the proposed regulation has an estimated economic impact of $3 million over two years, then the agency must hold a public hearing prior to adoption. This legislation as a way to ensure that agencies are considering all actual industry costs before passing new regulations.

Staff testified and lobbied strongly in support. The bill is awaiting the Governor’s signature into law.

Noxious Weeds

The Conference Committee Report on House Bill 2583 gives authority to the Secretary of Agriculture – with input from an advisory committee – to designate a plant as noxious. Current authority lies with the Legislature, which can be a burdensome and time-consuming process. It also requires county weed directors to check an online specialty crop database prior to applying pesticides.

Staff testified and lobbied strongly in support, successfully amending the bill to ensure certain provisions caused no harm to the grain industry. The bill has been signed into law.

Transportation Task Force

The Conference Committee Report on Senate Bill 391 establishes the Joint Legislative Transportation Vision Task Force to put together the next 10-year transportation plan. Appointees may be affiliated with one of several organizations listed in the bill, including one from the Kansas Grain and Feed Association. A report and recommendations are due to Legislature by January 31, 2019.

Staff monitored the issue closely to ensure agricultural interests were represented on the committee. The bill is awaiting the Governor’s signature into law.

CDL Renewal Extension

The Conference Committee Report on House Bill 2606 extends from four years to five years the period of time before expiration of a commercial driver’s license. Extending the renewal period by one year is an easy, small step toward lowering the regulatory burden, reducing cost, and expediting the process of conducting agribusiness in Kansas. It will also put Kansas in compliance with the federal Transportation Security Administration’s hazmat endorsement, which is also renewed every five years.

Staff testified and lobbied in support. The bill has been signed into law.

Budget

The Conference Committee Report on Senate Bill 109 is adjustments to the biennial budget for fiscal years 2018 and 2019 that was approved last year. A few appropriated items of interest were $3.25 million toward the State Water Plan Fund within the Kansas Water Office, and $100 thousand toward hemp crop research within the Kansas Water Office.

Staff monitored negotiations closely throughout the session to track funding for the state agencies that regulate our various industries. The bill is awaiting the Governor’s signature into law.

Scrap Metal Delay

The Conference Committee Report on Senate Bill 261 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.

Staff testified as neutral, understanding that while additional time may be needed, the industry strongly supports fighting scrap metal theft. The bill awaits the Governor’s signature into law.

Poultry Expansion

Senate Bill 405 allows for expanded poultry production in Kansas by creating an animal unit conversion rate for modern poultry facilities with dry manure systems, which is currently not addressed in statute. Most opposition came from Tonganoxie residents and their protest against Tyson Foods’ proposal to build a $320 million poultry production and processing complex near their community last year. Attempts to require county public vote approval failed in both Chambers.

Staff monitored the issue closely. The bill has been signed into law.

Broadband Task Force

The Conference Committee Report on House Bill 2701 establishes the Statewide Broadband Expansion Planning Task Force to study and identify opportunities and potential funding sources to expand broadband infrastructure and services across Kansas, including rural areas. Final recommendations are due to the Legislature by January 15, 2020.

Staff monitored the issue closely in support of expanded broadband in rural Kansas. The bill has been signed into law.

Elevator Inspection

House Bill 2765 would have established the Elevator Safety Act, empowering the Office of the State Fire Marshal to govern the design, construction, operation, inspection, testing, maintenance, alteration, and repair of elevators, lifts, escalators, moving walkways, and dumbwaiters. The Fire Marshal would have had the authority to establish rules and regulations over the industry and prohibit any inspections of elevators and conveyance equipment unless by a state-licensed inspection company. They would have also been granted civil penalty authority over all inspection companies owners of elevators and conveyance equipment. Similar laws have been passed in recent years in other states, including Colorado, Missouri and Oklahoma.

Staff engaged the Chairman of the House Federal and State Affairs Committee, citing unnecessary costs to industry and the already multiple entities that oversee elevator safety procedures. The bill never received a hearing.

Ad Astra Rural Jobs Act

The Conference Committee Report on Senate Bill 296 would have allowed tax credits on income, premiums, or privilege taxes for taxpayers who contribute capital to an approved investment company to fund a “rural business concern” with less than 500 employees, in counties with a population of less than 50,000. Businesses engaging in manufacturing, plant sciences, technology, or agricultural technology would have qualified for the program. Beginning in tax year 2020, 20% of the tax credit could have been claimed annually over a five-year period. The amount of tax credits claimed in any one fiscal year would have been limited to $10 million.

Staff testified and lobbied in support. The CCR passed the House 83-36 on the last day of the Veto Session, but the Senate adjourned before taking it up for a vote.

HPIP Extension

The Conference Committee Report on Senate Bill 296 would have extended 25% of unused High Performance Incentive Program (HPIP) tax credits beyond the current carryforward limit, from 16 years to 25 years, for those taxpayers who initially claimed an HPIP credit prior to January 1, 2018. In any tax year after the 16th year, the amount of tax credits used by a taxpayer would have been limited to 10% of the reduced amount. The HPIP provides a 10% income tax credit for eligible capital investments that exceed either $50 thousand in non-metropolitan counties or $1 million in the five metropolitan counties of Douglas, Johnson, Sedgwick, Shawnee, or Wyandotte.

Staff monitored the issue closely. The CCR passed the House 83-36 on the last day of the Veto Session, but the Senate adjourned before taking it up for a vote.