Updates and Alerts
STATE LEGISLATIVE UPDATE: FIRST ADJOURNMENT
Last Friday, April 5, marked first adjournment ending the main body of the legislative session. Lawmakers are now on break until the end of April, when they will return to Topeka for the wrap-up session to complete their work for 2019. During this interim the state’s official revenue forecasters will meet to update revenue projections, providing legislators with the revenue figures they will need to finalize the state budget – but also likely impacting the future of other issues.
Action last week was focused entirely on conference committees — conference committees are comprised of negotiators from the House and Senate who work to reconcile differences between their respective versions of a bill. A conference committee’s final compromise proposal must then go back to each body for another vote. It involves long days and lots of “hurry up and wait,” as offers and counteroffers are made, updated drafts are written and reviewed, and each chamber waits on procedure and action in the other chamber.
But many issues were tentatively resolved before adjournment, while some were not – see below for a number of highlights.
With the clock ticking on the April 15th deadline to present the Kansas Supreme Court with a revised K-12 education funding plan, a conference committee report passed the House (76-47) and the Senate (31-8) that includes the Governor’s proposal to add an inflationary factor to K-12 education funding for the upcoming two school years, including about $92 million in the upcoming year – a component the Supreme Court has indicated is necessary to make the funding formula constitutional. The bill also includes some education policy changes, and the Governor has already signed the bill. Conference committee negotiations to reach the final agreement were at times chippy, with House negotiators pushing hard for more policy changes and for different funding provisions it said were more targeted and sustainable while Senate negotiators held firm by noting the full House had not actually passed a funding bill with the provisions House negotiators were presenting. When it became clear a new last-minute funding plan from House leadership also would not have sufficient support in the House, House negotiators finally capitulated to the Senate’s funding position. Read the conference committee report brief here. See how House members voted here and how senators voted here.
With Governor Kelly having vetoed legislation proposing a number of tax policy changes, an attempt to override that veto had been expected last week but the effort never materialized when it became clear there would not be sufficient votes in the Senate, where the override would have been considered first (the effort likely would have fallen short in the House as well.) It would have taken 27 votes in the Senate and 84 votes in the House to override her veto – and it is believed the Senate was at least 2 votes short. But that is unlikely to be the end of the issue. Proponents of taking action on tax policy will likely introduce a modified measure for consideration and negotiation later in the session, when lawmakers have updated revenue estimates and tax policy can be negotiated alongside other issues like health care, and Governor Kelly has signaled her willingness to at least entertain a revised proposal.
What did the vetoed bill include? The legislation revised state tax laws in response to December 2017 federal tax law changes that would otherwise increase the state income tax liability of some Kansas individual and corporate taxpayers – what some legislators argue would amount to a major unintended state tax increase on individuals and corporations that would hurt the state’s competitiveness, and other legislators argue is revenue the state really needs for prisons, foster care, transportation, education, and more. Key provisions included how corporate foreign income should be classified and taxed, a question arising among many states (not only Kansas) as a direct result of brand new federal tax code substantially changing the treatment of foreign earnings and investment; whether the state should benefit from newly-taxable federal income related to now disallowed federal deductions for business interest, capital contributions, and FDIC premiums paid by financial institutions, part of broadening the federal tax base to reduce federal tax rates; and whether individual filers – where all non-corporate business entities pay their income taxes – should be able to elect to itemize deductions on their state tax returns if they opt to take a now much more generous federal standard deduction on their federal returns, a choice they don’t currently have.
The bill also included provisions reducing state sales tax on food by 1% (from 6.5% to 5.5%) starting Oct. 1, 2019, and creating a framework under which marketplace facilitators (like TripAdvisor or Etsy) and out-of-state online retailers with gross sales exceeding $100,000 must collect and remit state and local sales tax starting Oct. 1, 2019. You can read more about the vetoed bill here.
A House-Senate conference committee considering other tax issues will continue to negotiate during the wrap-up session, but among the issues on which there already appears to be agreement is restoring the expensing deduction for non-corporate business entities for business machinery and equipment placed into service during the tax year (limited to 100%), placing them back in parity with corporate entities. Negotiators have also agreed on provisions instituting certain requirements for tax preparers intended to protect taxpayers (read more about that here.) But sticking points in conference committee negotiations currently appear to include a proposal to limit property tax increases on low-income seniors and a proposal to limit or sunset new sales tax exemptions.
Conference committee reports representing a number of recommendations from last year’s Legislative Transportation Vision Task Force—primarily addressing user-based ways to help pay for transportation infrastructure—have passed the House and Senate and are on their way to the Governor. The Legislative Transportation Vision Task Force was charged with reviewing the state’s transportation system and funding as groundwork for a possible new statewide transportation plan.
A conference committee report passed the House (80-41) and the Senate (36-2) providing for an increase in registration fees for electric and hybrid vehicles. Read the conference committee report brief here. See how House members voted here and how senators voted here.
A conference committee report passed the House (90-33) and the Senate (39-1) creating a framework under which additional tolling on new projects only could be considered. Read the conference committee report brief here. See how House members voted here and how senators voted here.
A conference committee report passed the House (91-32) and the Senate (36-4) increasing fees on overweight/oversize vehicles. Read the conference committee report brief here. See how House members voted here and how senators voted here.
Other transportation issues could still be considered by the conference committee during the May wrap-up session.
A conference committee report passed both the House (84-39) and the Senate (28-12) that included provisions authorizing Association Health Plans (AHPs), a health care coverage alternative that allows small businesses to band together to help spread risk and increase negotiating power in order to reduce health care coverage costs, as well as the controversial Kansas Farm Bureau plan to offer non-insurance health coverage that would not have to meet ACA requirements. The measure now goes to the Governor. Read the conference committee report brief here. See how House members voted here and how senators voted here (these vote totals could override a possible veto). Opponents to the Farm Bureau plan also pointed to a decision last week by a federal judge with the U.S. District Court for the District of Columbia striking down U.S. Department of Labor rules governing AHPs, saying it provides an end-run around the Affordable Care Act; that ruling is expected to be appealed.
Prior to first adjournment last week the Senate Minority Leader gave procedural notice that when lawmakers return for the wrap-up session he will make a motion to pull the bill to expand income-based Medicaid eligibility – which previously passed the House (69-54) – out of a Senate committee and to the Senate floor for debate. Read about the measure here and see how House members voted here.
Last week the Senate voted (23-14) to confirm the Governor’s appointment of David Toland as the Kansas Secretary of Commerce. See how senators voted here. Despite being publicly supported by economic development agencies and community development groups across the state, the nomination had become unexpectedly contentious as opponents questioned his qualifications and temperament and supporters claimed was local political grudges and partisan politics.
A conference committee report passed the Senate (37-0) that would require the nonpartisan Legislative Post Audit agency to conduct a systematic and comprehensive review and evaluation of economic development programs every three years and the Department of Commerce to maintain a publicly-available online database of economic development incentive information. It also extends the bond maturity limit for the rural housing incentive district act program. The House will vote on the conference committee report when they return in late April. Read the conference committee report brief here.
The Governor has signed into law a bill that increases the annual tax credit available to contributors to the Center for Entrepreneurship. Read about it here. See how House members voted (122-2) here; the same version of the bill previously passed the Senate (40-0).
Last week a conference committee report was passed by the House (114-3) and by the Senate (37-0) establishing a framework for a commercial industrial hemp program in the state. The measure now goes to the Governor. Read the conference committee report brief here. See how House members voted here and how senators voted here.
Questions or feedback on these or other issues? Contact email@example.com.
ICYMI – LEGISLATORS MEET WITH CHAMBER COMMITTEE
On Friday, January 18, all seven Lenexa-area state legislators were guests of the Chamber’s Legislative Affairs Committee – there was good dialogue, good fun, and good food! Thanks to Kansas Sen. Dinah Sykes and Kansas Reps. Tom Cox, Charlotte Esau, Cindy Holscher, John Resman, Susan Ruiz, and Brandon Woodard for taking time to meet with business constituents. If YOU want to join other Chamber members in learning more about the issues and help lead the way on advocating for our community, contact Ashley Sherard at firstname.lastname@example.org.
THANKS TO OUR LEGISLATIVE AFFAIRS CHAIR!
Thank you 2018-2019 Legislative Affairs Chair Lisa Tomlinson of Bank of Blue Valley-Lenexa Branch – we appreciate your leadership! (Pictured with 2016-2017 Chair Josh Woolard of HNTB Corporation.)
JO CO CHAMBERS’ LEGISLATIVE BREAKFAST SERIES COMING UP!
Johnson County area chambers of commerce jointly host a series of Saturday morning breakfasts (from 7:30 – 9:00 am) to enhance communication and meaningful interaction between the business community and our state legislative delegation. For more information and registration details, click here (to register, Lenexa Chamber members should call 913-491-3600). A list of legislators currently scheduled to appear at each breakfast, subject to change without notice, will be announced soon.
GOVERNOR KELLY RELEASES PROPOSED STATE BUDGET
Governor Kelly has released her proposal to touch up the current fiscal-year state budget (FY2019) and for the upcoming fiscal year (FY2020). For the overview presented to lawmakers by State Budget Director Larry Campbell, click here. For the full budget documents, click here.
Questions? Contact Ashley Sherard at email@example.com.
CHAMBER BOARD APPROVES 2019 LEGISLATIVE AGENDA
The Board of Directors has approved a legislative platform to guide our advocacy in the upcoming 2019 legislative session, recently convened in Topeka. The platform addresses a spectrum of issues important to the business community including tax policy; key business costs and regulations; K-12 and higher education; transportation; economic development; and others.
For a summary of the platform, click here.
Questions or feedback?
Call Ashley Sherard, Vice President of Legislative Affairs at 913-888-1414 or email firstname.lastname@example.org.
GOVERNOR KELLY MAKES STATE OF THE STATE ADDRESS
Governor Laura Kelly presented her first State of the State address to a joint session of the Kansas House and Senate on January 16, 2019, where she laid out her broad vision for the state. Her priorities included schools, foster care and the state’s social services system, and Medicaid expansion.
For a transcript of the Governor’s speech, click here.
For the Republican response, click here.