Updates and Alerts

TAX AND EDUCATION ISSUES HEAT UP
LEGISLATIVE UPDATE – WEEK TEN (Mar. 13-17)

Tax policy, education, and the state budget all took center stage, as lawmakers considered major bills to exempt state and local sales tax on food and expand school choice with voucher-like Education Savings Accounts.

Lawmakers have only one more full week for committees to take action before the next legislative deadline on Mar. 29, when bills must be acted on by the opposite chamber in order to continue to advance (House bills acted on by the Senate, Senate bills acted on by the House.) The pace will be hectic as lawmakers work to finalize and move their bills ahead of the deadline – after this week, committee work will mostly be complete for the year.

Action of note included:

TAXATION
The House Taxation Committee held a hearing and then declined to consider SB 248, exempting food and food ingredients from both state and local sales tax starting January 1, 2024.
       As originally presented to the Senate, the bill would have repealed last year’s plan to phase down and eliminate state sales tax on food and replaced it with a state sales tax exemption only for federally-approved “healthy” food, a plan proposed by Republican Senate leadership to leave additional revenue for other tax reform purposes. But after that plan was amended by the full Senate to instead exempt food and food ingredients from both state and local sales tax starting January 1, 2024, significant concern was raised about the revenue impact on local governments and the substantial pressure it may put on local property taxes to offset the revenue reduction (estimated to be about $180 million to local governments statewide, including projections it would reduce revenues in Lenexa by $3-4 million or 2-2.5 mills, Olathe by $8 million or 3 mills, Wichita by $11 million or 3 mills, and Topeka by $5-6 million or 8 mills.) The Senate previously passed the amended bill (22-16). Read a summary of the amended bill. See how senators voted.
       While SB 248 is not expected to advance, other bills considering sales tax on food may still be considered.

The Senate Ways & Means Committee held a hearing on SB 309, creating a $220 million local extraordinary needs fund to provide grants to local governments hit by proposed elimination of local sales tax on food and other state legislation in order to hold communities harmless, a second $50 million fund overseen by a new committee tasked with providing grants to cities and counties for capital projects, and abolishing the local ad valorem tax reduction (LAVTR) fund. The bill – proposed by the Senate President after local governments opposed the Senate plan to eliminate local sales tax on food – was intended to alleviate the unanticipated impact on local budgets and reduce the pressure to raise property taxes to offset state-imposed revenue losses. To qualify, local governments would have to show they lost revenue and are abiding by Truth in Taxation public disclosure laws. While local governments told lawmakers they appreciated the intent of the bill, based on past history they were skeptical how long the grant money would continue to be provided. Read summary and estimated fiscal impact. With SB 248 being essentially tabled from further consideration, it is unlikely SB 309 will advance.

The House Taxation Committee held hearings:

• On SB 169, providing a 4.75% state income tax rate for individuals (does not include corporations.) The bill includes an exemption on the first $5,225 for individual filers and $10,450 for married filing jointly. It would eliminate the current 3.2% rate for those with income under $15,000 ($30,000 for married couples filing jointly), 5.25% for incomes between $30,000 and $60,000, and the top rate of 5.7% for higher earnings. The fiscal impact of the bill is estimated to be $570 million in FY 2025 when fully implemented. The Senate previously passed the bill (22-17). Read a summary and more about the estimated fiscal impact. See how senators voted. The House Committee may take action on the bill on March 23.
• On SB 33, making a number of income tax policy changes including providing for a cost-of-living adjustment for the state income tax standard deduction amounts, eliminate state income taxation of Social Security benefits and retirement plan income, and creating state income tax deductions related to net operating losses for certain individuals and federal tax credit disallowances for the federal work opportunity tax credit and the pandemic-related employee retention tax credit (the state deduction would be equal to 25% of the disallowance.) The Senate previously passed the bill (36-3). Read a summary. See how senators voted.
• On SB 8, reducing penalties for the late filing of and the failure to file personal property renditions and the discovery of escaped personal property and limiting the instances in which a taxpayer must file statements regarding personal property. Future annual filings would only be required when there has been a change to report related to the property previously listed or to the initial statement. Under current law, a county appraiser adds 5% to the assessed value of the property as a penalty for the late payment of property taxes paid within the month they are due, with an additional 5% penalty for each additional month up to 25%. The bill would reduce penalties for the late payment of property taxes to 2% of the property’s assessed value, with an additional 2% for each additional month up to 10%. The bill also reduces the penalty for escaped property taxes and for property taxpayers who fail to deliver a full and complete statement of assessment from 50% to 12.5%. The total personal property penalties assessed statewide at the county level for the 2022 tax year totaled more than $52 million. The Senate previously passed the bill (39-0). Read a summary. See how senators voted. The Committee is expected to take possible action on the bill the week of March 20.
• On HCR 5009, putting forth a proposed state constitutional amendment reducing the assessed valuation rate on residential property from 11.5% to 9%, leaving commercial property at 25% and utility property at 30%. If the bill moves forward, business advocates will request that all classifications of property be reduced equitably, not just one class see the benefit of property tax relief.

EDUCATION
The full House further amended and approved (64-61) SB 83, establishing voucher-like Education Savings Accounts (ESAs) whereby qualified students may divert public school base aid (currently $5,100) to an individually-directed Education Savings Account to pay for non-public educational services and expenses (originally HB 2218.) The program would be phased in over four years, with each consecutive year increasing the maximum number of qualified students allowed to have an account. Initially in 2023-24 the program would be open to public elementary and secondary school students who are eligible for free/reduced lunches or who are academic low-performers, up to a maximum of 2,000 students – and if that maximum is not met, students not meeting that criteria but with family incomes below 300% of federal poverty level (phasing up to 2026-27 and thereafter when any qualified student with a family income of less than 600% of the federal poverty level would be eligible – in 2023, that’s a family income of $180,000 for a family of four.) The bill explicitly does not allow any governmental agency to exercise control over or supervise any non-public school or home school in the program. Funds in an ESA that are not used would roll over to the next year and could continue to be used for up to 4 years of postsecondary education. Families and students may utilize both this program as well as the Tax Credit for Low-Income Students Scholarship Program. Although the fiscal impact remains somewhat murky, initial projections estimate a cost to the SGF of about $150 million.
       A House Committee amended SB 83 to substitute in HB 2218’s ESA plan, to require school districts to raise teacher salaries every year (from within existing resources allocated to the district under the school finance formula), to create a special education funding task force, and to include a $72 million boost to funding for special education. The full House further amended the bill to remove a proposed 10-member ESA oversight Board and vest oversight entirely with the State Treasurer.
       The House vote falls far short of the 2/3 approval that would be needed to override a likely gubernatorial veto. Republican House leaders were not expecting the close vote (in fact, the vote had to be held open for an hour in order to change enough votes for passage), with opposition coming from a number of rural legislators concerned about the impact on their local school districts. Read a summary of amended SB 83. See how House members voted. The Senate did not agree to the House’s changes to SB 83, and the measure now goes to a House-Senate conference committee to negotiate differences in the bill.
       As passed by the Senate, SB 83 originally provided additional student eligibility under the Tax Credit for Low-Income Students Scholarship Program (SB 83 passed the Senate (22-16); read a summary and see how senators voted.)
       More than 60 of the state’s 105 counties don’t have an accredited private school but proponents argue the ESAs may induce more organizations and individuals to open schools.
       Supporters say every family should have the opportunity to find the most successful educational path for their child, regardless of zip code or income. The measure is strenuously opposed by public school advocates, who say the non-public programs would lack accountability and oversight and could pick and choose students while diverting resources from public schools who serve any student. Even if the bill were to pass the legislature, it would almost certainly be vetoed by the Governor and support in the House fell substantially short of the 2/3 votes (84) needed to override a veto.

The full House amended and approved (116-6) HB 2400, enacting the “Kansas adult learner grant act” to facilitate workforce development by providing grants and workforce retention incentives to adults who pursue baccalaureate degrees part-time from eligible post-secondary educational institutions in certain high-need fields of study, similar to the current PROMISE Scholarship Act. A House committee and the full House both amended the bill to put certain limits on the proposed new program. Read a summary of the amended bill. See how House members voted. The bill now moves to a Senate committee.

The Senate Education Committee held a hearing on HB 2060, establishing a special education and related services funding task force. The House previously passed the bill (83-37). Read a bill summary. See how House members voted.

ECONOMIC/WORKFORCE DEVELOPMENT
The full House amended and approved (121-0) HB 2388, streamlining interstate occupational credentialing processes to get workers moving into Kansas into jobs more quickly, primarily focusing on creating a single electronic credentialing portal. Certification of law enforcement officers is exempt from the legislation. The full House amended the bill to develop a license verification portal. Read a summary of the amended bill. See how House members voted.

The Senate Commerce Committee amended, approved and forwarded to the full Senate for consideration HB 2292, enacting the Kansas apprenticeship tax credit act to encourage apprenticeship programs in Kansas by providing income tax credits for participating businesses that employ apprentices. The bill would establish a tax credit for employers for up to $2,500 per apprentice for up to 20 apprentices. The U.S. Department of Labor ranks Kansas 27th in the total number of active apprenticeship programs — but 38th in the number of active apprentices, 36th in the number of program graduates, and 42nd in the number of new apprentices. The bill also creates special apprenticeship grant programs aimed at nonprofit healthcare workers and educators. The Senate Committee amended the bill to limit balances held in the special apprenticeship grant programs. The House previously passed the bill (115-7). Read a summary of the amended bill.  See how House members voted.

The House Commerce Committee held hearings:

• On HB 2401, making several administrative changes to unemployment statutes including defining “benefit year” and “temporary unemployment” in the employment security law, requiring electronic filing of reports for employers with 25 or more employees, permitting discretion in the number of appointments and length of terms for the temporary employment security board of review and extending the time required for establishment of a new account due to a business acquisition. Read a summary and estimated fiscal impact.
  • Provisions of HB 2333 will be amended into the bill, providing for disqualification from unemployment benefits for failing to attend a job interview without giving notice to the prospective employer or for failing to respond to a job offer within five days. HB 2333 is intended to address a concern from policymakers and HR professionals about a job search loophole in unemployment statutes whereby applicants are “ghosting” prospective employers while still maintaining their UI benefits. Read a summary of the bill.
• On HB 2450, providing a sales tax exemption for the construction or remodeling of a qualified data center in Kansas, and the purchase of data center equipment, eligible data center costs, electricity and certain labor costs to qualified firms that commit to a minimum investment of at least $600,000,000 and meet jobs requirements (the bill would require the data center to create at least 20 new jobs.) The exemption could last from 30 years to indefinitely, depending on the size of the investment. Right now 22 states, including Texas, Nebraska and Iowa, have full sales tax exemptions for data centers; Missouri is one of three states with limited exemptions. Proponents say the sales tax exemption would make Kansas more competitive with other states in attracting large data centers, and the exemption would be similar to exemptions Kansas already provides for agricultural and manufacturing equipment. Opponents question the need and ROI of such incentives. Read a summary and estimated fiscal impact. 

The House Taxation Committee held a hearing, amended, and forwarded to the full House for consideration SB 91, creating an income tax credit and sales tax exemption aimed at incentivizing film and media projects in the state. The bill also includes educational and workforce grant programs intended to help promote and develop a related workforce. The tax credits are transferable. Kansas had a film tax credit until 2009 when it was cut as part of budget-balancing measures; 37 other states currently have film and media tax credits. The House Committee amended the bill to require economic impact studies of the program. The Senate previously passed the bill (28-7). A summary of the House Committee bill is not yet available online; read a summary of the bill as it passed the Senate. See how senators voted.

REGULATIONS
The House Commerce Committee held a hearing, amended, and forwarded to the full House for consideration HB 2447, prohibiting cities and counties from banning the sale of products or services otherwise allowed by state law. This bill arose after some municipalities began discussing banning otherwise legal products under state law, notably Wichita considering a ban on the sale of cats and dogs (later dropped). Proponents say the bill will prevent municipalities from interfering in legal commerce. Opponents say the bill as introduced was unlimited in scope, essentially nullifying local home rule authority and the ability to protect public health, safety and welfare. After cities raised concerns about the bill’s impact on their ability to enforce zoning ordinances and other regulations related to adult entertainment, tobacco, alcohol, fireworks, etc, the House Committee amended the bill to provide exceptions for zoning and land use as well as limits for alcohol and business licensing. Cities still worry the bill will hamper the ability to protect the health and welfare of their communities because where state law is silent on whether a product is allowed then local governments could not restrict it regardless of whether it posed a threat, forcing municipalities to repeatedly come to the legislature to outlaw a product before it could be limited at the local level. Read a summary of the amended bill.

The Senate Federal & State Affairs Committee amended, approved and forwarded to the full Senate for consideration SB 291, a Senate version of legislation aimed at protecting pensions and businesses against ideological boycotts involving environmental, social or governance (ESG) standards including requiring KPERS to divest from and prohibiting state contracts or the deposit of state moneys with entities engaged in such boycotts and prohibiting discriminatory practices in the financial services industry based on such boycotts.
       Proponents say the requirements ensure financial decisions are based solely on best rate of return; industry sectors important to the economy like oil, gas, mining, and firearms are protected; and social issues like diversity policies aren’t influencing financial decision-making. The Senate Committee added amendments intended to address concerns raised by KPERS officials that the bill as originally written could incur penalties that would cost the state billions in returns, but also added private sector disclosure mandates requiring written consent from clients acknowledging that ESG guidelines are being used to make investing decisions (enforceable under consumer protection laws by Attorney General Kobach.) Financial services industry representatives and the Kansas Chamber, among others, have raised concerns about the disclosure mandates and the broad consumer protection powers, urging lawmakers not to overreact with heavy-handed mandates on business. It’s not currently clear the impact the measure could have on companies who offer 401(k) plans to employees.
      Read a summary of the amended bill; also see HB 2436 below.

The House Financial Institutions & Pensions Committee amended, approved, and forwarded to the full House for consideration HB 2436, the House version of legislation aimed at protections from environmental, social & governance (ESG) standards, including prohibiting the state and political subdivisions from giving preferential treatment to or discriminating against companies based on such ESG criteria in procuring or letting contracts (requires a neutral stance), requiring KPERS fiduciaries to act solely in the financial interest of the participants and beneficiaries of the system, and restricting state agencies from adopting ESG criteria or requiring any person or business to operate in accordance with such criteria. See SB 291 above for examples of ESG criteria. This bill does not have the same private sector disclosure mandates as the Senate-proposed ESG bill (SB 291.) The House Committee made amendments related to proxy voting and other clarifications. Read a summary of the amended bill.

The House Federal & State Affairs Committee held a hearing on HB 2446, prohibiting cities and counties from regulating plastic and other containers designed for the consumption, transportation or protection of merchandise, food or beverages. This bill is intended to preempt local governments from regulating plastic bags, straws, takeout containers, etc. A similar bill that also included a preemption on regulating otherwise legal consumer merchandise failed to pass out of a Senate committee earlier this session (but see HB 2447 above, a simplified version now introduced on its own), leading to re-introduction of this bill without the “consumer merchandise” piece – this bill passed the legislature last year but was vetoed by the Governor. Read a summary. The Committee is expected to consider the bill the week of March 20th.

WORKERS COMP/UNEMPLOYMENT COMP
The Senate Federal & State Affairs Committee held two days of hearings before voting to table SB 135, a bill providing for licensure and regulation of the cultivation, processing, distribution, sale and use of medical cannabis. Business community representatives monitor this issue to ensure that employers retain the ability to set workplace drug policies in order to maintain safe workplaces. Read a summary and estimated fiscal impact. The Committee Chair said the issue is dead for the year, citing higher priority issues and questions about the merits.

LEGAL
The House Judiciary Committee held a hearing on SB 75, changing the statutory pre-judgment interest rate from a fixed rate of 10% to a variable rate based on the statutory rate provided for interest on judgments. Pre-judgment interest is intended to compensate plaintiffs for the lost time value of money for the time period spent litigating their claims. Proponents of the bill say a variable rate would more fairly and accurately reflect real-world prevailing economic conditions than the 10% fixed rate, which in today’s conditions has been creating a bonus for plaintiffs and penalizing defendants. The Senate previously passed the bill (38-0). Read a summary. See how senators voted. The House Committee is expected to consider the bill the week of March 20th.

The Senate Transportation Committee held a hearing, amended, and forwarded to the full Senate for consideration HB 2019, relating to transportation network company services (such as Uber, Lyft and others) establishing conditions for when a driver is an independent contractor versus an employee. The Senate Committee amended the bill to clarify its scope. The House previously passed the bill (84-38). Read a summary of the amended bill. See how House members voted.

NATURAL RESOURCES
The Senate Ag & Natural Resources Committee held two days of hearings on HB 2302, modifying the distribution of moneys into the State Water Plan Fund, supporting water-related infrastructure projects, and creating a dedicated 1.2% transfer of state sales and compensating use tax to the Fund (estimated to generate $54.1 million in upcoming FY 2024 – a substantial increase over the current $8 million dedicated to the State Water Plan.) The state sales tax transfer on behalf of water infrastructure would operate similarly to the state sales tax transfer to the State Highway Fund for transportation infrastructure. As the Ogallala Aquifer that serves large portions of western Kansas and its agricultural industry continues to be depleted, water resource conservation has been a growing concern for Kansas and its future economy. Lawmakers have been considering paths to updating aged water infrastructure and incentivize voluntary conservation. The House previously passed the bill (119-3). Read a summary. See how House members voted. The Senate Committee is schedule to take possible action on the bill on Tuesday, March 21.

Coming Up (Mar. 20-24)
Legislative schedules are subject to change.

TAXATION
On Tuesday the House Taxation Committee will hold a hearing on HB 2457, introduced by the House Taxation Committee Chair and proposing a number of state tax policy changes including providing an income tax rate of 4.95% for individuals and decreasing the tax rate for corporations; phasing out income tax on Social Security income by tax year 2026; increasing the Kansas standard deduction and providing for cost-of-living adjustments; eliminating state sales tax on food and food ingredients on July 1, 2023; and increasing the property tax exemption for residential property from the statewide school levy from $40,000 up to $65,000. A summary is not yet available.

The House Taxation Committee is expected to take possible action on HB 2411, decreasing the penalties for employers failing to timely remit employee withholding income taxes. Currently any delay in filing is assessed a penalty of 15% of the underpayment. This bill would change the penalty to 2% if remitted within one to five days, 5% if remitted within six to 15 days, 10% if remitted after 15 days, and 15% if remitted after 15 days and the Department has issued a notice to the person regarding the underpayment but the amount of the underpayment was not remitted within ten days of issuance of the notice. Read a summary and estimated fiscal impact.

The Senate Taxation Committee will hold hearings:

• On Tuesday on HB 2106, providing a sales tax exemption for sales of property and services used in the provision of telecommunications services. Projected to have an annual fiscal impact of about $17 million, the proposed exemption for telecommunications companies is intended to free up resources to better expand high-speed internet service across Kansas. The sales tax break would sunset in 2028. The bill previously passed the House (108-13). Read a summary.
• On Wednesday on SB 313, clarifying the determination of taxable income for purposes of the SALT Parity Act (governing the State And Local Tax income tax deduction.) This bill, pursued by the Kansas CPAs, clarifies legislation passed last year under which the CPAs believe KDOR’s issued guidance is contrary to legislative intent.
• On Wednesday on SCR 1610 a proposed state constitutional amendment to limit annual property valuation increases to no more than 3%.

EMPLOYER/EMPLOYEE RELATIONS
On Tuesday the Senate Public Health & Welfare Committee will hold a hearing on SB 315, requiring employers, child care facilities, and elementary, secondary and postsecondary educational institutions and employers to grant exemptions from any vaccine requirements (not just the COVID vaccine) without inquiring into the sincerity of the request and repealing the meningitis vaccine requirement to live in student housing. This bill expands legislation originally aimed at COVID vaccines passed in a special session during the pandemic to now include any vaccine. Employers say vaccine requirements and exemptions are already governed by federal law so this legislation is unnecessary.

LEGAL
On Tuesday the Senate Judiciary Committee will hold a hearing on SB 283, prohibiting conveyance of certain real property in Kansas to “foreign adversaries” as defined by the U.S. government (although the Kansas Secretary of Agriculture could, through rules and regulations, add or remove entities from the definition of “foreign adversary” after consideration of the risk to the state and national security and the economic costs and benefits of such action.) The prohibition would apply to all real property conveyances of more than 10 acres, and would apply to any person who is a citizen of a foreign adversary-state unless they are a dual citizen of the United States. Current Code of Federal Regulation foreign adversaries are China (including Hong Kong), Cuba, Iran, North Korea, and Russia.

“See How They Voted” Lenexa-Area Legislator Guide!

Kansas Senate

• Dist 21 – Senate Minority Leader Dinah Sykes, D-Lenexa (entire City of Lenexa) – Dinah.Sykes@senate.ks.gov

Kansas House of Representatives

• Dist 17 – Rep. Jo Ella Hoye, D-Lenexa (portion of north-central Lenexa) – JoElla.Hoye@house.ks.gov
• Dist 23 – Rep. Susan Ruiz, D-Shawnee (portion of northeast Lenexa) – Susan.Ruiz@house.ks.gov
• Dist 117 – Rep. Adam Turk, R-Shawnee (portion of western Lenexa) – Adam.Turk@house.ks.gov
• Dist 30 – Rep. Laura Williams, R-Lenexa (portion of south-central Lenexa) – Laura.Williams@house.ks.gov
• Dist 108 – Rep. Brandon Woodard, D-Lenexa (portion of central and eastern Lenexa) – Brandon.Woodard@house.ks.gov

Interested in a bill and want to learn more?

• Explore the legislature’s website kslegislature.org to find House and Senate calendars, links to proposed bills, and committee information including live meeting audio links and posted testimony.
• Watch House and Senate sessions and many committee meetings via the Kansas Legislature’s YouTube channel.
• Access archived committee meeting audio recordings here.
• Follow legislative action simultaneously detailed on Twitter using the hashtag #ksleg.
• Call the State Library’s toll-free legislative hotline at (800) 432-3924. Calls and questions are confidential.
• Ask questions such as how to read the calendar, what’s existing law and what would change in a proposed bill, etc, by contacting Ashley Sherard, the Chamber’s Director of Legislative Affairs, at asherard@lenexa.org or (913) 888-1414.

AREA LEGISLATORS MEET WITH CHAMBER

The Kansas Capitol came to the Chamber on Friday, January 13, when nearly all Lenexa-area state legislators were guests of the Chamber’s Legislative Affairs Committee, Board, and Economic Development Council to talk about issues in Topeka and connect with our members!

The Chamber looks forward to working this year with Kansas Senate Minority Leader Dinah Sykes and Kansas Reps. Jo Ella Hoye, Susan Ruiz, Adam Turk, Laura Williams, and Brandon Woodard.

CHAMBER BOARD APPROVES 2023 STATE LEGISLATIVE AGENDA

The Lenexa Chamber Board of Directors has approved a legislative platform to guide our advocacy in the upcoming 2023 state legislative session.  The platform addresses a spectrum of issues important to the business community including pandemic relief and recovery, tax policy, key business costs and regulations, K-12 and higher education, health care, transportation, economic development, and others.

For a summary of the platform, please click here.

Questions or feedback?  Call Ashley Sherard, Vice President and Director of Legislative Affairs, at 913-888-1414 or email asherard@lenexa.org.