Updates and Alerts

KEY TAKEAWAYS FROM WEEK TEN

March Madness Time At The Capitol

Friday, March 22, is the last day for legislative committees to meet, so action has been heavy as lawmakers push hard to move bills on issues they want to advance this year. Last week was among the busiest to date, with legislators taking action on a number of major policy issues including tax and budget bills – this coming week is shaping up to be just as hectic!

1. New Tax Plan Passes Senate By Veto-Proof Majority

One of the biggest question marks of the session was what path forward, if any, lawmakers may take on major tax policy changes in the wake of their failed attempt to override the Governor’s veto of a Republican-backed tax package passed earlier in the session.

This week the issue reemerged in the Senate in a new proposed tax bill that addressed the same tax elements as the failed plan but with some different details. New SB 539 includes provisions:

  • Replacing the three current individual income tax brackets with a single rate that phases down from 5.7% to 5.45% over 5 years;
  • Exempting Social Security income from state income tax;
  • Providing for a standard deduction increase plus annual cost-of-living adjustments;
  • Providing for a significant increase to personal exemption amounts, adding an annual cost-of-living adjustment and creating an exemption for dependents;
  • Establishing a refundable child tax credit, tied to parental income, for children under age 5;
  • Reducing financial institution privilege tax rates in parity with corporate rates;
  • Accelerating the elimination of sales tax on food and food ingredients by six months to July 1, 2024; and
  • Increasing the amount of the appraised value of residential property exempt from the statewide uniform 20 mill school finance levy to $100,000.

The package is estimated to reduce state revenues by $1.77 billion over three years and $3.29 billion over five years.

After an extensive floor debate the Senate approved the bill (29-11) — enough support to exceed the 2/3 (27 votes) needed to override an expected gubernatorial veto of the measure should it make it to the Governor’s desk, if senators stick to their same vote on an override. The Governor has repeatedly said she will not support legislation that would restructure the state’s income tax system from the current three brackets to a single rate, saying the move would be less financially stable and would disproportionately benefit higher earners.

After the vote the Senate President said he didn’t believe this bill would be the final product presented to the Governor. The House is working on its own tax measure, likely to emerge this coming week, and the House Tax Committee Chair says he believes the House’s bill will have a smaller fiscal impact. If a different measure passes the House, a final compromise proposal would be negotiated by 3-member teams from the House and Senate, and then voted on again by each chamber – whether that final product would be able to garner veto-proof support remains to be seen.

If a tax policy relief measure is not approved this session, the Governor has vowed to call lawmakers back for a special session to address the issue, an unappealing prospect in an election year when legislators want to devote their time to campaigning.

2. Senate Passes An Initial State Budget Proposal

One piece of business lawmakers must complete before adjourning for the year is passing a balanced state budget for the upcoming fiscal year that will begin July 1. While there is still a long way to go in the process, this week the Senate took a big step toward getting that accomplished by debating and approving an initial state budget proposal.

The Senate proposal, contained in SB 514, allocates $25.1 billion to fund state operations in FY 2025 – representing a 1% reduction from the current fiscal year’s “all funds” budget, but a 3% increase in spending from the tax-supported State General Fund budget. According to the Senate Ways & Means Committee Chair, because the proposed budget stays in the black and does not significantly alter the currently projected FY 2025 surplus of more than $3 billion, there is capacity for lawmakers to approve tax reductions. The measure passed the Senate (24-15).

Of special interest to our area are provisions in the bill allocating $28 million to support 2026 World Cup event operations like security and transportation and $75 million to help build the new KU cancer research center, which will consolidate cancer research at one facility with increased lab space and researchers. Currently KU’s cancer research is conducted in 15 buildings across three different campus locations. The bulk of funds for that project will come from private and federal sources.

The House has not yet debated its initial budget proposal, expected to happen this coming week. Once the House has its proposed budget, negotiators for the House and Senate will begin working out differences between the two chambers’ budgets to come up with a final proposal.

3. Medicaid Expansion To Receive Long-Awaited Hearing

This Wednesday committees in both the House and Senate will hold hearings on proposals to expand income-based Medicaid eligibility in the state, the first hearings on the issue since 2020. A House committee will hold a hearing on HB 2556, the Governor’s expansion plan, and two Senate committees will hold a joint informational hearing on the issue.

Medicaid expansion has been the Governor’s highest priority in the 2024 session, while Republican legislative leaders in both the House and Senate – who control legislative debate – remain staunchly opposed. Kansas is one of 10 states that have not expanded Medicaid since the federal government began offering it in 2014.

Both supporters and opponents have framed their positions on the issue on both fiscal and moral grounds. Proponents of expansion assert 1) the broader health care system, including by extension Kansas businesses who provide most health care coverage in the U.S., are indirectly bearing the burden of paying for this group’s higher-cost mostly unreimbursed care – contributing to the instability of health facilities, particularly in rural areas – while the state leaves millions in federal reimbursement dollars on the table, and 2) it is morally wrong to leave uninsured an estimated 150,000 mostly working poor whose earnings leave them stuck in a coverage gap, making too much for state Medicaid eligibility and too little to qualify for subsidies in the federal ACA marketplace. Opponents of expansion assert 1) the state can’t afford it, now or in the future, and that it won’t solve the system’s financial instability, and 2) it would be morally wrong to divert money that could be used toward disabled services and the needs of the frail, elderly, and mentally ill to instead extend a Medicaid entitlement to able-bodied adults they say choose not to work.

Republican leaders have proposed increasing the state’s Medicaid reimbursement rates paid to providers, which today are significantly lower than in most states, which they say will better shore up health system finances and encourage more providers to serve the existing Medicaid population. Health care advocates welcome the proposed move – something they have pushed for years – but say it doesn’t negate the need to expand coverage eligibility to expand access to more Kansans and help reduce uncompensated care.

4. Committee Action Heavy As Session Winds Down

With the session winding down, movement of bills is ramping up! It was a busy week of legislative hearings, with a number of bills tracked by the business community seeing action.

Bills approved by either the full House or Senate included:

Clarifying SALT Income Tax Deduction for Pass-Through Entities. HB 2465, clarifying the determination of taxable income and providing for the passing through of tax credits to electing pass-through entity owners for purposes of the State and Local Tax (SALT) Parity Act, passed the Senate (38-2). The bill also provides clarification regarding federal credit disallowances related to the employee retention tax credit, work opportunity tax credit, and business interest expense tax deduction, and permits the carryforward of certain net operating losses. The House passed its version of the SALT bill (124-0) last year. The measure now moves to a conference committee to work out differences between House-Senate versions of the bill.

Valuing Commercial Property. SB 311, excluding the sales price for commercial property internal revenue code section 1031 exchange transactions, build-to-suit transactions, and sale-leaseback arrangements from being used as an indicator of fair market value or in sales comparisons for purposes of property tax valuation, passed the Senate (21-19). During floor debate supporters said some commercial properties are being overvalued because elements outside bricks-and-mortar were unfairly being included in property valuations, while opponents raised concern that lowering commercial property valuations would shift property tax burden to residential property. The measure now moves to the House.

Imposing Notice Requirements for Credit/Debit Card Payment Surcharges. The House concurred (111-11) in HB 2247, which includes provisions requiring that the surcharge amount for the use of a credit/debit card must be disclosed through a clear and conspicuous notice to the customer at either the point of entry or the point of sale and in advance of such transaction. The U.S. Supreme Court previously struck down prohibitions on such surcharges, leading lawmakers to instead impose notice requirements. The bill previously passed the Senate (33-6). The measure now moves to the Governor for her review.

Promoting Investment in Energy Infrastructure. HB 2527, aimed at balancing how to meet growing development demand on our state’s energy infrastructure vs. managing reasonable and attractive electricity rates for residents and businesses, passed the House (111-8). Average electrical demand of an economic development project in 2019 was 2 MWs — in 2022 it was 76 MWs. A Senate committee is scheduled to take up the measure early next week.

Bills advanced by House or Senate committees, now eligible for consideration by their full chamber, included:

Addressing Threats Posed By “Countries of Concern.” A House committee took action on several bills limiting financial and security threats from “countries of concern” — foreign adversaries of the U.S. — namely China (including Hong Kong but excluding Taiwan), Cuba, Iran, North Korea, the Russian federation, and the Bolivarian republic of Venezuela.

  • SB 172 was amended and advanced by a House committee to prohibit foreign principals from countries of concern from holding any ownership or leasing interest in real property within 150 miles of a state or federal military building in this state, unless they have been cleared by the federal national security review process (formerly HB 2766). As a practical matter, the 150-mile scope would essentially cover the entire state.
  • SB 271 was amended and advanced by a House committee to prohibit the acquisition of critical components of drone technology from named “countries of concern” and requiring the divesture of such technology (formerly HB 2820).
  • SB 37 was amended and advanced by a House committee to require state-managed funds to divest from investments with countries of concern (with exceptions), prohibit state deposits in any bank domiciled in a country of concern, prohibit state contracts for goods or services with a foreign principal, and indemnify state-managed funds with respect to actions taken to comply.

All three bills are now eligible for consideration by the full House.

Strengthening the Workforce Pipeline. A Senate committee advanced HB 2745 streamlining occupational licensing for spouses of transferring military personnel in order to get workers into jobs faster. The measure is now eligible for consideration by the full Senate. The bill previously passed the House (119-0).

Tying Together Local Economic Development Incentives and Property Tax Rates. SB 468 was amended and advanced by a Senate committee prohibiting cities and counties that grant a property tax abatement from exceeding a year-over-year revenue-neutral property tax rate. The committee amended the bill to remove Tax Increment Financing (TIF) from the prohibition. The bill is now eligible for consideration by the full Senate, although it is unclear whether it will be taken up.

Income Tax Credit for Non-Public School Students. SB 509 was amended and advanced by a senate committee establishing a refundable Education Opportunity Tax Credit providing an income tax credit to taxpayers with eligible dependent children not enrolled in public school equal to either 75% or 50% of public school Base State Aid.

5. Looking Ahead To Another Busy Week

Looking ahead to the coming week, committees have scheduled a number of hearings and action on bills of interest to business advocates:

  • State Economic Development Tools vs. Corporate Income Tax. A Senate Committee will hold a hearing on prospectively eliminating two state economic development incentive programs, HPIP (aimed at capital investment) and PEAK (aimed at job creation), to buy down the corporate income tax rate (SB 546).
  • Controlling Property Tax Valuation. A House committee will hold hearings on two proposed state constitutional amendments aimed at controlling property taxes. One would allow for averaging the prior 10 years of property tax valuations for residential property only (HCR 5025), and the other would cap any property’s valuation growth to no more than 4% a year with some exceptions (SCR 1611previously passed the Senate).
  • Creating a Regulatory Sandbox. A House committee will hold a hearing on creating a regulatory relief division within the Office of the Attorney General and establishing the general regulatory sandbox program to waive or suspend certain state statutes and rules and regulations for program participants (HB 2821).
  • Creating a Data Center Incentive Program. A Senate committee will hold a hearing on creating a new state incentive program aimed at attracting large data centers, offering various sales tax exemptions (SB 545). A House committee held a hearing on its identical companion bill.
  • Managing Administrative Burden. A Senate committee will hold a hearing on increasing oversight of administrative rules & regulations to better manage administrative burden (HB 2648). The bill previously passed the House (82-36).

 

LENEXA-AREA LEGISLATOR GUIDE

Kansas Senate

Kansas House of Representatives

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 at asherard@lenexa.org or (913) 888-1414.

 

AREA LEGISLATORS MEET WITH CHAMBER

The Kansas Capitol came to the Chamber on Friday, January 12, when 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 2024 STATE LEGISLATIVE AGENDA

The Lenexa Chamber Board of Directors has approved a legislative platform to guide our advocacy in the upcoming 2024 state legislative session.  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, health care, transportation, economic development, and others.

Click here to view the Chamber’s 2024 State Legislative Agenda.

Questions or feedback?  Call Ashley Sherard, CEO, at 913-888-1414 or email asherard@lenexa.org.