This Week in Topeka
January 11-15, 2021
Business, Economic Development & Local Government News from the Legislative Session
They’re back! The 2021 session is underway with Monday’s official swearing-in ceremony followed by Governor Kelly’s State of the State address on Tuesday evening.
The first week of session is usually a little slow to get rolling as returning lawmakers re-acquaint themselves with the legislative routine while new lawmakers learn the ropes from their experienced peers. However, the threat of a COVID outbreak that could disrupt their work at any time and a lot of unfinished business from 2020’s abrupt end has kicked things into high-gear this week.
Here’s a look at this week’s highlights . . .
Knowing an outbreak of COVID within the Capitol could be severely disruptive to the legislative process, legislative leaders worked with health experts to develop policies and procedures to minimize the threat. The State has invested heavily in technology that allows lawmakers - and the public - to engage with committees virtually while other procedures have been enacted to maximize social distancing and keep COVID threats at bay. Despite a few glitches, the new technology is helping make legislative deliberations more transparent and better equipped to handle remote operations.
While visitors are not prohibited from entering the Capitol, the intent is to encourage visitors only when they have official business. If you plan to submit testimony, many committees are going paperless, so some procedures are very different from years past. Additionally, the procedures are subject to change at any time, so reaching out to committee assistants or your lawmakers for guidance would be advisable before you head to Topeka. Audio and video feeds of committee hearings and floor action can be found on the legislative website: www.kslegislature.org.
State of the State
The Governor’s State-Of-The-State address was conducted virtually this year. You can find a recording of her address on the Governor’s Facebook page - click here.
Her brief address touched on major themes including economic development, COVID recovery and education. Of particular note to the business community is the attention Governor Kelly gave to the Framework For Growth - the state’s new roadmap to economic prosperity; record capital investment in new and expanding businesses and emphasis on addressing the problems associated with the troubled infrastructure that led to severe problems for employees and employers alike as unemployment spiked last year.
Coinciding with the State-of-the-State address was the release of Governor Kelly’s budget for FY 2022. Highlights of the budget include investment in modernization of IT infrastructure, enhancements to the economic development budget, a continuation of her commitment to reduce reliance on the “Bank of KDOT” and a second effort to combine the Department for Children and Families with the Department for Aging and Disability Services into a single new agency – the Department of Human Services.
For a more detailed look at her budget, click here.
While there was praise for many of the themes raised by Governor Kelly in her budget, there are elements that drew criticism. Among them were her renewed call to re-amortize KPERS, the state employee’s retirement fund and her push to collect taxes on Internet sales and sales conducted by marketplace facilitators. These ideas received a chilly reception when discussed during the 2020 session and likely will face a similar reaction this year.
Property taxes continue to remain in the spotlight after last year’s veto of similar legislation. Typically referred to as Truth in Taxation, SB 13 was cued up for a hearing in the Senate Tax Committee on the second day of the session. The bill was quickly passed out of committee and debated on the Senate floor on Thursday where it passed 34-1.
In short, the bill seeks to place more transparency on property taxes and restrict local units of government from collecting more property taxes simply due to increased valuations. The bill outlines procedures for creating a “revenue neutral rate” and puts the emphasis on the actual revenue collected rather than the mill levy. Proponents argue that increases in valuation are creating de facto property tax increases even when local governments maintain, or even decrease, current mill levies.
SB 13, if enacted into law, also would eliminate the current property tax lid that has existed for many years. Other provisions in the bill would prevent valuation increases based solely on normal repair, replacement and maintenance of property and would give county treasurers the option to allow payment plans for nondelinquent property taxes. The bill has been scheduled for a hearing in the House Taxation Committee on Wednesday, January 20.
SB 22 was introduced and discussed in the Senate Taxation Committee on Wednesday. The hearing is scheduled to continue Tuesday, January 19. This bill contains numerous provisions largely driven by the federal Tax Cuts and Jobs Act of 2017 and the fact that Kansas automatically conforms to federal tax code changes. The bill is similar to a bill considered by the legislature during the 2020 session.
The bill addresses the tax treatment of Global Intangible Low-Taxed Income; FDIC premiums; carryforward of business interest, capital contributions, small business expenses and Payroll Protection Program loans. Additionally, the bill allows Kansans to itemize their deductions on their Kansas return regardless of their decision to itemize or use the standard deduction on their federal return.
A new element this year clarifies that Kansans whose identity was used fraudulently to obtain unemployment benefits do not have to include the reported income as part of their gross income.
Emergency Management Operations/COVID Response
Another bill that moved quickly was SB 14. This bill addresses changes made during the 2020 Special Session when HB 2016 was passed to allow for temporary operational changes within the state in response to the COVID pandemic. That bill contained multiple provisions including limitations on the governor’s authority during declared emergencies, liability protection for businesses and provisions to assist health care providers in dealing with increased demand for services due to COVID.
Many of the provisions in last year’s bill were set to expire on January 26. The intent of SB 14 is to extend the sunset date from January 26 to March 31 and allowing the legislature more time to carefully evaluate the policies enacted in HB 2016. The bill was quickly debated by the Senate Judiciary Committee, chaired by Senator Kellie Warren, and was passed by the Senate on Thursday 34-1. The bill will have a hearing in the House Judiciary Committee on Tuesday, January 19.
The House Commerce Committee, chaired by Rep. Sean Tarwater, held a hearing on HB 2045 which modifies and extends the Angel Investor Tax Credit. The tax credit, due to expire this year if no action is taken, offers tax credits for investors who provide critical financing for innovative startups.
A Legislative Post Audit (LPA) report and subsequent discussion raised questions about the impact of the program, but advocates argue the program is providing critical money that otherwise might not be available to Kansas startups. The Commerce Committee held a Wednesday hearing on the bill but took no immediate action. LPA found the program to be very popular in Johnson County with $21.2 million, or 56%, of the program’s total investment coming from Johnson County investors.
Next Week / Bills of Interest
Lawmakers are fearful an outbreak of COVID could once again limit the time they have to deal with legislation. Look for the tempo to remain high as lawmakers move priority legislation quickly to avoid a repeat of the 2020 session.
Unemployment - The Kansas Unemployment Trust fund was one of only a handful of state trust funds that was well-equipped to pay the large number of claims driven by COVID. Unfortunately, the unprecedented number of claims and extensive cases of fraud have left the trust fund balance quickly falling toward zero. Legislation will be introduced soon to make modifications to the trust fund and propose a formula that replenishes the fund without being punitive to businesses. Additionally, the legislation will address the fraud situation and drive structural improvements to the Department of Labor’s IT system enabling Kansas workers and employers to more efficiently interface with the unemployment system going forward.
Worker’s Compensation – several bills (HB 2016; HB 2017; HB 2040; HB 2041) have been introduced to change worker’s compensation statutes in Kansas. These bills address presumption related to drug impairment; replacing the prevailing factor standard with a substantial factor standard and disallowance of worker’s compensation benefits for fighting and horseplay. These bills have not been scheduled for a hearing at this time.
Minimum Wage – two bills (HB 2018; HB 2033) have been introduced proposing to increase the state’s minimum wage. One would increase the minimum wage to $17.25 per hour over 10 years and the other would increase it to $15 per hour over six years. These bills have not been scheduled for a hearing at this time.