This Week in Topeka
February 14-18, 2022
Business, Economic Development & Local Government News from the Legislative Session
With turn around day coming soon, the week in Topeka was focused on moving legislation out of committee and queuing it up on the House and Senate General Orders Calendars - a holding pen of sorts for legislation that has cleared committee and is awaiting action by the full chamber.
Not every bill sitting on General Orders is guaranteed to see floor debate. Just like committee chairs, the leaders of the respective chambers wield tremendous power over which bills will be debated and which ones will not.
Next week we’ll see committees finish their work and the legislature’s attention will turn toward working bills on the respective chamber floors. Bills surviving this step will be sent across the capitol for the second half of the long journey toward becoming a law.
Food Sales Tax
SB 339, a bill setting the state rate for sales tax on food to zero, was amended and recommended for passage by the Senate Assessment and Taxation Committee. The Committee added several provisions that will drive up the cost of the legislation which was originally pegged at nearly $320 million for the first year. Among the changes the Committee added are the following:
- Changed the effective date for the food sales tax cut from January 1, 2023 to January 1, 2024
- Changed to zero the rate of state sales tax charged for utilities used by commercial entities. Currently only residential and agricultural uses are exempted.
- Exempted tickets sold at movie theaters from state sales and use tax between July 1, 2022 and June 30, 2024. Advocates have argued that movie theatres have been hit especially hard during the pandemic and this will help them stabilize their operations.
- Excluded delivery charges that are separately stated on an invoice from sales tax calculations.
While there was initially bi-partisan enthusiasm for cutting the sales tax on food, the issue has run into headwinds of late. Concerns ranging from fiscal impact to politics have slowed progress on what looked like an issue that might earn early approval.
Rules and Regulations
Passing legislation is often only the first step in implementing the policies under which we operate our businesses and personal affairs. Many of the details on how legislation is carried out is left to various state agencies and commissions to address through the promulgation of rules and regulations.
Until the mid-1980s the legislature had the authority to override proposed rules and regulations but that changed due to a ruling by the Kansas Supreme Court. Since then, lawmakers have become increasingly concerned with rules and regulations stretching the intent of approved legislation.
The legislation, HCR 5014, would place a constitutional amendment on the November 2022 ballot that, if approved by voters, would give lawmakers the opportunity to revoke or suspend rules and regulations if approved by a simple majority of the House and Senate. Proponents argue the oversight will ensure enacted rules and regulations don’t go beyond what was intended by the legislature.
The concurrent resolution requires a 2/3rds vote in both the House and Senate to be placed on the ballot. Thursday’s House vote fell four votes short of the required 84 votes although four lawmakers were absent and at least one voted on the prevailing side in order to make another run at passing the resolution.
Developmental Disability Tax Credits
The Senate Commerce Committee took its first look at HB 2219, a bill that would offer employers a non-refundable tax credit of 50% of the hourly wages paid to individuals with developmental disabilities on their payroll. The legislation was a holdover from the 2021 session when the House approved the legislation 123-1. Advocates believe the tax credits will encourage businesses to consider hiring their clients and loved ones for meaningful employment opportunities and assist them in becoming more self-sufficient while aiding businesses in filling job vacancies with capable employees.
Employee Savings Accounts
The House Commerce, Labor and Economic Development Committee held a hearing on a proposal to encourage employee savings accounts through state tax credits. The bill, HB 2680, is called the Kansas Employee Emergency Savings Account (KEESA) program and would become the first such program in the nation utilizing tax credits if enacted.
Proponents contend the program has multiple benefits including serving as an employee recruitment and retention tool, an employee benefit that assists workers in becoming more productive and setting up employees for long-term financial success.
The program, which would be fully voluntary, provides tax benefits for the employer and employee if program parameters are satisfied. Lawmakers heard from a Kansas business owner who uses a similar program, without the tax credits, as he explained the positive results he and his employees have experienced.
As expected, lawsuits were filed this week in state court over the Ad Astra 2 map. Last week the legislature successfully overrode Governor Kelly’s veto of the controversial congressional map amid threats of promised lawsuits.
A group of residents from Lawrence and Wyandotte County filed the first suit in Wyandotte District Court alleging the map dilutes the political power of minority communities. Following that action, the American Civil Liberties Union of Kansas and the Campaign Legal Center filed a similar action also in the Wyandotte District Court.
While no official action has occurred on state house and senate district maps, there is believed to be a lot of behind-the-scenes action that should produce maps for consideration very soon. Johnson Countians are eagerly awaiting those maps as the county is expected to gain 3-4 house seats and 1-2 senate seats based on population shifts over the past 10 years. The new districts could result in quite a bit of boundary shuffling within the county.
On Thursday the Senate Assessment and Taxation Committee took action on several bills that could result in property tax reductions for Kansans. One bill, SB 464, would end the 1.5% state property tax assessment that is dedicated to building upkeep at state institutions of higher learning and other state-funded properties.
SB 431 would increase the current exemption on assessed valuation of residential property up to $100,000 from the current $20,000. Under current law, the first $20,000 of assessed value is exempted from the 20-mil property tax levy used to partly fund the state’s school finance formula. As the bill is written, the exemption would initially increase to $65,000 with the balance of the authorized increase being tied to future average increases in property values.
Lastly, SB 432 would create a back-to-school sales tax holiday for the first weekend in August. The temporary sales tax cut would only to apply to specified items as defined by the law but are items that would generally be associated with back-to-school shopping.
Because of changes made by the committee the fiscal note is not clear but combined, the changes would have a price tag of more than $100 million annually. Per the legislation, lawmakers would have to compensate for some of the cuts with allocations from the State General Fund.
A snowy day in Topeka on Thursday led to a mostly quiet day in the capitol, but the inclement weather didn’t stop the House and Senate education committees from meeting and working through bills they’ve been contemplating since the session began. On the House side, the K-12 Education Budget Committee combined several measures into two bills and advanced both to the House for further consideration.
HB 2615, which addresses alternative educational opportunities outside the classroom, was combined with HB 2550 and HB 2553. I’ve addressed these bills in previous reports. As a reminder, HB 2550 would support students transferring out of public schools and into private schools under certain conditions. HB 2553 allows students to transfer to any district of their choosing with minimal restrictions.
The other bill combines the contents of HB 2662 and HB 2513. HB 2662 is known as the Parent’s Bill of Rights and contains provisions requiring school districts to maintain publicly available information on materials used for classroom instruction and other provisions deemed excessively intrusive by opponents. HB 2513 requires copies of certain tests, questionnaires and surveys be made available for parental consent.
On the Senate side, the Senate Education Committee held hearings on SB 363 and SB 393, which deal with some of the same subjects addressed by the House K-12 Education Budget Committee.
Supporters of the legislation believe the provisions provide greater transparency, increased accountability, and more engagement with parents. Opponents contend the provisions contain overly burdensome requirements and are an intrusion into the classroom. They also say many of the provisions will create unnecessary pressure on teachers, leading to teacher shortages.
Despite the good news that hospitalizations and deaths related to COVID are dropping, fallout from the COVID pandemic continues to show up in Topeka.
Vaccines - COVID and otherwise – have captured quite a bit of attention as of late including a host of bills introduced in the Kansas Legislature. The discussion has also broadened to include requirements and protections associated with the writing and filling of prescription medications for off-label use.
The writing of off-label prescriptions is not unusual but has gained a lot of prominence recently as it relates to the use of certain drugs to prevent or treat COVID-19.
Because of the legislation focused on vaccines and potentially broadened exemptions, Nurture KC, a local group working to improve family health and reduce infant mortality, released the results of a statewide survey they commissioned assessing the attitude of Kansans toward vaccines. The poll was conducted in late January and early February and found that 95% of Kansans believe taking vaccines is extremely important or very important to maintaining good health. To view the poll results, click here.
Renewable energy is a growing industry, but it is not without its detractors. Concerns over safety, property rights and reliability are among the concerns being considered in a host of bills introduced this session. Despite multiple days of presentations and hearings on SB 353, the Senate Utilities Committee failed to pass out the controversial legislation that captured so much attention this session. Supporters of renewable energy viewed the bill as a threat to their industry while supporters of the bill believed the provisions of the bill would give greater oversight on wind turbines without harming the industry.
The chairman of the committee announced during Wednesday’s hearing that SB 353 would not advance at this time but cautioned committee members and the audience that concerns addressed in the bill would only increase over time and further consideration of the topic would be necessary.
The future of water has been the focus of the House Committee on Water. For a couple of years now the Committee has looked at how water is regulated and managed in Kansas. What they found was a hodge-podge of departments and agencies overseeing the many uses of water in our state. This week the Committee began hearings on HB 2686, a bill that creates the Kansas Department of Water and Environment and establishes the Water and Environment Maintenance Fund funded by a new fee on water rights. The goal is to provide for a more centralized oversight of water use throughout the state and create a plan to address water needs well into the future.
Mental health doesn’t typically fall under the heading of utilities, but HB 2281 would establish a new $.20 monthly fee on phone bills to support the new 988 mental health hotline. Originally the fee was proposed at $.50 per month.
The new 988 hotline was established by Congress in 2020 in reaction to increased need for suicide prevention services. Conferees providing testimony noted that the suicide rate in Kansas increased almost 70% since 1999 and more than 16,000 calls to the national suicide prevention line originated in Kansas just last year. Advocates for the 988 hotline believe the expanded services will provide greater support for Kansans experiencing a mental health crisis. Money generated from the fee would support a statewide system for responding to calls and making appropriate mental health services available to Kansans.
Sales Tax Collection Compensation
SB 463 would compensate businesses for collecting sales tax on behalf of the state by allowing them to have a tax credit equal to 1.5% of the sales and compensating use taxes they collect each month. The credit would be capped at $300 per month for each retailer.
This week the Senate Assessment and Taxation Committee recommended SB 463 advance out of committee and be placed on the Senate’s Consent Calendar – a designation for bills deemed non-controversial. While the bill did land on the Consent Calendar, it was later withdrawn and placed on the General Orders Calendar where bills are cued up for more exhaustive debate and consideration.
Plastic Bag Bans
The Senate Commerce Committee held a hearing on SB 493, a bill that would prevent cities and counties from enacting ordinances restricting the use of plastic bags and containers in their jurisdictions. Proponents argued a consistent, statewide law was necessary to control costs of providing these items to customers while opponents argued plastic items are harmful to the ecosystem and home rule authority should not be pre-empted.
Beer Sales at Local Wineries
The House Commerce, Labor and Economic Development Committee held a hearing HB 2688, a bill that would require licensed farm wineries be issued a cereal malt beverage retailer license provided all statutory requirements were met. Proponents of the bill want to be able to sell beer in addition to the wine-related products they currently offer. However, current law makes that concept difficult. The bill would streamline the process and allow local wineries to expand their product offerings.
R & D Tax Credit Expansion
HB 2394 would expand eligibility for the Research and Development Tax Credit that is currently only authorized for corporate taxpayers. The bill, if enacted, would allow other taxpayers to earn the tax credit. Currently, corporate taxpayers can claim the 6.5% credit based on the amount of actual qualified research and development expenses they incurred in the current and previous two tax years.
In addition to opening the credit to other taxpayers, the bill proposes to increase the 6.5% credit to 10% and allow for transferability of earned credits. The bill was heard in the House Taxation Committee earlier this week.
Kevin Walker, IOM
Senior Vice President of Public Policy
(913) 766-7602 | (913) 526-6855