This Week in Topeka
March 28-April 1, 2022
Business, Economic Development & Local Government News from the Legislative Session
The main part of the 2022 Legislative Session has come to a close. Lawmakers will return to Topeka on April 25 for the veto session where they will consider potential gubernatorial vetoes and wrap up remaining legislation before officially ending the 2022 Legislative Session.
While the brief return in late April is known as veto session, there is much more that happens in the session’s final days including reconciling the budget with the April revenue projections that are released just prior to lawmakers returning to Topeka.
Note: Many of the bills discussed in this week’s edition have legislative summaries included. You can find the summaries by clicking on the first reference to the bill number in each section.
Receipts to the state treasury continue to exceed projections since the Consensus Revenue Estimating group issued its last semi-annual report last November. The April summary memo shows total receipts exceeded projects by 5.2% or just a little more than $315 million. The report shows continued strong activity in both individual and corporate income taxes.
The state’s economic forecasters will issue their newest estimates later this month. These latest estimates will be used to finalize the state budget when lawmakers return to Topeka later this month. To review the April receipts memorandum, click here.
Going into the session a $3 billion budgetary surplus all but guaranteed tax policy would get a lot of attention during the session. What wasn’t clear was which of the myriad of discussed cuts would find their way into a comprehensive tax bill. That picture became a bit clearer as lawmakers in both chambers gave overwhelming approval to HB 2239 and sent the bill to Governor Kelly for consideration.
The tax package has a fiscal note that averages about $100 million per year.
Among the items included in the bill:
- An increase in the residential property tax exemption associated with the uniform statewide school finance tax
- A research and development tax credit
- An exclusion for delivery charges that are separately stated on your invoice
- Parity for state and local taxes paid by pass-through entities commonly known as SALT Parity
The book may not be closed on additional tax policy. Lawmakers are trying to get a handle on already-approved spending and tax cuts before putting more proposals on the table – something that could still occur during the late April wrap-up session.
One proposal being cobbled together, Senate Substitute for HB 2597, might ultimately include provisions such as an increase in the standard deduction, child daycare tax credits for businesses and possibly eliminating the sales tax on utilities paid by businesses. The bill also contains language that would allow eligible businesses that were subjected to COVID pandemic shutdowns to receive a partial refund for property taxes they paid. The conference committee report on the bill has not yet been acted upon by either chamber.
Yet another bill, HB 2237, contains provisions designed to spur affordable housing through various tax credits to developers and investors. This bill is also waiting on the House and Senate to consider adoption of the conference committee report. Lack of housing in general and the issue of affordable housing specifically have received a lot of attention this session.
Food Sales Tax
The elimination or reduction in the food sales tax has been a popular issue from day one, but as of yet nothing has been finalized. Governor Kelly proposed full elimination of the state’s portion of the food sales tax, but all session long lawmakers have wrangled with the fiscal impact and how best to safely eliminate hundreds of millions from the state coffers without negatively impacting the overall budget.
The latest proposal hammered out by House and Senate negotiators would cut the current 6.5% rate on food to 4% in 2023 followed by a cut to 2% in 2024 and then to zero by 2025. The phased-in approach appeals to lawmakers concerned about absorbing the hit all at once.
Regardless of how the proposal looks if and when it lands on Governor Kelly’s desk, the plan will only impact the state portion of the tax. From day one the governor and lawmakers have been clear that local units of government will still be able to apply local sales taxes to food
In addition to debating how much to cut and how quickly to enact the reduction, lawmakers have also grappled with details including how the cut might apply to food sold in restaurants and prepared foods that are often available alongside food ingredients in grocery stores. At present the brokered compromise does not include food sold at restaurants. Because a portion of the state highway fund is derived from sales tax, lawmakers have also had to consider mechanisms to protect the highway fund from an unintended cut.
Despite crafting what appears to be a viable compromise, no action was taken on HB 2106, the bill that ultimately may become the legislative vehicle to cut the food sales tax. Look for lawmakers to tackle this issue when they return for veto session.
Sports betting is one step closer to reality in Kansas after the House acted last week to approve legislation that is viewed as a compromise by stakeholders. Senate action, if it occurs, will have to wait until lawmakers return to Topeka later this month. The House bill, House Substitute for Substitute for SB 84, received the minimum 63 votes needed to win approval in the lower chamber.
The most interesting component of the bill is a provision allocating 80% of the state’s revenue from sports betting to support a professional sports facility in Kansas. Recent speculation about the future home of the Kansas City Chiefs likely plays into the inclusion of this provision in the legislation.
Lawmakers are not only brokering compromises between competing proposals in the house and senate, but they also are keeping an eye on similar legislation in Missouri. How the two states address taxation of bets and the parameters of how the wagering will occur are important competitive considerations – especially along the Kansas/Missouri border.
Education – Budget/Open Transfer
Senate Substitute for Substitute for HB 2567 includes the annual budget for K-12 schools as well as a number of policy provisions that have been discussed throughout the session. The provision capturing the most attention may be the concept allowing non-resident students to freely transfer to a district of their choosing with minimal restrictions.
Proponents have argued the freedom to transfer to a district other than their residency-based district allows for greater competition and access to more opportunities for students. Opponents argued that transfers already occur and that the new provisions usurp the authority of local boards. They also have raised concerns that the new legislation will lead to increased taxes for the local residents who fund the district beyond the state-provided funding.
Neither chamber of the legislature has acted on the conference committee report. Considering the legislation includes the K-12 budget, lawmakers will have to deal with this upon their return in late April – with or without the open transfer provisions.
Education - Parents Bill of Rights – SB 58 contains provisions that have become known as the “parents bill of rights.” The bill, which has been negotiated into a conference committee report, has not been acted upon yet by either chamber. The legislation contains numerous provisions advocates say will bring more transparency to schools and give parents greater insight into the classroom materials their children will see. Concerns over Critical Race Theory and books discussing sensitive subjects available in some schools have fueled the call for more transparency and oversight.
Opponents argued parents already have access to the materials and the provisions of the legislation are unnecessary. They further believe the legislation will create administrative burdens for teachers and schools taking time away from focusing on student instruction and engagement.
Proposed congressional maps are currently in court, but will the same fate come to SB 563 – the bill containing the Kansas House, Senate, and State Board of Education maps? Only time will tell.
Some lawmakers raised concerns over the legislative maps but for the most part the house and senate maps enjoyed broad, bi-partisan support. However, the last-minute bundling of the State Board of Education map with the proposed legislative maps caused consternation for some lawmakers.
Ultimately, the bill passed the Senate 29-11 and the House 83-40 and is now on its way to Governor Kelly for her consideration. Should she choose to veto the maps – which is uncertain at this writing – the legislature would have a realistic shot at overriding the veto considering the healthy vote counts on final action.
Johnson County gained seats in the legislative maps and saw the State Board of Education boundaries shuffled a bit although the County is still split among three Board seats as it is now.
For several sessions, the legislature has kicked the tires on clearing up liability concerns related to school programs that enable students to gain real-world, hands-on job experience. The liability questions created barriers that hopefully will now open the door for more students to learn skills and trades that will translate to post-school careers.
In short, SB 91 clarifies that schools would take on the responsibility for liability in these “work-based learning programs” as defined by the legislation. At issue over the years of debate was the type of insurance available to schools and how they would cover their liability in these professional relationships.
The legislation is on its way to Governor Kelly after being approved by the House 116-0 and the Senate 37-2.
Home delivery of items from your favorite store has become commonplace but so too has the “porch pirate” who grabs packages off your front step before you return home. SB 408 seeks to counter porch pirates by updating current statutes dealing with theft. The legislation also contains changes to other elements of our legal system.
The bill passed 40-0 and 114-2
In 2021 the legislature approved an overhaul to the state’s beleaguered unemployment system. The changes adjusted rate tables saving employers millions in unemployment contributions, set in motion an upgrade to the state’s antiquated computer system and compensated businesses for the rampant fraud that was occurring.
HB 2703 makes technical changes to the 2021 legislation by fixing an error in the rate tables, modifying program language to ensure Kansas remains compliant with federal unemployment law and clarifies the job search process that was added to the 2021 law.
The changes in HB 2703 will continue the effort to ensure that Kansans who lose their jobs and Kansas employers will have a safe, fair, and customer-focused system going forward.
As has been noted already, the Kansas Legislature is on a brief break. Lawmakers will return to Topeka on April 25 to put the finishing touches on the session. This Week in Topeka will return at that time.
Kevin Walker, IOM
Senior Vice President of Public Policy
(913) 766-7602 | (913) 526-6855