Veto Session Report
May 9, 2022
Business, Economic Development & Local Government News from the Legislative Session
Lawmakers returned to Topeka on April 25 to convene the wrap-up period known as Veto Session. True to its name, senators and representatives attempted a handful of veto overrides while also wrapping up other items of business before adjourning in the early morning hours of April 29.
Typically, this would be the last action of the year before the largely ceremonial Sine Die adjournment, but with congressional maps still tied up in court, lawmakers are planning to return on May 23. At that time, they plan to deal with potential fallout from pending legal action on the maps that define our congressional districts for the next ten years.
Governor Kelly, not unexpectedly, vetoed several pieces of legislation that lawmakers sent to her desk earlier in the session. The bigger question was which of the vetoes would the legislature attempt to override and how successful would they be in the attempts. Here is a brief look at the more notable vetoes and subsequent action by the legislature.
Parents’ Bill of Rights (SB 58) – The parents’ bill of rights was championed to ensure parents had full access and awareness of the instructional materials being used in the education of their children. Opponents argued the legislation was an unnecessary and costly intrusion into the operations of public schools. The Senate was able to secure the required 27 votes to override the governor’s veto, but the House fell 12 votes short, and the veto was sustained.
Plastic Bag Ban (SB 493) – This bill would have prevented cities and counties from enacting regulations restricting the use of plastic bags and other containers for food service. The veto was overridden in the Senate on a 27-12 vote but with no motion to consider a veto in the House the veto was sustained.
Fairness In Women’s Sports (SB 160) – This bill would require interscholastic, intercollegiate, intramural and club athletic teams sponsored by public educational institutions to be designated based on biological sex. The Kansas Senate was successful in overriding the governor’s veto on a 28-10 vote, but the House fell three votes short, and the veto was sustained.
Food Assistance (HB 2448) – This bill was proposed to help address the workforce shortage by requiring that “able bodied adults without dependents” between the ages of 18-49 be required to receive employment training as a condition of receiving benefits from food assistance programs. The legislation becomes law after the Senate and House voted to override the governor’s veto 29-11 and 86-36 respectively.
Food Sales Tax (HB 2106) – Despite a lot of bipartisan support at the start of the session to eliminate the sales tax levied on food, the legislature opted to adopt a phased-in approach. While the impact will be the same – reducing the state’s portion of the sales tax to zero – it’s going to be phased in over three years rather than all at once.
Proponents of the phased in approach argued this is the more fiscally prudent way to approach a policy that would reduce revenue to the state coffers by more than $400 million per year. Opponents of the phased in approach argued the large budget surplus and strong revenue projections allowed lawmakers to safely cut the state sales tax on food to zero all at once. Despite the difference of opinion, the legislation passed the Senate 39-0 and the House 114-3. The governor is expected to sign the bill.
Masks/Quarantine (SB 34) – Although the government’s response to the COVID-19 pandemic was debated throughout the session, it wasn’t until the end that lawmakers gave approval to legislation putting new restrictions in place.
SB 34 amends the Kansas Emergency Management Act and certain public health statutes so that governmental entities and public officials would be prohibited from requiring a person to wear a face mask in response to a contagious or infectious disease.
Additionally, the bill prohibits governmental entities from issuing and requiring COVID-19 vaccination passports. Other provisions of the allow address the role law enforcement can make in carrying out public health orders and limit what tests and vaccinations can be required by schools in the state.
The legislation passed both chambers with just over the minimum number of required votes. The bill is currently on Governor Kelly’s desk waiting on her to act.
KPERS (SB 421) – Starting the session with a $3 billion surplus led to no shortage of ideas on how to best utilize the vast amount of money in the bank. One idea that took root and became law was SB 421 – a proposal to buy down old debt and shore up the Kansas Public Employees Retirement System.
Through this bill, lawmakers agreed to use more than $1 billion of the surplus to pay off debt that occurred when the state failed to make required contributions in FY 17 and FY 19. These so-called “layering” payments amounted to nearly $254 million. The balance of the money allocated by the legislation would be used to cover the unfunded actuarial liability in the KPERS fund.
While disagreement to the concept of the legislation was minimal, there were differences of opinion on how much should be allocated for this purpose and how the money could be utilized for other concepts. In the end, the bill received a large amount of legislative support, and the bill currently is waiting for action by Governor Kelly. It is projected that the actions of SB 421 will free up more than $460 million over the next five years and provide flexibility should there be an economic downturn.
Open Enrollment - HB 2567 contains the budget for the Kansas Department of Education as well as several policy provisions that were discussed throughout the session. Of note is a provision that formalizes the process for open enrollment in districts across the state.
Districts must now establish a policy identifying the capacity they have to accept new students and then follow a process that could ultimately allow non-resident students to transfer into the district.
Proponents argued the open transfer policy allows parents to move their school-aged children to districts they believe are better suited for the education of their children. Opponents argued that districts already allow for transfer students and that an influx of non-residents students would place additional tax burden on taxpayers who reside in the district boundaries.
The legislation was approved by the Senate 24-14 with the House lending its approval 75-45. The bill is currently waiting for action by Governor Kelly.
Sports Wagering (SB 84) - Although later than many supporters would have hoped, the Kansas Legislature finally gave approval to legislation that authorizes sports wagering in the state. For several years, several factions worked for and against proposals that made finding a compromise difficult.
This session, however, most of the stakeholders were able to find the winning mix and SB 84 was adopted and sent to Governor Kelly for her signature.
The bill allows sports wagering to take place at the state’s four casinos which can then work with partnering organizations to allow for sports betting across the state. A 10% tax will be placed on each bet.
If the legislation is approved by Governor Kelly, Kansas will join 30 other states in allowing sports wagering after the U.S. Supreme Court opened the door for additional sports wagering based on a 2019 ruling.
The large budget surplus going into the session opened the door for lots of conversation about taxes. As the session progressed these solidified into a handful of bills addressing multiple areas of taxation. The first to be approved was HB 2239 which was signed into law by Governor Kelly on April 14.
Among the items included in the bill are:
- A requirement to publish data related to last year’s Revenue Neutral Rate legislation
- The creation of a complaint process if a taxpayer believes a jurisdiction has violated provisions of the Revenue Neutral Rate statutes
- An increase in the amount of property tax exempted for the 20-mill levy for schools from the current $20,000 to $40,000 and establishing a mechanism for increasing the exemption into the future
- A process for pass-through entities to pay income tax at the entity level rather than at the individual level
- Removing shipping and handling charges from taxation when retailers are calculating a customer’s bill
- Increasing the Research and Development Tax Credit
HB 2597 has not yet been approved by either chamber, but some lawmakers are hoping to see action on the comprehensive tax bill when they return in late May. This bill’s provisions include:
- An increase in the standard deduction
- Expanding the income tax exemption for certain social security benefits
- A subtraction modification for retirement plan income
- Net operating loss carry forwards
- Elimination of estimated tax prepayments for retailers
- Elimination of state sales tax on utilizes used by commercial entities
- Property tax refunds for retailers impacted by COVID shutdown orders
Medical Marijuana - The session started out with optimism for supporters of medical marijuana but like a puff of smoke this issue may be vanishing into thin air. Late in the veto session there appeared to be momentum building but negotiations between the House and Senate never resumed after an initial meeting of the conference committee.
When lawmakers return on May 23, there is always the possibility the issue gets more attention if the issue becomes a bargaining chip in other negotiations, but nothing is certain at this point. Kansas is among the 13 states that do not have some version of legal marijuana use permitted. Advocates for the issue have built a strong coalition and no doubt the issue will resurface next year if nothing happens later this month.
Child Care/Housing (HB 2237) – Lawmakers wrestled all session with ideas that could help grow the state’s workforce and connect workers with available jobs. Throughout these discussions it was clear that access to housing and childcare are among the barriers that must be addressed.
The bill, which was approved by Governor Kelly on May 5, provides multiple solutions to assist with housing accessibility and affordability while also expanding access to the state’s current childcare tax credit program. Currently only corporations can earn the tax credit, so this legislation opens the program up to other entities. Proponents believe the expanded program will enable smaller businesses to provide daycare benefits to their workforces.
On the housing front, the bill creates several innovative programs with the goal of bringing new housing options in communities with high demand. Among the new programs are:
- Kansas Housing Investor Tax Credit
- Kansas Affordable Housing Tax Credit
- Historic Kansas Act providing tax credits for certain commercial structures
- Kansas Rural Home Loan Guarantee
Lawmakers will return to Topeka on May 23. While a return to Topeka for anything other than Sine Die adjournment is not common, legislative leadership wanted to carve out time specifically to deal with congressional redistricting maps.
Appeals to a lower court ruling on the newly drawn congressional boundaries came quickly and the state’s Supreme Court will hear arguments in mid-May. Time is of the essence as the June filing deadline is approaching and lawmakers may need to work quickly to make changes if legal challenges go in favor of the plaintiffs.
Kevin Walker, IOM
Senior Vice President of Public Policy
(913) 766-7602 | (913) 526-6855