Updates and Alerts

KEY TAKEAWAYS FROM WEEK THIRTEEN

Legislative Session Reaches First Adjournment

Friday, April 5, marked first adjournment of the main body of the legislative session! It was a lot of hurry-up-and-wait in the Capitol as House and Senate negotiators worked to resolve differences in bills in order to construct a final proposal known as a Conference Committee Report (CCR). CCRs must go back to each chamber for an up-or-down vote; they are not subject to amendment. Because CCRs often contain the contents of multiple bills, lawmakers and advocates sometimes must determine if the provisions they like in a CCR outweigh ones they don’t.

Tax policy took center stage in the closing hours, with lawmakers ultimately passing a compromise tax relief plan that is now on its way to the Governor. An earlier plan supported by both Governor Kelly and the Senate had been rejected with strong bipartisan opposition in the House – putting the future of tax relief this session in question – before the new plan emerged.

Lawmakers also took action on a number of other major issues, including the budget, K-12 education funding, unemployment compensation, energy policy, regulatory reform, and workforce development.

Looking ahead, lawmakers will now return to the Capitol in late April for a short wrap-up session when they will complete any unfinished business.

  • Tax Plan On Its Way To The Governor
  • Senate Rejects K-12 Education Funding Proposal
  • Bills Signed Into Law By The Governor
  • House & Senate Focus On Floor Action, Business Bills Move

1. Tax Plan On Its Way To The Governor

After some disarray following the House’s strong bipartisan rejection of a compromise tax plan supported by the Governor and the Senate – which saw House and Senate legislative leaders declare tax negotiations were done until the wrap-up session in late April – lawmakers regrouped late at night to pass major tax reduction legislation that is now on its way to the Governor.

Despite urging from Governor Kelly, House Democrats had argued the earlier plan didn’t do enough for low-income Kansans, and House Republican opponents agreed lawmakers could do better.

The new plan, which includes income, sales, and property tax reductions, passed the House (119-0) and the Senate (24-9). A summary of key elements of CCR for HB 2036 include:

  • Replacing the current three-bracket income tax system with dual brackets starting TY2024:
    • Eliminating the bottom bracket, leaving two brackets.
    • Reducing rates for the top bracket from 5.7% to 5.55% and the second bracket from 5.25% to 5.15%.
  • Increasing the personal exemption from $2,250 to $18,320 for MFJ, $9,160 for all other persons, and an additional $2,320 for each dependent.
  • Increasing the Kansas standard deduction for single filers from $3,500 to $3,605, HOH from $6,000 to $6,180, and MFJ from $8,000 to $8,240.
  • Eliminating state income tax on Social Security income.
  • Reducing financial institution privilege tax rates to provide parity with corporate rates.
  • Accelerates the elimination of state sales tax on groceries by 6 months to July 1, 2024.
  • Lowering the statewide school mill levy from 20 mills to 19.5 mills (backfilled from State General Fund).
  • Increasing the exemption for residential property from the statewide school levy from $40,000 to $100,000.
  • Eliminating the Local Ad Valorem Tax Reduction Fund (LAVTRF) and the City-County Revenue Sharing Fund (CCRSF) – neither state-local revenue sharing fund has been funded for 20 years.

The plan would be projected to save taxpayers about $1.56 billion over three years. That’s above the threshold of how much Governor Kelly has said she wants to spend on tax cuts, and it’s unclear whether she will sign the measure. Democrats in the House supported the plan, while Democrats in the Senate opposed it.

If a tax policy relief measure is not approved by the end of the session, expected sometime in early May, the Governor previously vowed to call lawmakers back for a special session to address the issue – an unappealing prospect in an election year when legislators will want to devote their time to campaigning

2. Senate Rejects K-12 Education Funding Proposal

This week the Senate rejected (12-26) a proposed K-12 education funding measure that had previously passed the House (65-58), a slim majority where 63 votes are needed for majority approval (CCR for SB 387). The issue now returns to a House-Senate conference committee for further negotiation.

The Conference Committee Report (CCR) for SB 387 funded recommended K-12 education general state aid, but included a controversial change to how funding for special education would be calculated.

School districts and some legislators have argued that the state has for years not been meeting its statutorily required funding level for special education, forcing districts to divert general state aid away from all students to pay for those enhanced services. But other legislators argue the statutory formula is flawed, legislative audits say school districts are not appropriately providing and funding special education services so why put more money into a broken system, and point out the federal government is not meeting its required statutory funding level.

CCR for SB 387 included a provision that would provide an increase of $77.5 million for special education but would take back $75 million in K-12 funding on July 1, 2025, if revisions changing how special education aid is calculated aren’t enacted into law. Those revisions would require school districts to designate a portion of locally-raised school funding to special education and that amount would be included in the calculation that determines the amount of required state special education funding – as a practical matter, this revision to the formula would change the state from underfunding to overfunding special education with no change in actual dollars. This proposal to count local tax dollars as state special education funding has been a flashpoint since it was first floated during previous interim legislative meetings.

In her proposed budget, Governor Kelly had added $74.9 million each of the next five years to get state special education funding to the statutorily required level by FY2029. Those provisions of her plan were removed by lawmakers.

Senate Education Committee Chair Molly Baumgardner, R-Louisburg, said she believed the measure failed in large part because of process and timing challenges that prevented senators from getting comfortable that they fully understood its provisions, scope, and changes.

K-12 education funding will now be resolved during the wrap-up session in late April, and House-Senate negotiators appear poised to remove the controversial provision changing special education funding calculation.

3. Bills Signed Into Law By The Governor

Several bills were signed into law by the Governor this past week including legislation increasing the monetary threshold for small claims court from $4,000 to $10,000 (HB 2604). Small claims court is a cost-effective venue for many smaller businesses to adjudicate legal disputes, and the higher threshold will keep it accessible as costs increase. The measure passed the House (118-2) and the Senate (40-0).

Business advocates have been tracking a number of other bills currently under her consideration, including measures:

Making Negotiated Workers Compensation System Reforms. Lawmakers passed a bill putting forth a workers compensation reform compromise carefully negotiated by advocates for business and labor over the course of nearly a year (SB 430). The bill includes higher benefit caps for workers (current caps have not been increased since 2011 and there was concern the caps could be found unconstitutionally inadequate) and reduced administration for employers that will save time and expense. The measure previously passed the House (122-0) and the Senate (40-0).

Reducing Administrative Burden. Lawmakers approved a bill strengthening legislative oversight of state administrative rules and regulations, with the goal of better managing the cost and effort of complying with state administrative requirements (HB 2648). The measure previously passed the House (82-36) and the Senate (27-13).

Preempting Local Regulation of Plastics. Lawmakers approved a bill prohibiting municipalities from regulating and taxing plastic bags, food containers, straws and similar items (HB 2446). If approved, the measure would nullify an ordinance that recently took effect in Lawrence. The bill previously passed the House (72-51) and the Senate (24-16). Businesses say such bans would be costly and anti-consumer and the patchwork nature of local ordinances would create substantial administrative burden for businesses that operate in multiple jurisdictions. The Governor previously vetoed similar legislation, echoing the argument of opponents who say it infringes on local control.

4. House & Senate Focus On Floor Action, Business Bills Move

This week the House and Senate primarily focused on negotiations and floor action related to Conference Committee Reports (CCRs) proposed by House-Senate negotiators, including CCRs addressing a number of business issues.

Measures approved or rejected by the House and/or Senate this past week include:

Setting An Initial State Budget for Upcoming FY 2025. Both the House (78-44) and the Senate (26-12) passed an initial $25 billion state budget for upcoming FY 2025 that starts on July 1, a key to adjourning the session (CCR for SB 28). It includes funding to increase Medicaid reimbursement rates to providers, support the World Cup event in Kansas City, and help fund the proposed KU Cancer Center. Finishing touches will be made to the budget after revenue estimates are updated in mid-April.

Continuing to Reform the Unemployment Compensation System. The Senate (38-1) and House (123-0) passed a CCR continuing to reform the unemployment compensation system (CCR for HB 2570). The legislation addresses several issues including tax rate, wage base, weeks of temporary benefits, negative balance employers, and applicant “ghosting.” CCR for HB 2570 now moves to the Governor for her consideration.

Implementing Property Tax Policy Changes. The House rejected by voice vote a CCR that included provisions that would have created a retroactive property tax exemption for certain eligible businesses deemed to suffer from government competition (HB 2096). The exemption is restricted to day cares, fitness centers, and restaurants. The CCR also includes provisions prohibiting 1031 exchanges, build-to-suit transactions, or a sale/leaseback arrangement from being used in arriving at fair market value for property tax purposes or being considered valid sales for purposes of the sales ratio study used for measuring tax appraisal accuracy. Bipartisan opposition in the House primarily stemmed from concern the Governor would likely veto the measure over the more controversial provisions – something she did last year – risking passage of other popular provisions in the CCR granting property tax relief to disabled veterans and low-income seniors. The CCR had previously passed the Senate (23-14). It now goes back to conference committee for further consideration.

Preserving and Promoting Investment in Energy Infrastructure. The Senate (33-2) and House (119-0) passed a CCR with provisions 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 (CCR for HB 2527). Conference committee negotiators also added to the CCR provisions imposing new requirements for closing coal-fired electric plants (previously SB 455) – that legislation addressed concerns federal EPA regulations may force premature plant closures before sufficient alternative dispatchable generation was available. CCR for HB 2527 now moves to the Governor for her consideration.

Strengthening Workforce Development. Lawmakers have taken action on a number of measures aimed at strengthening workforce development.

  • Supporting Career Education and Training. The House passed (98-22) a CCR expanding eligibility for adult career education and certain post-secondary scholarships (CCR for SB 438). Provisions in the measure expand eligibility for adult education and career training through the A-OK program (SB 438) and eligibility and support for scholarships in the high-need field of nursing among other scholarship programs (previously HB 2645). The CCR now moves to the Senate for consideration.
  • Expanding Access to Child Care. The House passed (110-10) a CCR consolidating early childhood programs – including the workforce-related issues of child care licensing, subsidies, and regulations – in order to improve effectiveness in serving families and expand child care availability and affordability (CCR for SB 96). The CCR now moves to the Senate for consideration.

Addressing Threats Posed By “Countries of Concern.” Lawmakers have been considering a series of bills aimed at 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.

  • Restricting Land Ownership By “Countries of Concern.” The House passed (84-36) a CCR prohibiting foreign principals from “countries of concern” from holding any ownership or leasing interest in real property within 100 miles of a state or federal military building in this state, unless they have been cleared by a federal national security review process, but the measure failed to pass the Senate (19-14) and has been sent back to conference committee for further consideration (CCR for SB 172). As a practical matter, the 100-mile scope would essentially cover the entire state. A more extensive bill proposed by the Attorney General that would have banned land ownership or leasing by an entity from any foreign country unless it was granted an exemption by a new State Land Council stalled out in a Senate committee amid opposition from agricultural, financial, business, and civil rights groups and concerns by committee members about the bill’s scope (SB 446), and the Attorney General has been critical of the House’s measure.
  • Restricting Drones From “Countries of Concern.” The House (90-30) and Senate (21-12) passed a CCR prohibiting the acquisition by state or local government agencies of critical components of drone technology from named “countries of concern” and requiring the divesture of such technology (CCR for SB 271). Conference committee negotiators also added provisions prohibiting state contracts for goods or services with a principal from a country of concern unless a national security clearance agreement is in place (previously a portion of SB 37). The measure now moves to the Governor for her consideration.

House and Senate negotiators have also been working on a number of other issues for which agreement has not yet been finalized or votes have not yet been taken, including combatting retail crime, bringing back a film tax credit program to assist in luring movie productions to the state, deferred maintenance needs at higher education institutions, and much more. Any work not completed before first adjournment on April 5th may be considered during the wrap-up session in late April.

 

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.