2/28/2019 Legislative Session Update

     For all intents and purposes, the Kansas Legislature completed the 7th week of the session yesterday with the conclusion of General Orders floor debate over bills today, with only pro forma work on tap for today. February 28 is the scheduled House of Origin deadline for the session.
     The House and Senate spent considerable time on the floor debating bills this week, with each chamber scheduling dozens of bills for consideration in advance of the turnaround deadline. Legislators will be on break until returning for the second half of the session that begins on Wednesday, March 6.
     Must pass bills for the session are a budget and K-12 education funding. Other issues, while important to many are not required to be passed before adjournment (e.g., taxes, transportation program, sports wagering, etc.).
     More than 600 bills have been introduced to date, but hundreds will be left behind with the passing of the House of Origin deadline and the Legislature will turn its attention to the bills that advanced from one chamber to another before they left town and a handful of other bills saved by the proverbial bell, so to speak by being rerouted through an exempt committee to keep them alive for the remainder of the session.

Legislative Highlights of the First Half of the Session:

K-12 Funding.
     The Senate fended off an amendment to add $90 million to an education-related bill earlier this week offered by a democrat senator as a way to advance Governor Kelly’s desire to provide sufficient funding for K-12 education to get the State out of litigation before the Kansas Supreme Court. Although the Senate rejected the amendment, a Republican Senate Leader indicated during floor debate he believed the Legislature would appropriate the money necessary to address the Court’s decision by March 15, as requested by the Kansas Attorney General and the amendment was not necessary at that time. The AG is required to submit briefs to the Kansas Supreme Court on the case by April 15 and had requested the Legislature act one way or another by mid-March so briefs can be prepared and filed in a timely manner.

Taxes.
     The Senate moved quickly early in the session to bring up a so-called mega tax bill that failed on the final day of the 2018 session, with Senate President Susan Wagle naming herself to chair a special tax committee to specifically look at bills related to that initiative from last session.

SB 22 incorporates the pieces of that bill from last year, which include:

  • Allow individual filers to itemize their state return even if they use the standard deduction on their federal form;
  • Exempt from state income tax deferred foreign income (repatriation), dating back to tax year 2017 and going forward;
  • Allow deduction of certain business interest; and,
  • Make certain adjustments attributable to FDIC premiums.

     Opponents to the bill have argued now for more than a year that the unknown impact on state revenues is reason enough to not pass the bill, which is primarily due to the repatriation of foreign income. The estimate for that piece of the package is potentially a $100+ impact on the State General Fund. Proponents suggest this is new found money for the state and an inappropriate windfall that would not be coming to Kansas but for a change in Federal tax law and thus the State should adjust its rates to negate any windfall.
     The Senate passed the bill on a vote of 26-14, which is one shy of a 2/3 majority most likely needed for a veto override.

The House considered the bill earlier this week and added a few amendments:

  • Reduce the state income tax on food products by 1% (down from 6.5% to 5.5%);
  • Add language that would impose a sales tax on certain internet sales transactions for entities with $100,000 or more in total gross sales.

     The House did not consider SB 22 before the House of Origin deadline passed, although the House Taxation Committee did advance the bill to the floor earlier this week. Taxes will be a second half of the session issue, as it almost always is.
     Food is a heavy lift. Most legislators and the Governor are concerned with the fact that the sales tax on food (state and local) is near or even more than ten percent in some instances and among the highest rates in the country. However, budget concerns suggest this may be something that receives greater consideration in a year or two when state revenues (hopefully) stabilize from the whipsaw of the 2012 tax cuts and 2018 reinstatement.
     As for internet taxes, generally legislators support some kind of imposition of a sales tax on internet sales as a way to provide some parity for our state’s brick and mortar sellers, but the challenge is positioning any bill as “tax fairness” rather than a “tax increase.”

Liquor Issues.
     The Division of Alcoholic Beverage Control of the Kansas Department of Revenue brought forth HB 2035 early in the session to clarify ABC agent enforcement authority over Cereal Malt Beverage (CMB) product sales after the law relating to strong beer sales goes into effect April 1.
     HB 2035 was amended in the Senate Committee on Federal and State Affairs to clarify that CMB products sold by liquor retailers would be subject to the State’s 8% enforcement tax and CMB and 6% beer products sold in the CMB licensed locations are subject to state and local sales tax. That section was further amended and clarified with a floor amendment during floor debate.
     On April 1, 2019, CMB retailers can sell 6% beer and retailers will be able to sell non-alcohol products up to 20% of their gross sales, not counting lottery or tobacco sales, as a result of legislation passed in 2017 that implements on that date.
     HB 2223 will allow those growing products used in the making of Kansas farm wine to sell the wine and other products that use their products. The initiative of the bill was brought forth by a berry grower who sells products to a farm winery and would like to be able to sell the wine products that utilize his berries. The bill passed on General Orders in the House this week and will head to the Senate for consideration during the second half of the session.
     SB 70 proposes to streamline the temporary permit process for on premise consumption of liquor products. The measure has passed out of the Senate Committee on Federal and State Affairs and is likely to be considered on the floor of the Senate during the second half of the session.
     HB 2133 will require common carriers to report to the Kansas Department of Revenue when out-of-state alcohol shipment deliveries are made in Kansas (wine). The measure has passed out of the House Federal and State Affairs Committee and is likely to be considered on the floor of the House during the second half of the session.
     HB 2239 will allow a liquor licensee to sell products away from their brick & mortar facility within a common consumption area (e.g., drink cart or retail area away from the licensee, but located within the common consumption area).

Medicaid Expansion.
     The Governor and a number of legislators remain supportive of an expansion of Medicaid to an estimated 150,000 Kansans, but to date there appear to be no intentions of House or Senate Leadership willingly scheduling floor debate on this issue.
     It remains to be seen whether the Kansas Farm Bureau “non-insurance health care coverage bill” that passed the Senate last week will impact this issue or the support for it during the second half of the session.

Sports Wagering & Expanded Gaming.
     The House and Senate Federal and State Affairs Committees have both held “informational hearings” on the subject of sports wagering, but to date there does not appear to be consensus on a model bill or even a specific bill interests are focused on as of yet.
     Parties interested in this issue include the four state-owned and operated casinos, the major league sports organizations (e.g., MLB, NFL, NBA, etc.), fantasy sports companies, convenience stores and restaurants and even the Kansas Lottery has seemingly positioned itself as a possible vendor/sports book operator.
     It is anticipated some kind of sports wagering bill will pass this year.
     Proponents of reducing the tax on slots-at-tracks to benefit the owner of The Woodlands pari-mutuel track introduced bills in both the House and Senate, as they have done every year dating back to the passage of the Kansas Expanded Lottery Act (KELA) in 2007. Track owners at the time didn’t like the revenue percentages contained in the original gaming bill, SB 66, and have unsuccessfully sought a larger share ever since. HB 2280 was held for hearings in the House Commerce, Labor and Economic Development Committee, but not advanced. State contracts with the four state-owned and operated casinos prohibit expanding gaming beyond what was allowed under SB 66, passed in 2007, or severe economic penalties could be imposed on the State – repayment of $61 million in privilege fees and 10 percent interest dating back to the time of payment. The estimated penalty today is approximately $135 million.

Electric Issues.
     Earlier this year a coalition of sorts composed of industrial customers (large electric users), the Kansas Chamber, Americans for Prosperity, the Citizen’s Utility Ratepayer Board, a green energy nonprofit advocacy organization and others requested introduction and/or support for SB 69, which would direct the Legislative Coordinating Council (House and Senate Leadership Committee) to select a consultant or consultants to conduct a comprehensive study of electric rates beginning with the narrative that Kansas rates are too high and should be reduced one way or another.
     Not surprisingly, on the other side of this legislation are the electric utilities who argue a recent study conducted by the State Corporation Commission (KCC) regarding the rate history for KCP&L and Westar sufficiently demonstrates that rate increases in Kansas are due primarily to decommissioning of coal plants, investment in new generation and transmission, loss of wholesale customers and imposition of State and Federal environmental mandated investment.
     Hearings were held on SB 69 earlier this week with opponents being required to testify first, which is not tradition. After the first day, the proponents began to slow walk their bill and suggest it should not be worked this week and instead held over for consideration after turnaround. The Electric’s had proposed their own study bill (SB 181), a task force with industry representatives and legislators, but that approach was rejected out of hand by the proponents of SB 69.
     Following hearing both sides, the chairman of the Committee asked the sides to get together and try to work out their differences and craft a study bill that all parties would accept their findings. That effort is ongoing and likely to produce an agreed-upon bill for consideration in the next few weeks.
     Still under consideration is whether the half-dozen or so other bills impacting rates that this coalition introduced should still be considered this year. The Electric’s suggest with some degree of appropriateness that it doesn’t make sense to consider piecemeal bills intended to affect rates if a broad-based study is going to be conducted, which would study issues related to those bills as well.
     I would expect the major electric bill of the session will be SB 69 in some kind of agreed-upon form endorsed, or at least accepted by both sides and the other bills are left by the wayside.

Wind Energy.
     Legislation to place siting restrictions on wind energy projects appears dead after two days of hearings before the House Energy, Utilities and Telecommunications Committee held during the last two weeks.

Wildlife & Parks-related Issues.
     Early in the session, the Kansas Department of Wildlife, Parks and Tourism requested introduction of two bills; one would allow the Secretary to increase certain licensee fees (SB 50) and the second would allow the Secretary to increase fees on cabins the Department owns and manages. The first bill went away after strong backlash from certain legislators and the public in regard to fee increases for licenses and the bill was never scheduled for a hearing. The second bill, SB 49, was considered by the Senate before turnaround and faced opposition from those concerned with the State being in competition with private sector hotels, B&B’s and other lodging venues. The bill advanced to the House on a vote of 29-11, so a good margin of passage, but probably more difficult than thee Department originally thought it would be.
     In the House, a bill was introduced to allow landowners to purchase a deer tag and transfer it to someone else. The idea is for a landowner with at least 80 acres of land to purchase a deer tag and sell it to someone else for hunting on their property. The State had a similar program about 20 years ago and it was shelved after complaints of poaching and negative impact on the deer population, among other complaints. Proponents of HB 2167 counter the Department should revisit the issue and develop a workable plan that helps farmers and ranchers make a little extra income, opens more land to hunting opportunities and encourages tourism, while protecting the deer herd. Strong opposition from the Department, bow hunters and others nearly killed the bill, but it eventually passed the House with the minimum required number of votes – 63, and will not be considered by the Senate.

Transportation.
     Both the House and Senate have introduced a package of bills as an outgrowth of recommendations from the transportation task force that met during the fall of 2018.
Those bills include:

  • Creation of a transportation planning program;
  • Fees on electric and hybrid vehicles;
  • Increased heavy truck permit fees;
  • Allow cities and counties to exceed a property tax lid for certain transportation projects; and,
  • Tolling Options.

     We anticipate hearings on these measures during the second half of the session. Some of the bills have funding mechanisms included (e.g., fees on hybrid vehicles, heavy truck permit fees, etc.). Those bills likely do not advance as stand-alone proposals, but rather would likely have to be considered as part of a package in order to generate sufficient support in the Legislature.

Bills of Interest & Status.
HB 2006 would require the Kansas Department of Commerce to track economic development incentive programs and create a list of who receives incentives and assess the success or lack thereof for each investment. The House passed the bill unanimously – 122-0 – and the bill now goes to the Senate for further consideration. Alive.

SB 68 was brought forth by the major telecommunications companies as a follow-up bill to legislation passed in 2018 designed to facilitate the installation of “small cell technology” to enhance internet service in selected areas, such as downtown in a city or areas with limited wireless service. The bill last year was intended to streamline a telecom’s ability to hang equipment on public infrastructure (e.g., poles, buildings, towers, etc.). The telecom’s indicated in hearings that certain cities were requiring traditional franchise agreements and a burdensome application process they believe was prohibited by their 2018 legislation. During the past week, cities and the telecom companies reached a compromise and the bill moved forward over to the House. The bill prohibits traditional franchise agreements (e.g., fee or tax based upon revenues), but does allow a city to require a “master license agreement” or related right-of-way management tool. Alive.

HB 2180/SB 139 would reduce certain title and registration fees at the county treasurer level and replace them with $8.00 service fees on each transaction, which would purportedly have generated in excess of $10 million a year in additional revenue for county treasurers. The House Transportation Committee held hearings on HB 2180, but failed to bring the bill up for a vote. Dead.

HB 2115/SB 56 proposed to require state contractors to install special software on their computers to track keystrokes, website visits and activity to confirm the operator was actually working on state business. The proponent was a software company who has hired lobbyists around the country to try to pass this legislation to insure contractors are not overbilling state and local governments for services. The targets of the bill included attorneys, architects, engineers and other professionals who routinely provide services to state and local governments. The bills collapsed under controversy and were never scheduled for hearings. Dead.

HB 2135 would give cities back the ability to regulate political signs in the public right of way. Several years ago, a preemption bill was passed and since then, public rights of way have become one of the most popular sites for placement of campaign signs. Cities complained that business owners do not like signs in front of their businesses that infer support and require maintenance work-arounds (e.g., mowing, trimming, etc.) and cities expressed concerns for public safety when signs are placed in proximity to intersections and block views of oncoming traffic. The bill passed out of committee but was not heard on the floor. The bill was rerouted through an exempt committee and is likely to come back after the turnaround break. Alive.

Several bills to repeal the death penalty in Kansas were introduced earlier this year. The House Corrections and Juvenile Justice Committee held hearings on the House bill, but it failed to advance out of committee (HB 2282). Dead.

The Legislature has seen a number of bills relating to “abandoned housing” introduced and considered during the past decade. All have failed at some point in time most generally over property rights concerns, although one did make it to the governor’s desk a few years ago. Governor Brownback vetoed that bill. This year the House Commerce, Labor and Economic Development Committee brought forth the same bill the governor vetoed in 2017 and advanced the bill to the floor with no vocal opposition. HB 2314 was not considered before the turnaround deadline, but it remains alive as having been re-referred to an exempt committee to keep it alive for the second half of the session. The bill is an attempt to give cities a judicial process to help deal with residential properties that have been abandoned by their lawful owners when such properties become a blighting influence as defined in the bill to their surrounding neighbors. Alive.

     The second half of the session begins on Wednesday, March 6 with most committees ramping up a full schedule of hearings starting the week of March 11 heading towards the Second House of Origin deadline, scheduled for March 27.

Legislative Deadlines.

  • Wednesday, March 27 - Second House of Origin Deadline
  • Friday, April 5 - First Adjournment
  • Wednesday, May 1 - Veto Session Begins
  • Friday, May 17 - 90th Calendar Day

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Legislative Information.
     As bills move through the process, they can be amended every step of the way, from committee to the floor to the other chamber, conference committee and so forth. The Kansas Legislature’s website will list all versions of a bill and the current version of the bill will also contain original and amended language.
     You can access bills, calendars, legislative information and much more at the Kansas Legislature’s official website:
www.kslegislature.org/li

Please do not hesitate to contact me if you have questions in regard to matters highlighted in this report or other issues under consideration in the statehouse.

Whitney B. Damron, P.A.
wbdamron@gmail.com
919 South Kansas Ave.
Topeka, Kansas 66612-1210
(785)224-6666