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Government and Community Affairs

The Government & Community Affairs (GCA) Committee educates members regarding legislative issues and communicates the needs of the business community to local and state officials.


Statehouse Report

Statehouse Report: April 7, 2014

The last week before the 2014 session’s first adjournment deadline included many late nights in the Statehouse that actually lasted until Sunday morning. This marks the official end of regular session, which sends legislators home for a three week break before returning for Veto Session. Veto Session, which begins April 30th, will give Senate and House members time to finish their supplemental appropriations budget along with other outstanding legislative priorities and reconsider any possible bills that were vetoed by the Governor.

The dominating issue was deciding what approach is the best solution to comply with the court’s education order. The legislature is charged with equalizing school funding requiring $129 million. The Senate and House had approved vastly different solutions. The Senate and House budget leaders started negotiating their differences through the weekend. In an unusual, yet expected move, in an effort to expedite the process, the Senate agreed to the House’s position that essentially fills the education spending with existing state general funds. A stipulation for the House, however, was to include the Senate’s position to eliminate tenure for teachers. The House and Senate agreed and prepared to debate the compromise late Saturday night. At 1:15 am, the House was unable to pass the bill. On Sunday, after lengthy and contentious debates, the House and Senate were both able to pass the bill. This marked the official first adjournment until April 30th.

Economic Development Incentives
Two bills, SB262 and HB2430 are bills to modify PEAK legislation (Promoting Employment Across Kansas) to extend the period that employers are allowed to keep the withholding on new employees to help make up for the loss of revenue caused by the 2012-13 income tax reductions. HB 2430 has been supported by most chambers and economic development groups. HB2430 is now in conference committee. SB262 will not be worked.

Education
Sunday night, the House and Senate passed the school finance plan to comply with the court order. The bill is essentially the House’s proposed plan with the addition of a few policy pieces from the Senate. Per the House version, there were no changes to the school finance formula such as reductions in the virtual education or transportation aid weightings. There is also flexibility for the calculation of the Local Option Budget up to a Base State Aid Per Pupil basis of $4,490 for two years, an increase from the current law $4,433. The general Base State Aid Per Pupil is currently $3,838 and already poised to increase to $3,852 on July 1, 2014. The plan adopted by the Legislature would have essentially been very close to the plan passed by the House last week that picked up 91 votes. However, controversy was ignited within the House over the weekend once the Senate’s language eliminating due process for teachers was added to the bill. Sunday night, the House passed the plan exactly with the majority required 63 votes. The Senate needed 21 votes, but passed it with 22. The plan now heads to the Governor’s desk.

Taxation
After three years, the counties and taxpayers have come to agreement on a process to assist in the determination of commercial and industrial machinery and equipment. HB 2643, as amended, would seek to retroactively clarify legislative intent from 2006 when a property tax exemption for certain commercial and industrial machinery and equipment was enacted by determining the circumstances under which property could be classified as personal property or real property. In making the classification determination, county appraisers would be required to conform to the definitions of real and personal property provided elsewhere in Kansas’s law. The bill also addresses IRB properties. Along with the Ash Grove cement amendment put on in the House, the Senate added an amendment to allow property tax exemptions for certain health care facilities. The bill has been sent to a conference committee.

HB 2614 would rename Court of Tax Appeals to the Board of Tax Appeals, undoing the 2008 legislation was placed in Sub for SB231, and passed by the House. The bill would provide that the Board does not have the power or duty to question who has authority to sign a taxpayer’s appeal; to question who may represent the taxpayer in the hearing; to determine whether the taxpayer representative is authorized to practice law; to question whether a contingent fee is a violation of public policy; and to take action or fail to take action that would impede a settlement between the county and the taxpayer. The bill is in conference committee.

HB 2607, a proposed sales tax holiday, was heard and approved in the House Taxation Committee last month. It has not been considered by the full House though. If it became law it would create a four-day sales tax holiday in August beginning in 2015 for the purchase of clothes, school supplies, computer software and personal computers, running from the first Thursday in August to the first Sunday. The fiscal note is estimated to be $5.5 million to the State General Fund and an additional loss of $1.4 million to local units of government. This bill, in its current form, is not very far in the overall process of becoming law.

Governance
The Kansas Medical Society’s non-economic damages bill, SB311, is on the way to the Governor. The three components included in the bill are the increase in non-economic damages; collateral source rule changes; and allowing for the Daubert standard for expert witness testimony. The bill as passed, does not have the collateral source damages provision.

Health Care
HB2553, a bill that would establish the health care compact was passed and is awaiting action by the Governor. This would allow Kansas to become a part of a multi-state effort to address concerns of the federal health care act. HB 2553 would allow Kansas to join the Interstate Health Care Compact. The purpose of the Compact would be to secure the right of Compact Member States to regulate health care within their boundaries, and to secure federal funding for Member States that choose to invoke their authority under the funding provisions of the Compact. The U.S. Congress would have to consent to the Compact in order for it to be effective. If approved by Congress, the Compact would become effective on its adoption by at least two Member States. Pursuant to the bill, the Compact could be amended, and a state would be able to withdraw from the Compact. The bill contains a preamble that includes statements on the importance of the separation of powers, including between federal and state authority, and the preservation of individual liberty and personal control over health care decisions. The bill then would establish the nine articles of the Compact.

Transportation and Infrastructure
After last week’s action, HB 2014, the bill repealing the Renewable Portfolio Standards that was approved by the Senate, was debated and effectively killed by the House. Proponents of the bill have since tried several political maneuvers to somehow revive the issue in another energy/utilities bill. Three failed attempts were made to create opportunities to latch the issue to existing bills in play. There will certainly be more attempts by proponents on the issue to revive the legislation after the Veto Session begins on April 30th.

Statehouse Report: March 31, 2014

The legislature had a short week with the majority of work completed by Wednesday. This was the deadline for the House and Senate to pass bills that were sent over from the opposite chamber. Thursday and Friday were reserved for conference committees to meet and sort out the differences between House and Senate versions of bills. Two conference committees were held Thursday morning but that is all that transpired before they left town for an extended weekend. Next week we will see many conference committees meet and conference committee reports will run in both the House and Senate chambers before the first adjournment Friday, April 4th. The legislature will be off for three and a half weeks before they return on April 30th for Veto Session.

The biggest issue dominating discussion under the dome is how the legislature will fill the court decision requirement of finding $130 million to equalize both the Local Option Budget and the capital outlay funds. The Senate is considering several different scenarios behind the scenes within their respective caucuses. House leaders have their own plans that will appear in committee hearings next week. The legislature will work on this issue all next week, and hope to have something passed by next Friday to send to the Governor.

Economic Development Incentives
HB 2430, the House's PEAK bill supported by the Administration and most local Chambers and Economic Development organizations, was debated on the Senate floor on Tuesday. During debate, there was one amendment offered by Senator Caryn Tyson that was approved. The amendment simply stated the Secretary of Revenue would also have to approve any applications for PEAK benefits. This is in addition to the Secretary of Commerce. HB 2430 passed the Senate 35-4. HB 2430 should be considered in conference committee next week.

Education
As of today, there is no clear solution to fill the $129M requirement from the court decision. There are several plans discussed within the Senate and the House will consider their plans next week in committee. Specifically in Senate discussion, there are several education weightings from the formula that could be shifted to fill the court order. Among these, is a possible 50% reduction in base state aid for virtual education and transportation aid for all school districts. It is still unclear, which plan will surface as the senate plan. It is clear though that nothing is official. The proposals discussed within the Senate have been within their respective caucuses, and have not been unveiled in any public hearing or setting. The House will have a formal hearing on their education plans that are not identical to any of the senate proposals. More information will be available next week.

Taxation
HB 2643 was debated and approved by the full House 123-0. This bill would add language from the Department of Revenue's Property Valuation Division Valuation Guidebook to the statutes, mentioning both the general rule for classification based on the use of the property as well as the three-part test used when the general rule doesn't produce a clear result. The bill has been referred to continue on to the Senate committee next week.

Reform of the Court of Tax Appeals, within Senate Bill 231, was approved by the House and is now heading for conference committee between the leadership of the two tax committees. This has been supported by the Kansas Chamber and other business organizations, was amended into Senate Bill 231 and passed by the House by a vote of 123-0. COTA has been heavily criticized the past couple of years for its decisions in income, property, sales and excise tax appeals impact individual and business taxpayers. The bill would limit the authority of COTA as a freestanding court, return it to "Board of Tax Appeals" status, and enumerate specific grounds for removal of Board members. HB 2607, a proposed sales tax holiday, was heard and approved in the House Taxation Committee last week. It has not been considered by the full House though. If it became law it would create a four-day sales tax holiday in August beginning in 2015 for the purchase of clothes, school supplies, computer software and personal computers, running from the first Thursday in August to the first Sunday. The fiscal note is estimated to be $5.5 million to the State General Fund and an additional loss of $1.4 million to local units of government. This bill, in its current form, is not very far in the overall process of becoming law.

Governance
Last week, the full House worked the non-economic damages bill, SB 311, supported by the Kansas Medical Society and Kansas Chamber. On Monday, the bill was passed by the House 119-3. The bill has already started the negotiating process in conference committee examine the added collateral source rule change. The conference committee will resume next week.

Health Care
Last week, the House debated HB 2553, authorizing creation of a multi-state health care compact. If approved by Congress, the Compact would allow participating states to take all of the federal dollars spent in their state on health care (including Medicare and Medicaid programs) and repurpose them for any other state sponsored health care program. The House passed the bill 74-48. The bill has now been referred to the Senate Federal & State Affairs Committee.

Transportation and Infrastructure
This was an eventful week for energy policy under the dome. HB 2014, the bill repealing the Renewable Portfolio Standards, was debated and approved on the Senate floor on Tuesday. After a lengthy debate, the bill passed the Senate by a vote of 25-15. Since the Senate Utilities Committee approved this bill and turned it into a House bill, once HB 2014 was approved by the full senate it would immediately go to the House floor for a motion to concur or non-concur. This bypasses the usual step of going to the House energy committee to restart the process. Instead, when this type of action happens, usually the bill will then go to conference committee for the chairmen counterparts to negotiate the differences in the bill. However, in a bizarre twist, on Wednesday, once HB 2014 was considered on the House floor for a motion to go to conference committee, there were procedural maneuvers offered by Representative Russ Jennings that essentially killed the bill dead in its tracks. There is a chance though; there will be an attempt to revive the issue once again in some other form.

Statehouse Report: March 24, 2014


Most legislative committees wrapped up their work last week. The budget committees will meet the first of this week to complete their K-12 school finance proposals. Conservatives want to load the school finance proposals up with school reform amendments opposed by traditional education interests.

The House and Senate will be working bills Monday thru Wednesday this week, and conference committees will meet Thursday and Friday. The regular session will conclude on April 4th and the Veto Session begins April 30th.

Economic Development Incentives
HB 2430, the House's PEAK bill supported by the Administration and most local Chambers and Economic Development organizations, was reported favorably by the Senate Commerce Committee and should be worked by the full Senate early this week. A committee amendment will allow the use of PEAK benefits for "retention" of existing Kansas jobs to sunset. Supporters of the sunset of the retention benefits argue that is has fed the Border Wars in the metro Kansas City area. Supporters of the retention benefits argue that it is the only tool Kansas has when other states try to attract jobs currently located in Kansas. The bill with Senate Committee amendments is Substitute for HB 2430.

Education
The House and Senate budget committees have been assembling their respective school finance proposals this past week. The House plan mirrors the Governor's recommendation to fully fund the Local Option Budget and Capital Outlay Equalization, as directed by the State Supreme Court. However, the original House Appropriations Committee school finance plan also included a number of K-12 reforms favored by conservatives, including a new charter school authority outside the control of local districts. House Speaker Ray Merrick criticized the addition of the conservative amendments, explaining they were not part of the agreement struck with the Governor and Senate leadership, and introduced an additional school finance proposal without them.

After several days of behind the scenes discussions, the Senate leadership proposal is expected to be unveiled in the Senate Ways and Means Committee on Monday. Rumors are that the Senate plan also will fully fund the $129 million needed for equalization funding, but significant parts of the money will come from redirecting dollars that are already part of the school finance formula. For the Lawrence School District, the most impactful change may be a rumored 50% reduction in funding for Virtual Education. Current Virtual Education expenditures are just over $4,000 per FTE pupil statewide; but the Greenbush Education Coop in SE Kansas offers Virtual Education services for as low as $2,000 per pupil.

Taxation
Resolution of the conflict over the proper property classification of commercial and industrial machinery and equipment may be at hand as representatives of industry and the Association of Counties met late last week to review possible compromise language. If approved, HB 2643 will add language from the Department of Revenue's Property Valuation Division Valuation Guidebook to the statutes, mentioning both the general rule for classification based on the use of the property as well as the three-part test used when the general rule doesn't produce a clear result. The bill will be worked by the House this week.

Reform of the Court of Tax Appeals, supported by the Kansas Chamber and other business organizations, was amended into Senate Bill 231 and passed by the House by a vote of 123-0. COTA has been heavily criticized the past couple of years for its decisions in income, property, sales and excise tax appeals. The bill would limit the authority of COTA as a freestanding court, return it to "Board of Tax Appeals" status, and enumerate specific grounds for removal of Board members.

HB 2607, a proposed sales tax holiday, was the subject of a hearing in the House Taxation Committee on Wednesday and approved by the Committee on Thursday. If it became law it would create a four-day sales tax holiday in August beginning in 2015 for the purchase of clothes, school supplies, computer software and personal computers, running from the first Thursday in August to the first Sunday. The fiscal note is estimated to be $5.5 million to the State General Fund and an additional loss of $1.4 million to local units of government. This proposal has surfaced in previous legislative sessions and never been approved because of the fiscal note.

Governance
The full House worked the non-economic damages bill, SB 311, supported by the Kansas Medical Society and Kansas Chamber. An amendment supported by the Kansas Bar Association and opposed by the Kansas Chamber and Medical Society, offered in the House removed the collateral source rule changes. Final action on the bill is scheduled for Monday.

SB 10, the local government Open Records proposal, was the subject of a hearing in House Federal and State Affairs Committee last Wednesday. The bill could be worked the first of this week.

Health Care
On Friday, the House debated HB 2553, authorizing creation of a multi-state health care compact. If approved by Congress, the Compact would allow participating states to take all of the federal dollars spent in their state on health care (including Medicare and Medicaid programs) and repurpose them for any other state sponsored health care program. The intent of the bill, supported by various conservative groups, is to create a state-designed alternative to the ACA, Medicaid and Medicare. A Final Action vote in the House will be taken on Monday.

Transportation and Infrastructure
Last week the Senate Utilities Committee approved a bill that repeals the Renewable Portfolio Standards for electric utilities approved by the Legislature in 2009. Various conservative groups, including the Kansas Chamber, Americans for Prosperity and Kansans for Liberty, all support repeal. The committee approved the repeal and inserted their proposal into HB 2014, making the proposal subject to conference committee action without prior passage by the House. Passage by the full House is expected to be a close vote. It is still unclear how Governor Brownback might deal with this issue if the bill makes its way to his office. Brownback has been a strong supporter of renewable energy growth in Kansas.

Immigration
Immigration reform issues remain quiet.

Advocacy Limitations and Recordkeeping
Bills previously reported are pending in committees.

Arts and Culture
Funding for the State's Arts Agency has been reduced to $200,000 for the next fiscal year, pending final approval by the Legislature.



Statehouse Report: March 17, 2014


This will be the last full week of heavy committee activity as we are rapidly approaching the end of the Regular Session. Legislative leaders in both houses are trying to limit the number of controversial issues that are worked. But a few are still popping up because they have the support of the Kansas Chamber and/or Americans For Prosperity. Committees will have a full schedule of bill hearings and spend time working the bills previously heard that are priorities for leadership. Many proposals, some of them good ones, will fall by the wayside because they are too controversial or because committee chairs feel they just don't have the time to work them.

The biggest issue left in the session is determining the Legislature's response to the State Supreme Court's decision in the Gannon Case, the challenge to the state's funding of K-12 public education. The decision could result in infusion of an additional $130 million in state aid to schools or major changes to the funding formula and no new money. The worst case scenario would be if the legislature took no action by July 1st, or action the three-judge district court panel decided was completely unacceptable. That could result in the suspension of all state equalization aid and would cost the school districts about $1 billion.

The end of the Regular Session is Friday, April 4th, and the Veto Session will begin on Wednesday, April 30th.

Economic Development Incentives
The Senate Commerce committee has scheduled a hearing on House Substitute for HB 2430 on Monday. This is the Department of Commerce's PEAK bill that passed the House 110-13 a couple of weeks ago. Possible action is scheduled for Wednesday. The bill is supported by the Kansas Chamber, and most local chambers and economic development organizations. There are four major components:
1) Companies could qualify for PEAK by agreeing to pay "average" wages equal to or in excess of the county median wage. Current law requires payment of wages in excess of median wages, so the new standard is more flexible.
2) Qualified companies who had entered into the program prior to January 1, 2013 could request extension of the program for an additional two years, and he Secretary of Commerce would have discretion to grant the extensions to allow such companies the amount of benefits intended under the original agreement. This language results from the further reduction of individual income tax rates reducing the value of a company's PEAK benefits.
3) The statutory cap on the amount of income taxes that may be diverted by PEAK benefits would be expanded such that any unused or engrafted amounts in any year could be carried forward to increase the cap in the following year. Clarifies that the annual cap is $6 million each fiscal year, and beginning July 1, 2020 imposes an aggregate cap on the entire program.
4) Removes the sunset on the PEAK program.

Education
This past week started with a flurry of meetings among legislative leaders and the Administration to discuss how to respond to the Gannon decision. There are two broad choices: fully fund the school district equalization formula (approximate cost $129 million in new funds to the formula), or amend the formula to fit the current level of appropriation. House and Senate Democrats have called for fully funding the formula out of the projected ending balances. Such an action would reduce the projected ending balance for FY 2015 to about $118 million, far below the 7.5% statutory requirement and so low as to force some budget and spending adjustments by the Administration for those months when expenditures exceed state revenue. Alternatively, if Republicans do decide to fully fund the equalization formula they could redistribute funds from T-WORKS or other state agencies to satisfy the court decision but reduce expenditures somewhere else. It would be very difficult to establish new funding priorities without strong objections from some stakeholder group.

The funding issue clouds the future of the Governor's All Day K proposal, that had its own price tag of $16 million in new spending for each of the next five years.

Finally, the overarching question of "adequacy" of the state funding formula is still before the district court's three judge panel. Although there was language in the Supreme Court decision that gives fiscal conservatives some comfort, the panel could still rule that millions of dollars in new funding is needed to fulfill the constitutional requirement to provide for public schools.

All of these issues have to be resolved by the end of the session, and are shaping the outcomes of many other issues that impact the budget.

Taxation
The path forward for the CIME property classification issue is starting to take shape. The House Tax Committee passed out HB 2643 with two "friendly" amendments. The first provides an alternative process for valuing complex industrial properties that may be used at the option of the taxpayer or the county. Basically, either party could ask the State Property Valuation Department to appoint a qualified appraiser to value the property with the county picking up the tab. The business community generally supports this flexibility while counties have mixed views about the alternative process (mostly concerns about who will pay for it). The second amendment provides that, beginning with property tax year 2014, property that has been constructed or purchased using IRBs and that was exempt from property tax, but subsequently returned to the tax rolls, would retain its classification as either real or personal property as designated by the Court of Tax Appeals at the time of the exemption. Reclassification of the property would be possible only under certain defined circumstances.

The underlying bill takes language from the PVD Valuation Guidebook and places it in the statutes where it would provide greater direction to county appraisers. The PVD language explains that the use of the property would generally determine whether it would be treated as personal property or real estate, and where that general rule was not applicable the three-factor formula favored by the Association of Counties and referenced repeatedly by the Kansas Courts would be used to classify the property.

This proposal provides the most universal fix to the CIME classification issue and should have the impact of producing no fiscal note for the vast majority of counties that are already following the PVD Guidebook. The Department of Revenue fiscal note for the bill says there would be no fiscal impact to DG County.

HB 2614, which proposes to remake the Court of Tax Appeals as the Board of Tax Appeals and implements several major reforms to the Court, was approved by the House Taxation Committee this past week and is on House General Orders. The bill has broad support and is expected to pass the House. Before passage, the Committee passed several amendments that were requested by the Administration and Kansas Chamber.

In a surprise election year move, the House amended a bill pertaining to tax status of amateur-built aircraft (HB 2542) to add $45 million of funding for the Local Ad Valorem Tax Relief Fund. The LAVTR hasn't received any funding since 2003, but was once one of the major forms of state support to local units of government. The funds are intended to reduce local property taxes, but local units seldom reduced their levies upon receiving the state funds, so they just became another source of local revenue. It is unlikely the Senate will consider LAVTR funding given the pressing funding demands of K-12 and higher education.

Governance
SB 10, which revises the Open Records and Open Meetings laws was amended and passed by the Senate. The amendments allow a person to request up to 25 pages of documents and use up to one hour of staff research time for "free." After the free pages and time there are provisions for reasonable fees to be charged to fulfill Open Records searches. The amendment language probably creates a "free" fee loophole that will have unintended consequences for agencies and those requesting documents learn to shape their request to fit the standards for free searches. The bill had a hearing in the House Federal and State Affairs Committee last week.

The House Commerce Committee will have a hearing on SB 311, the comprehensive legal reform package that includes increasing the cap on non-economic damages, on Monday. Supported by the Kansas Chamber and Medical Society, the bill previously passed the Senate 32-8.

Health Care
The bill to authorize an increase in the number of trade association sponsored health insurance plans has been approved by the House Insurance Committee and is still awaiting action by the House.

Hearings were conducted last week in House Insurance Committee on the bill to mandate additional converge of autism disorders for children in state authorized health insurance plans. This proposal has been gaining support the past several years and passage seems likely this year.

Transportation and Infrastructure
Despite the best efforts of Secretary of Transportation Mike King, KDOT and T-WORKS will be in the sights of legislators if they choose to fully fund the school finance equalization budget as directed by the Kansas Supreme Court. While funding of the South Lawrence Trafficway appears secure, other future projects will be in jeopardy in the legislature strips additional funds from the program.

Immigration
Immigration reform issues remain quiet.

Advocacy Limitations and Recordkeeping
Bills previously reported are pending in committees.

Arts and Culture
Funding for the State's Arts Agency has been reduced to $200,000 for the next fiscal year, pending final approval by the Legislature.




Government & Community Affairs Events
The Legislative Priorities Series is comprised of three separate events held throughout the legislative session.

1. Legislative Priorities Breakfast: The Chamber, City, County, School District and University of Kansas provide their unified legislative priorities to the local delegation.

2. Mid-Session Legislative Update: The local delegation provided an update on legislative issues during an informal, late-afternoon event.

3. Legislative Wrap-Up Reception: An evening social event held in celebration of the completion of the legislative session and in recognition of the efforts of the local delegation.

*Sponsorship opportunities exist for the series. As a Legislative Series Sponsor your company's brand name will be highly visible, appearing in all promotional pieces and prominently displayed on all table tops at each of the series' three events. For sponsorships, please contact Adam Handshy, 785.865.4427 or ahandshy@lawrencechamber.com.
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