2020 Legislative Policy Watch Weekly E-Update

Issue No. # 7, February 21, 2020

In This Issue
Budgetary Manipulations Have Begun
Farm Economy Update
KSU Research & Extension Update
Pay Day Loans in Kansas
Rattlesnake Creek Water Rights Struggle
Climate Hearing Video Available
Legislative Notes: Energy Legislation, Raw Milk, etc.
Calendars for Week of Feb. 24
About Policy Watch

About Policy Watch E-Updates


The Legislative and Policy Watch Weekly E-Update is a project of the Kansas Rural Center.

Editor: Mary Fund
Paul Johnson, Policy Analyst


Policy Watch Sponsors
The Kansas Rural Center
promotes the health of the land and its people through research, education and advocacy that advance an ecologically sound, economically viable,  and socially just agriculture. For more information about KRC go to  www.kansasruralcenter.org.

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The Kansas Natural Resource Council (KNRC)
promotes environmentally responsible practices and sustainable natural resource policies to ensure the quality and abundance of these resources for future generations. For more information about our organization and programs, or how to become a member, please visit



Kansas Farmers Union is the state's oldest  active farm organization working to protect  and enhance the economic interests & quality of life for family farmers, ranchers & rural communities. For more information go to:

League of Women Voters of Kansas is a grassroots, volunteer, non-partisan political organization with nine local Leagues across the state. For nearly 100 years, LWVK has encouraged the informed and active participation of citizens in government and has influenced public policy through education and advocacy. The League never endorses candidates or political parties For more information, contact  lwvk.org.


Climate and Energy Project  (CEP) is a  Kansas-based non-partisan non-profit working to find practical solutions for a clean energy future. For More information go to:



Friends of the Kaw (FOK)
works to protect and preserve the Kansas River for present and future generations. For more information go to:





Audubon of Kansas  is a statewide, non-profit organization established to promote appreciation and stewardship of Kansas' natural ecosystems, with special emphasis on conservation of prairies, birds, other wildlife and their habitat. For more information about our organization and programs, please visit   www.audubonofkansas.org 

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Sen. Jerry Moran
DC Ofc 202-224-6521

Sen. Pat Roberts
DC Ofc  202-224-4774

Rep. Roger Marshall, 
1st Dist. 
DC Ofc: 202-225-2715

Rep. Steve Watkins
2nd Dist.
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Rep. Sharice Davids
3rd Dist.
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Rep. Ron Estes
4th Dist.
DC Ofc.: 202-225-6216
BUDGETARY MANIPULATIONS

    by Paul Johnson

The budget games have begun. The starting point is the Consensus Revenue Estimating group's projection of revenue for 2021 that must be used by the Governor and the Kansas Legislature. The Governor issued her 2021 State budget on January 14. There are key assumptions in this budget. By statute, Kansas should strive for at least a 7.5% ending balance for the $7.92 Billion State General Fund (SGF). The Governor's proposal has an ending balance of 8% - $627.8 million.

Since the great recession of 2009 until 2018, Kansas was far below the 7.5% target due to unaffordable tax cuts. After the reversal of most of the tax cuts in 2017, the ending balance was $761.7 million (11.5%) in 2018 and $1.105 Billion (15.7%) in 2019. For Fiscal Year (FY) 2020, the Governor proposed paying off some borrowed debt - that had been incurred under the previous Governor to 'balance' the State budget as constitutionally required - thus lowering the ending balance to $533.3 million (6.8%).

The Legislature has been rushing through the review of the Governor's budget. Similar to speed dating, budget committees are taking testimony from the Department or Agency along with limited public testimony one day and making final budgetary decisions the next day. There is very little time to truly understand most of these budgets and even ask the most relevant questions.

The House Appropriations and Senate Ways & Means committees are assembling the various budget reports to fashion a 'mega-budget' in each chamber that will eventually be reconciled. The timing of this reconciliation depends on many other budgetary choices.

The Governor proposed refinancing the Kansas Public Employees Retirement System (KPERS) thus stretching out payments ten years but saving the SGF $131 million in 2021. What is not being debated is public school financing in light of the Kansas Supreme Court ruling so base aid per student increases from $4,436 in 2020 to $4,569 in 2021 and up to $4,846 in 2023.

What is unknown is the size of proposed tax cuts that may or may not be vetoed by the Governor. If Medicaid (KanCare) expansion is passed, the Governor's estimated cost to the SGF is $35 million a year starting in 2022. Final, final budgetary deliberations will not happen until the veto session that starts April 27.

A key factor that could impact final budget decisions will be the latest consensus revenue estimator's projection on April 10. The question is an ending balance amount that can be agreed upon for 2021 and the impact on 2022, 2023, etc.

 2020 is an election year for all 125 Representatives and 40 Senators so who cares what the budget may look like in 2 to 5 years? It seems certain that the new Highway Plan - FORWARD - will be rushed through without any new user fees (fuel taxes) and taking 16% of the general sales tax that is essential to all other state services.

 Public education funding is constitutionally protected compared to all other vital social and public safety services. Outside of an ending balance, Kansas does not have an established 'rainy day' fund to respond to the next, inevitable recession.     

   Contact Paul Johnson at pdjohnson@centurylink.net
FARM ECONOMY UPDATE

The House Rural Revitalization Committee heard testimony on the condition of agricultural credit in Kansas last week as the U.S. farm economy searches for stability.   Farm Credit Associations of Kansas have four independent financial services cooperatives along with CoBank that finance agriculture to farmers and ranchers in every Kansas county. They provide more than $5 Billion in financing for their customer-owners.
 
CoBank also provides funding for rural utilities, including power supply, generation and transmission as well as rural communication. There is no federal funding provided to Farm Credit - instead consolidated debt securities are sold to the investing public that in turn fund all Farm Credit institutions. Through diversification of lending - by geography, commodity and loan size - Farm Credit manages risk and insulates itself against the cyclical nature of the farm economy.
 
Net farm income in 2019 increased 9% from a year ago, but remains 31% below peak levels just six years ago. Much of the improvement in 2019 was a result of direct government payments which increased about 70% from the previous year and reached the 6th highest in the last 30 years. For 2020, USDA projects a net farm income increase of just 1.5% over 2019. Cash prices in Central Kansas for corn, wheat and soybeans in mid-January were 14.5%, 14%, and 13% respectively, below the historical 10-year average. KSU has estimated negative returns to feeding cattle in 54 of the last 84 months although 2020 appears more favorable.
 
Results from the Ag Credit survey of district commercial banks indicate 24 consecutive quarters of declining repayment rates and 25 consecutive quarters of increased demand for renewals and extensions which have combined to lead to 14 consecutive quarters of declining funds available for farm loans at reporting commercial banks - the longest streak since the survey began in 1980.

Agricultural credit conditions in Kansas have also weakened. Liquidity ratios have declined from previous highs, and solvency ratios have slightly increased. Stress does exist in the farm sector, but not at the widespread levels seen in the 1980's. Chapter 12 bankruptcies filed by Kansas farms in 2019 were 36 compared to 260 in 1987.  (However, Kansas, Georgia and Nebraska tie for second to Wisconsin which was first in the nation in number of farm bankruptcies in 2019.  https://www.fb.org/market-intel/farm-bankruptcies-rise-again )
 
 Land values sharply declined in 2015 and 2016 but have flattened or only softly declined since then. In terms of the national share of farm debt, commercial banks hold 42%, farm credit holds 41%, Farm Service Agency & Farmer Mac hold 4%, life insurance companies hold 4% and Miscellaneous holds 9%. 

As farm borrowing demands have increased, rural populations (and importantly their deposits) have declined. Financial conditions have weakened alongside slumping commodity prices but strong farmland values have helped support balance sheets during this difficult time. 

Government payments are an unlikely source of continuing revenue, and market forces will again need to sustain the farmer's cash flow needs. The prayer is that new trade agreements will bolster commodity prices and save the farm economy.       
 
K-STATE Research & Extension Update

Kansas St ate University's Dean of Agriculture comes annually to the Kansas Legislature to give an annual report on both the College of Agriculture and K-State Research & Extension. KSU is very proud of being the first land grant in the nation when formed in 1863. The number of undergraduates in the College of Agriculture has declined from 2,700 in 2014 to 2,326 today while there has been an 18% increase in the number of graduate students.  There has been a decline in the number of international students and 30% of the enrollment in the College are out of state students.
 
Dr. Ernest Minton is the Dean of Agriculture and the Director of K-State Research and Extension. Dr. Minton spoke of pet foods and milling & baking as key growth areas for the College. As for Research and Extension, their year-long goal setting established the priorities of 1) local foods, 2) rural stress and 3) succession planning for an aging farmer community. There were no specifics offered on these three goals or an employee count for research or extension. This presentation was before the Kansas Senate Agriculture and Natural Resources committee.
 
The topic that got the most questions was K-State's efforts with research on industrial hemp. K-State trials have identified two hemp varieties that performed particularly well for Kansas.

Total research and extension funding in 2020 reached $166 million. Of that $166 million, $10 million came from the federal block grant appropriation, $50.5 million came from a state appropriation, $22 million came from county appropriation, and $81 million from research grants, contracts and other funds. There were no specifics offered on this $81 million outside of $56 million of that being research dollars awarded.
 
 The College and K-State Research and Extension have developed a $262 million facilities master plan called an AG VISION 2030. The plan is for 210,000 square feet to replace or renovate older agriculture facilities, state-of-the art teaching and research laboratories, technologically advanced classrooms & meeting areas, additional greenhouse space, and modern grain, food and livestock research & teaching facilities. 1911, 1950s-60's, and 1980's were when the College of Agriculture's mid-campus facilities were built. The budget for KSU and K-State Research and Extension will be decided over the next few weeks.   


PAYDAY LOANS IN KANSAS
 
Given that one-third of Kansas households do not have a bank account, payday loans are a way of life for thousands of Kansas households. The Senate Ways and Means Committee held an  informational hearing this past week on payday loans while not addressing any specific legislative bills.
 
The Pew Charitable Trusts have researched consumer finances for several years. In short, Pew's research shows that payday loans in Kansas today carry excessive fees that drain millions of dollars from residents each year. In dollar terms, a borrower who takes out $300 and ends up in debt for five months (the average amount of time that a payday borrower spends in debt during the year nationally) would repay a total of $750 - a 391% interest rate. 

Small amounts of credit can help people who are struggling to make ends meet, but only if structured appropriately to have affordable payments and mutually sustainable prices. Ohio and Colorado have both passed laws that align the interests of borrowers and lenders, ensuring an efficient marketplace where there is widespread access to credit that is affordable to the borrowers and profitable for lenders.
 
Lenders charge Kansas' consumers far higher prices than they do in other states because Kansas law allows it. At the same time, Kansas law prevents lenders from offering lower-cost, more transparent products such as affordable small installment loans. Kansas law grants to high-cost lenders an extraordinary form of loan collateral - access to a borrower's checking account or car title. This means the lender is repaid before the borrower can choose to pay the rent, mortgage or other financial obligations first. Kansas law - the Kansas Uniform Consumer Credit Code - authorizes unlimited interest rates for lines of credit.
 
Kansas is one of only six states where payday lenders use such an unrestricted line-of-credit statute. This is also the statute that auto title lenders use to operate in Kansas. This allows payday and title lenders to issue revolving lines of credit - similar to credit cards - but with interest rates that are often 299% or higher, plus fees.
 
After reform in Colorado in 2010, payday lenders have acknowledged that credit is widely available - with prices in that state that are three times lower than in Kansas. The same companies that operate in Kansas today also operate in states that have reformed their laws. The Office of the State Bank Commissioner created the Consumer and Mortgage Lending Division (CML) in 1999 after Legislative enactment. CML Division currently overseas, examines, and licenses non-depository entities that conduct mortgage business, extend consumer credit, transmit money, or provide debt management services.
 
Kansans for Payday Loan Reform was established in the fall of 2019. They are Kansans from social service, consumer, business, and faith communities committed to fighting for reforms to protect borrowers and boost the Kansas economy. Making payday loans more fair and affordable will save hard-working Kansans tens of millions of dollars a year. The plan is to offer legislation in the 2021 Kansas Legislative session.
For more information: www.pewtrusts.org/small-loans

 
RATTLESNAKE CREEK WATER STRUGGLES & WATER RIGHTS

  The Rattlesnake Creek sub-basin is located in Stafford, Pawnee, Edwards, Kiowa, Ford, Clark, Barton, Rice, Pratt, and Reno counties and covers approximately 1,300 square miles. This sub-basin is home to many farmers and ranchers, as well as the United States Fish and Wildlife Service's Quivira National Wildlife Refuge. The U.S. Fish and Wildlife Service hold a senior water right for the Quivira National Wildlife Refuge and filed an impairment complaint with the Kansas Department of Agriculture Division of Water Resources (DWR) in 2013. The impairment was confirmed by the Division in 2016. The Division of Water Resources and stakeholders have been actively trying to find a solution but have not been able to come to a workable agreement.
 
KDA's Division of Water Resources rejected a proposed local enhanced management area for failure to meet the legal requirements and proposed action that included an administrative order to reduce pumping of junior water rights. The U.S. Fish and Wildlife Service did not make a request for water in fiscal year 2020 in order to find local, voluntary, collaborative and non-regulatory solutions to address the water needs.
 
2019 was a wet year but by fall the two gauges of streamflow on Rattlesnake Creek closest to Quivira showed below minimum streamflow measurements. Five years ago, legislation was passed to allow augmentation pumping from a nearby aquifer into Rattlesnake Creek but nothing has been done. There is discussion of developing a watershed wide water conservation area to limit water rights but opposition has stalled that idea for now.
 
Senate Concurrent Resolution (SCR) 1614 was heard before the Senate Agriculture and Natural Resources committee on February 17 and subsequently approved to be sent to the Senate floor. The resolution supports the "Kansas farmers in the Rattlesnake Creek sub-basin in their ongoing effort to protect their water rights and livelihood through a collaborative solution to the region's water impairment issue" and commends the US Fish & Wildlife Service for their efforts to reach a collaborative solution.
 
Only proponents testified arguing that "Kansas grain producers would be greatly harmed by impairment orders against the use of groundwater for irrigation and urging stakeholders to continue working together to find a solution through augmentation."
 
No one had a clear solution to this challenge. Augmentation by pumping from a nearby aquifer would be expensive and who should pay? In this resolution, there is no mention of the economic and natural resources value of Quivira. Expertise from the Division of Water Resources was not requested to clarify the questionable facts espoused by the proponents. These water rights for Quivira are Kansas water rights - thus Kansas has the future of Quivira in its hands.
 

WEALTH DAY CLIMATE HEARING VIDEO AVAILABLE

The Comprehensive Climate Hearing at this year's WEALTH Day,  February 10, 2020, 
was made possible by elected officials, climate activists, experts, and by the 400 participants
in WEALTH Day at the Capitol. You can now view the full recording of the  Climate Hearing online !  

Climate Hearing Conferees include: Doug Kluck, Central Region Climate Services Director for the National Oceanic and Atmospheric Administration (NOAA); Rep. Jason Probst; Fred Iutzi, President of The Land Institute; Rachel Myslivy, Associate Director of the Climate + Energy Project; Richard Mabion, President of the Kansas City Branch of the National Association for the Advancement of Colored People (NAACP); Dorothy Barnett, Executive Director of the Climate + Energy Project, and Rabbi Moti Rieber, Executive Director of Kansas Interfaith Action (KIFA).
 
Thank you to Loud Light for recording it and making it available to all of us. You can also
  find all of the climate hearing testimonies and supporting documents archived at:

LEGISLATIVE NOTES
ERO 46 Governor's Reorganization order to create an independent Kansas Energy Office.  On Wednesday Feb. 19, the Senate Utilities committee heard testimony about ERO 46. It will be discussed again on Monday February 24.  ERO 46 would move the state energy office out of the Kansas Corporation Commission (KCC) so it would function more like the Kansas Water Office in planning our energy future. The House has not brought ERO 46 up for discussion but can do through March. But the House does have a resolution (HR 6013) to disapprove ERO 46.  If no action is taken by either Chamber by  March 30 , the ERO will go into effect. If one body rejects the ERO, it will stop enactment of the proposed change.   Testimony from Climate Action KC is available  Here   and from Climate + Energy Project (CEP) Here .

HB 2363 Kansas solar pollinator habitat act. The bill was heard this past week in the House Agriculture committee. It would ask the Kansas Biological survey to develop and publish criteria and a scorecard on the siting of ground-mounted solar sites to establish or maintain pollinator habitat including native perennial vegetation. A growing body of research explores co-location opportunities on solar sites-from planting pollinator habitat to growing crops among the panels. By planting deep-rooted perennial vegetation in and around solar panels, pollinator-friendly solar projects can provide a host of ecosystem services, including habitat for wild insect pollinators, groundwater recharge, reduced erosion, soil carbon sequestration and improved crop yields from the increase in pollination services.Kansas currently has slightly more than 30 MW of utility scale solar power. Analysts project utility Solar Photovoltaics - or PV capacity will more than double in the next five years.  
 
SB 308, raw milk labeling bill, passed out of Senate Agriculture committee on Thursday Feb. 20 with some amendments. It will be heard on the Senate floor next Tuesday or Wednesday.   The bill allows the retail on farm sales of raw milk and contains language for labeling. See     SB308.


CALENDARS for Week of February 24, 2020
For next week's full committee schedules, go to "Calendars" on the Menu at:
  http://www.kslegislature.org/li/     Also, we recommend checking the daily calendars for any changes.

Deadlines: Committee hearings are slim next week. February 27 is Turn Around Day", or the last day to consider non-exempt bills in their house of origin so floor action is the emphasis this week. After this date, only  exempt committees can introduce bills.  March 25 is the last day to consider non-exempt bills not in their originating chamber. Exempt committees: House and Senate Federal and State Affairs, Senate Ways and Means, Senate Assessment and Taxation, House committees on Calendar and Printing, Appropriations, Taxation or select committees of either house when so authorized. Exempt bills are those sponsored by, referred to or acted upon by an exempt committee.
 
Friday, April 3rd is First Adjournment.  No bills considered after this date except bills vetoed by governor, omnibus appropriations act and omnibus reconciliations spending limit bill. Veto session is anticipated to begin on Monday, April 27th.


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