News from Topeka
26th District
GREETINGS,
We are two weeks in to the 2018 Kansas Legislative Session. I cannot call it a slow start as lots of action is taking place daily. The session is basically taking off where it left at adjournment last session. I was optimistic that the session would be shorter than in previous years. After two weeks in Topeka, I think I will be proven wrong. With administration in limbo and agency turnover rates at an all-time high, frustration has set in. Many have called me with issues and concerns that are not being addressed because of the inability to communicate with those in positions to help them. As your Senator, this lack of available help is most disturbing. Perhaps when the Governor's ambassadorship finalizes and Lt. Governor Colyer can assume a full-time leadership role, response times in departments will improve, giving quicker resolutions to constituent issues and problems. I continue to appreciate your comments and input on issues. Please contact me if I can be of service to you.
Dan.kerschen@senate.ks.gov // Capitol phone: 785-296-7353
STATE OF THE STATE ADDRESS
 
On Tuesday, January 9th, Governor Brownback gave his eighth and final State of the State address. The governor spoke of his many dreams for Kansas and highlighted accomplishments within the state such as 17,000 fewer abortions in the past six-years and a decreasing childhood poverty rate. These are positive numbers, but we must remain diligent until the number of abortions are 0 and all Kansan children are living above the poverty rate. You can hear the governor's speech here or watch the address here.
GOOD NEWS 
 
With the stock market at all times high, KPERS should report a $2 billion investment gain for 2017. This should bring the total asset level to around $19 billion and improve the funding ratio.

In 2018, U.S. Supreme Court will decide if online retailers must collect and remit state sales tax. This will level the competitive playing field between brick & mortar retailers and on-line retailers. Click here to read the story.

We have had good news on the budget numbers this fall, but it will require constraint and good management to keep Kansas moving in an upward direction.
  • Kansas has met every monthly revenue projection since June 2017. 
  • The national and state economies are improving. Consumer confidence, employment, and GDP growth all returned to healthy levels. The stock markets are at historical highs. 
  • The Rainbow Crisis Stabilization Center to receive full funding in the budget. 
  • The Senate voted to confirm 17 governor nominated appointments.
SCHOOL FINANCE
 
School finance litigation remains a big issue for the 2018 session. Considerable good faith effort was made by the legislature to comply with the Supreme Court's concerns over K-12 school funding in the 2017 session. While serving on the Select Committee on School Finance last session, I thought the legislature had fixed the school finance formula. 

In 2017, we modified Kansas tax policy to increase taxes by $600 million over a 12-month period. About half of the increase came from closing the LLC loophole. The other half came from partially rolling back the personal income tax rates effective July 1, 2017 following the deep cuts that went into effect January 1, 2013. 

I voted for the tax increase with the understanding schools would receive $200 million in additional funding in 2017, and another $100 million in 2018. The remaining additional taxes would be applied to shoring up core services: mental health, foster care, Medicaid for children, Medicaid for the frail and elderly, early childhood education, and public safety as well as propping up the Pool Money Investment Fund. The attorneys representing the schools did not agree. They argued in front of the Kansas Supreme Court that at least another $600 million would be required to satisfy their demands. The Kansas Supreme Court appears to be out of patience after dealing with school litigation off and on for the last quarter of a century. They ordered the Legislature to respond back to them by April 30th with expert studies showing a school finance structure that is adequate and funded appropriately. The studies by nationally respected outside experts are currently underway and are expected to be completed by March 15, 2018. I look forward to seeing the results of these studies. Since 2010 alone, the plaintiff's attorneys have been paid $6.1 million by schools. It is time to explore options to reduce or eliminate the perpetual cycle of conflict over school finance and end the perennial and recurrent threat of school closures by the Kansas Supreme Court.

The Governor did not wait until the study was done either. Instead of waiting on the expert studies to be completed, which would give updated guidance on structure and funding adequacy, he decided to just pay the attorneys' demands for more money. His budget has the state paying an additional $600 million over a five-year period. Unfortunately, to comply with this would put the state budget right back in a deficit. 

The Kansas Constitution does not allow a budget deficit. The projected $300.7 million deficit must be eliminated by spending cuts, tax increases, or a combination of both by FY-20. Another tax increase or an 18% across the board cut to all services would be required to get the budget balanced. There is no majority will in the Senate to pass another income tax increase. I will not support further increases in personal income tax rates.
KANCARE 2.0

Healthcare providers and beneficiaries have repeatedly expressed concerns about their ability to provide and receive the appropriate level of care as well as problems with eligibility through the clearinghouse. I, too, share these concerns.

This past Tuesday, Senate President Susan Wagle, Senate Majority Leader Jim Denning, Senate Ways and Means Chairwoman Carolyn McGinn, and Senate Public Health and Welfare Chairwoman Vicki Schmidt (all members of the State Finance Council) delivered a joint statement calling for the state to stop moving forward with their plan to make serious changes to the state's Medicaid system called KanCare.
LANSING PRISON

The State Finance Council was scheduled to meet last Thursday for an informational meeting to discuss the plan to rebuild the state's oldest and largest prison, Lansing Correctional Facility. The Administration canceled this meeting, and it has not been rescheduled at this time.
I and other legislators remain concerned about the proposed $362 million rebuild that is backed by Governor Brownback. Many legislators are concerned with the project's cost and CoreCivic, the private prison operator that would build the new Lansing facility.

The plan, as introduced, would be a 20-year, $362 million contract that would finance, design, construct, and maintain a new state prison in Lansing. Under the plan developed by KDOC and CoreCivic, the new facility would have 1,920 maximum and minimum-security beds and 512 medium security beds. Technology and design upgrades would allow the KDOC to reduce staffing from 682 to 371.

First-year payment by the state would be $14.9 million and would rise 1.9% yearly during the contracted 20-years.
HEMP LEGISLATION

On Monday and Tuesday of this past week I chaired the Senate Agriculture and Natural Resources Committee as we held hearings on S.B. 263, a bill that creates a program to research the use of industrial hemp. We received good information and comments throughout the hearings. Hemp prohibition began in 1937 in the United States. In the 2013 Farm Bill, section 7606, Legitimacy of Industrial Hemp Research was defined as distinct from marijuana. It authorized institutions of higher education or state departments of agriculture (in states that legalized hemp cultivation) to regulate and conduct research and pilot programs. The U.S. House passed the hemp amendment to the Farm Bill to allow pilot programs and research to begin on industrial hemp and determine whether hemp farming would be beneficial for American farmers and businesses. Thirty-one states have defined industrial hemp as distinct and removed barriers to its production. Each state that allows farming may  promulgate its own regulations regarding industrial hemp research and pilot programs. Production must follow state regulations.

The Department of Agriculture, alone or in coordination with a state educational institution (regent schools), may cultivate industrial hemp grown from certified seed and promote the research and development of industrial hemp.

Representatives from the Kansas Bureau of Investigation and various law enforcement officer associations spoke in opposition to the passage of H.B. 2182 in 2017. They expressed concern the bill would provide a legal defense to the possession of marijuana by a person holding an industrial hemp license. H.B. 2182 did pass on the House floor in 2017.

The Kansas Bureau of Investigation (KBI) testified neutral to S.B. 263 but was opposed to H.B. 2182.

The Bill will need good language and content to satisfy all sides of the issue before it can be passed out of committee and on to the Senate floor.
KANSAS UTILITY COSTS
The federal corporate tax cuts should reduce utility costs for everyone
 
Kansas has the highest prices for electricity in the entire Mid-Continent Region. Kansas's electricity price increases have far outpaced inflation over the last five years and have, in fact, grown three to five times faster than the pace of inflation over that time. Kansas electricity prices are approximately 25% higher than the prices in Iowa or Arkansas and are approximately 20% higher than prices in Oklahoma and Texas. Prices for electricity in the states of Nebraska and Missouri range 10-15% lower than prices in Kansas. This regional price disadvantage affects every Kansas customer, whether residential, commercial, or industrial.
On January 11, 2018, a number of large volume electric users in the state requested the Kansas Department of Commerce address the issue of noncompetitive electric prices in Kansas, as compared to the prices for electricity in surrounding states since regionally-high pricing likely affects business retention and expansion and employment expansion in Kansas.

As a separate matter, effective January 1, 2018, Congress reduced the corporate income tax rate from 35% to 21%. Kansas electric customers have prepaid utility income taxes as a part of their electric rates at the former 35% level. With the reduced federal tax rate to 21%, Kansas electric customers are owed a return of these prepaid tax amounts, which are no longer owed to the federal government. These amounts, which must be returned to Kansas electric customers, are substantial, likely totaling in the hundreds of millions of dollars.  The Citizens' Utility Ratepayer Board (CURB), as well as the Kansas Industrial Consumers Group, Inc. (KIC), have filed complaints with the Kansas Corporation Commission (KCC), demanding that these overpaid tax amounts be accounted for and returned to Kansas electric customers. The KCC will be responsible for directing the way all utility companies will pass these tax reduction savings, which have already been paid by utility customers, back to the customers, who have now overpaid

In addition to these refunds of prior over payments, current rates will need to be addressed to reflect the lower federal corporate tax rate.
As you can see, the 2018 session is off and running. Thanks for taking time to read my newsletter. I appreciate your attention.

Best Regards,
CONTACT INFORMATION
645 S 263 W
Garden Plain, KS 67050
316-535-2310