Weekly Legislative Report
February 15-19, 2021
The extreme cold temperatures kept the Kansas Statehouse dark and quiet for the start of the week. A few committees met virtually, but most were cancelled both Monday and Tuesday. With business pushed back two days, committee chairs rushed to get in as many hearings as they could the rest of the week. The last day for non-exempt committees to meet is next Friday, February 26th. Then its floor work up until Turnaround on March 5th, which marks the half-way point in the legislative session. All non-exempt bills that have not passed their House of Origin by Turnaround are dead for the year.
The Senate Commerce Committee spent three days this week looking at Senate Bill 177, the unemployment insurance (UI) reform companion bill to House Bill 2196 that was heard last week.
During the hearing, a coalition of business groups testified that Kansas is ranked second in the country with roughly $700 million in fraudulent UI claims. The legislation they have proposed establishes a new, fixed table structure each year that will bring the trust fund up to the Kansas Department of Labor’s (KDOL) solvency standards. The agency reported that their new 2-tiered identity technology has stopped thousands of identity theft attempts since it launched last week.
A big piece of the debate remains on whether businesses or the state should be responsible for replenishing the millions of dollars lost from fraud. Both committees plan to work their separate bills next week. However, in the meantime, it is likely that leaders will work together to amend and advance just one bill to speed up the process.
A second bill that legalizes sports wagering in Kansas was heard this week in the House Federal and State Affairs Committee. House Bill 2199 would authorize the state’s four casinos to contract with the Kansas Lottery to manage and operate in person and online sports betting. The bill would also allow racetracks and 1,200 convenience store retailers to participate, which is different than the Senate’s proposal in Senate Bill 84.
Another difference is the amount of tax revenue that would be collected by the state. HB 2199 as written would tax in-person betting at 14% and bets made online at 20%. This is projected to generate roughly $4.5 million in state tax revenue. Under SB 84, Kansas would receive 7.5% of bets placed at the casinos and 10% of online wagering, totaling roughly $2.25 million for the state coffers.
Tax Incentive Programs
The Senate passed two bills this week that make changes to current tax incentive programs for businesses.
Senate Bill 65 would no longer require businesses to participate in either the Kansas Industrial Training (KIT) or Kansas Industrial Retraining (KIR) programs to be eligible for the High-Performance Incentive Program (HPIP) tax credit. The bill passed by a vote of 38-0.
HPIP provides a 10% tax credit to qualifying employers who pay above average wages and make a capital investment of at least $50,000 at the company’s facility. In the five metro counties of Douglas, Johnson, Sedgwick, Shawnee and Wyandotte, the threshold is $1 million. The tax credit has a 16-year carryforward provided facilities can requalify for HPIP.
The second bill, Senate Bill 66, was much more controversial and passed only by a vote of 26-12. The bill extends and expands the expiring Kansas Angel Investor Tax Credit through 2026.
Lawmakers have been critical of the program after a legislative post audit found that participating businesses did not always produce the number of jobs expected. The program provides a tax credit to individuals or companies that invest in small, innovative startup companies in Kansas. Several legislators expressed frustration with the Kansas Department of Commerce during the Senate debate for not providing data that proves the program has shown success.
SB 66 also increases the tax credit received from a single investment to $100,000 from $50,000, increases the total yearly tax credits allowed to $350,000 from $250,000, and allows an investor to seek a tax credit up to 50% of their investment. The bill also no longer requires the business to stay in Kansas for 10 years after they receive the investment.
Tax on Digital Goods
Lawmakers continued the debate on whether to impose sales tax on digital goods such as audio books, Netflix and other streaming services. The House Taxation Committee heard House Bill 2230 this week, which would require sales taxes to be collected from all sales of digital property and subscription services beginning on July 1 of this year.
The Kansas Department of Revenue reports that Kansas is one of only 17 states that do not tax digital products. They estimate that HB 2230 would raise $50.9 million in the first year. While most agree that this bill resolves a fairness issue and levels the playing field between brick-and-mortar businesses and online retailers, there is some disagreement on how the additional revenue should be used to provide tax breaks for Kansans.
Next week, the House Financial Institutions and Rural Development Committee will consider a bill that makes several reforms to payday loans offered in Kansas. House Bill 2189 would cap payday loan interest rates at 36% and allow for fees (current APR rate can be as high as 391%) and would allow installment payments over months rather than requiring the full loan to be paid off within 15-30 days.
The bill is backed by Kansans for Payday Loan Reform that is part of a national movement to reform payday loan policies in several states. Members include faith organizations, labor, and community interest’s groups from throughout Kansas. Reforms like those in HB 2189 have been passed most recently in Ohio, Colorado, and Virginia while Nebraska last year passed by ballot initiative a flat 36% APR.
Workforce Development Funding
The House Higher Education Budget Committee met this week to consider Governor Laura Kelly’s proposed budget for higher education in Kansas. During committee deliberations, several legislators scrutinized regent universities for continued bloated budgets and duplicative programs. The committee voted to approve the Governor’s proposed 5.5% reduction in state aid to the Board of Regents and instead agreed to direct $10.4 million to 19 community colleges and six technical colleges for workforce development courses taken by high school students.
On Thursday, the full Senate was scheduled to work a Senate Resolution to approve ERO 48, moving Kansas Tourism back to the Kansas Department of Commerce. However, the Senate did not take up the resolution. The Legislature has 60 days to act on an ERO, and if no action is taken the ERO becomes effective. Action is not anticipated on the ERO in either Chamber and the ERO is expected to take effect thought non-action of the House and Senate.
State Budget Review
Weather shortened the week for budget action, but there was movement in the process. The Senate discussed the Dept. of Wildlife Parks and Tourism (KDWPT) budget and the need to pay for flood damage repair at the state parks. KDWPT has taken care of most of the major damage and they are optimistic about the park attendance this year.
In a change this year, the Senate Commerce Committee is charged with reviewing the Kansas Department of Commerce budget, which this year now contains the Tourism budget. On Friday, the Senate Commerce committee worked the budget and kicked it out after some amendments were made. It now moves to the Ways and Means committee and should be worked next week.
The Senate supported the Governor’s state hospital budget recommendations while the House is looking at more funding for salaries and the use of facilities. This will likely be a point of contention during budget negotiations.
The House Budget Committee expressed support for continued funding for tech ed programs and proposed that the State’s Regents four colleges refund tuition for classes during COVID-19. There is continued frustration about remote classes being effective and worth the cost of regular tuition.
Other Bills to Note
· House Bill 2242 was heard on Wednesday in the House Insurance and Pensions Committee. The bill increases the percentage amount the state fire marshal may levy on fire insurance company premiums caused by fire business being transacted in Kansas. The industry opposes the bill and the Fire Marshall’s attempt to raise taxes on insurance companies to increase agency funding.
· House Bill 2261 and Senate Bill 175 were heard this week in their respective chamber’s health committees. The bills enact the rural emergency hospital act to provide for the licensure of rural emergency hospitals. The House Health and Human Services Committee also passed out their bill on Wednesday.
· Most of the bills introduced by the Kansas Insurance Department this year have all passed out of committee and are awaiting floor work next week.