Weekly Legislative Report
January 24-28, 2022
 
It was the first full week of the 2022 Legislative Session, and committees were picking up the pace. We also saw 92 new bills introduced this week as lawmakers near the first legislative deadline on Monday, when all requests for member-sponsored bill drafts by the revisor’s office must be completed.
 
Taxes
The Legislature began digging into one of this year’s hot topics – reducing or eliminating the food sales tax in Kansas. The House Taxation Committee heard two similar bills on Tuesday that would both provide a 0% state tax rate for sales of food and food ingredients, while still allowing cities and counties to levy local taxes. The bills would also discontinue the nonrefundable food sales tax credit.
 
House Bill 2484 would exempt food and food ingredients, including food sold at restaurants, from state retail sales and compensation use tax beginning on January 1, 2023. Food and food ingredients would not include alcoholic beverages or tobacco but would specifically include bottled water, candy, dietary supplements, food sold through vending machines, prepared food (food sold at restaurants), and soft drinks. House Bill 2487 would also provide a sales tax exemption for farm products sold at a farmers’ market.
 
The Senate Assessment and Taxation Committee will hear their food sales tax bills next week. That body will also consider Senate Bill 328 next week, which would provide an income tax rate of 4.75% for all individuals. Under current law, individual income tax rates are set at 3.1% for income under $15,000, 5.25% for income between $15,000 and $30,000, and at 5.7% for income $30,000 and over. SB 328 would set the individual income tax rate at 4.75% regardless of income and filing status beginning in tax year 2024.
 
APEX Economic Incentive
The Senate approved on Thursday a $4 billion new development incentive to attract an undisclosed manufacturing facility to Kansas. Senate Bill 347 creates a special tax incentive for economic development projects with at least a $1 billion investment. It would also be eligible to suppliers that sell more than $10 million worth of products to that entity.
 
Secretary of Commerce David Toland has touted this as the largest private-sector investment in Kansas history. The project is expected to bring 4,000 jobs and includes a new 3 million square foot plant, the biggest in the state. Kansas is one of two states currently being considered for the project.
 
Before sending to the full Senate, the Senate Commerce Committee added a provision to the bill that would buy down the corporate income tax rate across the board by 0.5% per year during the life of the program. The $50 million/year tax cut was added to help existing businesses while still bringing new economic development to the state. The provision also appeased some lawmakers that were lukewarm to the idea of granting such a large incentive to just this one secret entity. The bill sunsets on March 1, 2023, for legislative review.
 
The Senate passed the bill on emergency final action by a vote of 32-7 on Thursday to quickly send over to the House Commerce, Labor, and Economic Development Committee to consider this Monday, with a deadline of the Governor signing the bill no later than Thursday, February 3rd.  
 
Regulatory Reform
The Senate unanimously passed House Bill 2087 on Tuesday, a bill that better streamlines the review of proposed rules and regulations. The bill was introduced last year in response to legislation passed in 2018 that increased the oversight by the Director of Budget to ensure transparency of the economic impact of regulations proposed by state agencies.
 
The Senate’s bill triggers the Budget Director’s review when a regulation would impact the regulated community by $1 million over a two-year period. The House, however, passed the bill last year with a higher $3 million threshold. The bill is likely to be considered in a conference committee later in the session.
 
Budget Review
The House budget subcommittees held meetings on transportation, nursing homes, and foster care. The Senate budget subcommittees will begin work next week.
 
The Senate Ways and Means Committee heard from the Secretary of Corrections on staffing issues. The state’s prison system continues to face shortages, largely due to uncompetitive wages that compete with jobs in safer jobs in the private sector.
 
Wages are a constant issue for budget committees. House members heard from the Secretary of the Kansas Department of Transportation about their staffing shortages in positions from snowplow drivers to engineers. Staffing was an issue before the pandemic and continues to impact many state agencies.
 
Presentations from the Judicial Branch and the State’s public defender system also echoed problems with recruiting and retention of employees.
 
Unemployment Insurance
The House Appropriations Committee heard the Kansas Department of Labor (KDOL) on their progress to fix the unprecedented amount of fraudulent unemployment claims happening during the pandemic and the delays in processing legitimate claims. KDOL leaders reported on new technology to combat fraud and work done by agency staff to speed up the claims process. They noted there was still much work to do, but budget legislators were more supportive of the agency’s efforts than they had been in recent months.
 
In addition, both the House and Sente Commerce Committee’s heard from business representatives on the state of unemployment insurance in Kansas as well as an update from the Kansas Department of Labor during a joint meeting. There is indication of new fraudulent activity occurring in 2022 and lawmakers are keeping a close eye on that.
 
Key Hearings This Week
House Bill 2463 was heard on Wednesday in the House Health Committee. The bill would lock in place the current KanCare program through January 1, 2026. The Kansas Department of Health and Environment would be required to negotiate and extend contracts with the three managed care organizations (MCO) that administer the state’s Medicaid program, allowing the next Governor and administration the authority to enter into new MCO contracts. Currently, officials were planning to seek requests for proposals this fall, with new contracts to go into effect in January 2024. There was strong opposition during the hearing and no proponents.
 
The Senate Utilities Committee held hearings this week on two bills, Senate Bill 323 and Senate Bill 324, that would mandate strict guidelines on wind and solar leases between developers and landowners. The Senate Local Government heard a similar bill targeting the renewable energy industry, Senate Bill 325, that related to wind and solar zoning requirements for counties. A few landowners testified in support of the bills, while industry representatives strongly opposed the state interfering with local governments and individual property owners to make decisions that are in their best interests. There did not appear to be overwhelming support in either committee.
 
Looking Ahead
After the Senate passed Senate Bill 318 last week, a bill allowing for a sales tax exemption on all purchases of fencing materials and services used to enclose agricultural land, the House Taxation Committee is scheduled to hear the bill next Tuesday. SB 318 was introduced in response to the December wildfires in portions of central and western Kansas that impacted over 160,000 acres across 12 counties. The bill would also give county commissions the option to abate property taxes for all buildings and agricultural improvements that has been damaged in a state-declared disaster.
 
The Senate Financial Institutions and Insurance Committee is expected to act on Senate Bill 335 next Thursday. The bill would exempt self-funded association health plans that are federally regulated and not under the jurisdiction of the Kansas Insurance Department from the annual state premium tax.
 
House Bill 2559 was introduced in the House Agriculture Committee this week and will be heard next Thursday. The bill establishes a statutory framework to monitor for and eradicate boll weevils found in cotton crops. While cotton is one of the fastest growing commodities in the region, Kansas is the only surrounding state that does not have a formal monitoring program to detect the pest before it could devastate Kansas acres and potentially spread to cotton ginned out of state.
 
Senate Bill 199 will was introduced in the Senate Public Health and Welfare Committee last year and will be heard in the House Insurance Committee on Wednesday. The bill allows for short term health insurance policies, 6 or 12 months in duration, with not more than one renewal period. The bill was passed by the Senate Financial Institutions and Insurance Committee and approved by the Senate last year when the provisions of SB 199 were put in a conference committee report and passed by the 2021 Legislature,  but vetoed by the Governor.
 
House Bill 2518 was introduced in the House Local Government Committee and will have a hearing on Wednesday at 9:00 am. The bill amends improvement districts notification requirements to include requiring cities to mail notice by first class mail, amends the use of protest petitions and requires disclosure of the special assessment in real estate contracts and creates a buyer option to void the sale if the notice is not included in the contract.