March 4th, 2019 Newsletter
This regular newsletter keeps you in touch with news and developments in the Kansas legislature. In this and all newsletters, I shall be reporting decisions and discussions taking place in the legislature that impact my constituents, and all Kansans. As your Kansas Senator, I encourage you to reach out to me and share your concerns and questions. You can reach me at Jim.Denning@Senate.KS.Gov or call my office at 785-296-2497.
Fast Facts
Johnson County Economy Remains Strong (Source: CERI)
  • Home Sales
    • 785 per month
  • Home Average Selling Price
    • $347k, up 18% over last year
  • Retail Sales
    • Averaging $1.3 billion per month
  • Residents Employed
    • 329k, 2.7% increase over last year
  • Unemployment Rate
    • 2.6% vs 3.8% in KCMO
Turnaround

Last week was Turnaround week in the statehouse. Turnaround is considered the half-way point of the legislative session. Dozens of bills were traded off between the House and Senate. Each Chamber will now take up renewed committee work and debate on these bills.
 
We will continue addressing a number of major issues when we return to Topeka for the second half of session. We must ensure that the tax savings from the federal tax cuts are passed on to Kansas taxpayers as intended, not used to expand government spending. We will also complete our work on school funding and the remaining State budget.
Senate Bill 9: $115 Million Payment to KPERS
100% of payment applied to the school group
SB 9 makes the KPERS payment skipped over last year. The bill was sponsored by 18 senators. It passed both the Senate and House unanimously. It is now on Governor Kelly's desk awaiting her signature. The entire $115M KPERS payment will be credited to the school group. The school group has the lowest funded ratio at 61.6%, well below the total KPERS funded ratio of 68.4%. A 60% or less funded ratio is considered critical code red status by pension standards.
 
Making the payment will result in fiscal year (FY) - 19 payments meeting the actuarial required contribution. It will be the first time this has occurred in 25 years. Making this payment sets the course for all future payments to be at the actuarial rate. KPERS reported that postponing the payment costs $630K monthly or approximately $20K per day.
 
Please see graph below. Making this payment is important and historic. The actuarial rate is met, the funded ratio could increase to 70%, another milestone accomplishment. Future payments beginning in FY-20 will only incrementally increase, while significantly reducing the unfunded liability on an annual basis. It is like the last 10 years of a 30-year mortgage where the majority of the payment goes towards reducing principle rather than just paying interest.

Senate Bill 22
Allows Kansas taxpayers to continue to itemize their tax returns
The Senate passed SB-22 a few weeks ago and sent on to the House. SB-22 is not a tax cut. It must pass to avoid an unintended tax increase. The senate version had two main components.
 
The simple part of the bill would allow Kansas filers to take the new federal standard deduction but still reserve the option of itemizing their Kansas returns. When Congress made changes to the federal tax code last year, it triggered the need for states - like Kansas - to take action so that families in our state wouldn't be penalized. That's what this bill is about. If we don't act, these taxpayers will receive a tax increase as a result of no longer being able to itemize their mortgage interest, property taxes, charitable contributions, and health care expenses on their Kansas tax form. For some, the extra tax could be similar to a car payment or a month's groceries.
  • For Individuals - adjusts the Kansas tax code so that Kansans with itemized deductions that total between $7,000 and $24,000 can continue to itemize on their state income taxes even if they no longer itemize on their federal income taxes. Some middle-income tax filers might not itemize at the federal level this year due to recent changes Congress made to the federal tax code to raise the standard deduction. Without this bill, these middle-income tax filers would no longer be able to itemize at the state level, triggering a higher state income tax liability for these families.
The complex part of the bill is with repatriation and global intangible low-taxed income at the corporate level. Neither have previously been taxed in Kansas.
  • For multi-national companies - clarifies language in the Kansas tax code so that changes in the federal tax code do not trigger unintended tax hikes at the state level. Without this bill, these Kansas companies would be subjected to additional taxes at the state level, making Kansas a more expensive state for businesses to operate in. Kansas is one of a handful of states who has not addressed this new international tax phenomenon. Missouri has already addressed this and will not add this tax. We need to act to stay competitive with Missouri and other neighboring states.
In Committee, the House added two major additions to SB-22. The first addition is a 1% reduction on sales tax on food. This was a major campaign promise made by Governor Kelly. The second addition was language to tax purchases on the internet similar to the way the purchases are taxed locally. This is seen as a fairness issue and helps with the fiscal note associated with lowering sales tax on food purchases by 1%. The House will debate SB22 on their floor in the next week or so.
 
Tax rates remain the same, that is to say SB22 does not modify either individual or corporate income tax rates.

Individual tax rates remain unchanged from July 1, 2017.


Corporate tax rates remain unchanged.
  • 4% up to first $50K
  • 3% surcharge on earnings above $50K
K-12 School Funding
Supreme Court's latest demand for more funding
The legislature went through the transparent legislative process and passed SB19 in 2017, and SB423 and SB61 in 2018, providing schools more than $1 billion dollars in new money. This was the legislatures attempt to address the lawsuit the Supreme Court ruled on against the State.
 
I voted for SB19, SB61, and the Senate version of SB423. A thumbnail sketch of the legislative attempt to satisfy the Supreme Court's demand for additional K-12 funding is below.


The KS Supreme Court ruled over the summer that this was still not enough money and demanded 1/3 more, or about $360 million. The court indicated this was for inflation cost not included in the prior legislation. The Kansas State Board of Education interpreted this to be $90M additional school funding in FY-20 with the $90M remaining constant for the next 3 years, totally $360 million. Governor Kelly put this amount in her FY-20 and FY-21 budget.
 
The Senate has Governor Kelly's school inflation budget addressing the litigation in SB 142 which will be heard and worked in Senate Select Committee on Education Finance. The Senate committee will be working on school finance when we return following Turnaround.
High Utility Rates in Kansas
Rates in Kansas are 30% higher than surrounding states

High electric rates in Kansas continue to be a hot topic in Topeka and bills are likely to soon see action in the Senate.   A coalition of energy consumers, from hospitals and schools to businesses and renewable energy advocates, are negotiating with investor owned utility companies (IOU) on Senate Bill 69, which would require a comprehensive study of electric rates and provide solutions to lower rates in the future. Senate Bill 24 and Senate Bill 126 provide for the immediate reduction in Kansas electric rates. The chart below clearly shows Kansas utility rates are out of line.


Following the Kansas Legislature
You can view video streaming of both chambers via the Kansas Legislature YouTube page. In addition, many committees are now audio streamed. The Kansas Legislature website is easy use with Senate and House calendars and journals as well as the rosters of both chambers. 

Here are the relevant links:

Capitol Office
300 S. W. 10th Street, Room 330-E
Topeka, KS 66612
785.296.2497
jim.denning@senate.ks.gov
Overland Park
8416 W. 115th Street
Overland Park, KS 66210
913.345.9416


Paid for by Jim Denning for Kansas Senate - Kathy Vance, Treasurer
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