February 20, 2018 Legislative Update

On Tuesday, the Topeka Chamber, the Wichita Independent Business Association and the National Federation of Independent Business co-hosted a small business day at the Statehouse. Small business owners from across the state, including several members of the Chamber’s Small Business Council, gathered to hear from Senate President Susan Wagle, House Speaker Ron Ryckman, Senator Taxation Chair and 2^nd District Congressional Candidate Caryn Tyson and Governor Jeff Colyer. Attendees learned about the school finance litigation and the legislature’s possible response to it. They also heard the new governor’s perspective on what it will take to grow Kansas’ economy in the future. Key on his mind, as on every business owners’: developing a skilled workforce for the jobs of the future.

 

Salina businessman, Tracey Mann, was sworn in as Kansas’ new Lt. Governor last Wednesday at the Statehouse. His run for Congress in 2010, though unsuccessful, gave him name recognition in western Kansas’ 1st Congressional district which ought to be an asset to Governor Colyer’s gubernatorial campaign next year.

 

Last Wednesday, a joint meeting of the House and Senate Taxation Committees heard a report from economists at the Department of Revenue estimating the state may receive as much as $137 M in additional revenue this year due to the federal tax bill passed in December. That number could increase to $179.9 MM for FY 2020 and $187.7 MM for FY 2021 depending on how taxpayers respond to the new federal law. Most of the projected income comes from individual taxpayers who will now be subject to increased limitations for certain charitable deductions and limitations on the deduction for state and local taxes and for qualified mortgage interest. Some of the revenue is estimated to come from businesses with foreign holdings.

 

The good news is that money will now become embedded in the budget for the upcoming fiscal year and should increase cash available, mainly, for K-12 school funding. The additional revenue also takes the pressure off of raising property or other taxes to finance schools. On the other hand, legislators are already discussing whether attempts should be made to force certain businesses which will face a lower federal tax burden to return such a “windfall” to taxpayers. In the case of regulated utilities, that is quite a bit easier said than done given that such entities can only set or change their rates after exhaustive regulatory proceedings.

 

Yesterday, the House Taxation Committee heard about House Bill 2572 which creates a joint legislative committee on transparency in STAR Bonds, Rural Opportunity Zones, PEAK, the job creation fund, and certain property tax exemptions. Under the bill, the ten-member committee, five members each from the House and Senate, would advise on what information should and should not be available. 

 

Last week, the Senate Commerce Committee approved a bill extending the time period for companies to utilize tax credits they have earned under the High Performance Incentive Program (HPIP). Currently, HPIP credits can be carried forward for 16 years. Under Senate 334, 75 percent of tax credits which are unused after 16 years could be carried forward indefinitely, provided that only 25 percent of the credits could be claimed in any one tax year. The bill could be debated this week on the Senate floor.

Last week, the Senate Commerce Committee also passed-out a bill to restore businesses’ ability to deduct as an expense the costs of certain kinds of tangible property and computer software. Governor Brownback pushed for expensing as a form of economic development incentive back in 2011, but the incentive was eliminated in 2012 in conjunction with the larger effort to reduce or eliminate income tax for small businesses. Now that most Kansas businesses are paying income tax to the state again, following last year’s repeal of the exemption for pass-through business entities, the expensing measure is again a highly relevant incentive.

On Wednesday, the Senate Public Health and Welfare Committee held a hearing on this year’s Medicaid Expansion bill. The Topeka Chamber testified in favor, as did the METL coalition and many others. A similar bill passed the legislature last year but was vetoed by Governor Brownback. The Bridge to A Healthier Kansas expands Medicaid eligibility to households with incomes below 138 percent of the federal poverty level. This year’s bill is different from last year in that it requires able-bodied adults in Medicaid to work a minimum of 20 hours each week or be enrolled in a workforce training program. Governor Colyer has not been as expressive in his opposition to Medicaid Expansion as was his predecessor but, as far as observers can tell, the new governor is likely to veto to measure again. For this reason, Senate leadership is said to be considering whether to even allow a Medicaid Expansion bill to be debated on the floor of the Senate. Proponents will continue to apply pressure.

 

This Friday, Professor Dr. Lori L. Taylor of Texas A&M, who has been hired to conduct a cost study of K-12 education in Kansas, will meet with a select group of lawmakers to discuss her findings to date. The Kansas Supreme Court has based its rulings about the inadequacy of K-12 school funding on a similar study the legislature commissioned in 2002 by Augenblick and Myers. Since the legislature has seldom if ever funded schools at the level suggested by its own consultant, the court has consistently concluded that the funding must, therefore, be inadequate. The legislature hired Dr. Taylor in hopes that she will bring new facts to the court about what can constitute adequate funding for schools. Her final report will be available Mar. 15.

 

This Friday is the deadline for the House and Senate to pass most of the bills before them and send them across the Statehouse to the other chamber. This is called the “turnaround.” Expect a great deal of debate on the floor of each body through Thursday night. Lawmakers will head home on Friday and will return, after a short break, next Wednesday, Feb. 28.

 

At its first quarterly meeting of 2018, the Board of Directors of the Greater Topeka Chamber of Commerce considered and adopted a range of policy statements which have been developed in conjunction with the Coalition of Local Chambers. The Coalition is an ad hoc group of 20-odd local chambers from across Kansas which speak with one voice on such issues as: