01 May 2023 Kansas Capitol Review – Sine Die Adjournment
The 2023 Kansas legislature’s veto session began on Wednesday, April 26. Over proceeding three days, lawmakers took up a few bills for final action, passed an omnibus budget bill for the remainder of fiscal year ’23 and fiscal year ’24, and attempted to override about nineteen bills previously vetoed by Governor Laura Kelly.
Around 10:30 p.m., on Friday, April 28 the 2023 edition of the Kansas Legislature formally adjourned sine die (final day). Barring any veto by the Governor Kelly of either the omnibus budget bill or the K-12 education budget bill – which would require the legislators return for a special session – the legislature is now adjourned for the year. There is the possibility of a few interim committee hearings scheduled during the summer which we will monitor.
During the 2023 session, we reviewed and tracked each of the 470 bills introduced in the House and the 325 bills introduced in the Senate. Approximately 100 of those bills were passed by the legislature and sent to the governor, where 15 were ultimately vetoed. Please find a final summary, below, of the most relevant bills this session.
State Water Plan Funding
House Bill 2302, as introduced, would have created a new funding mechanism for the state water plan fund (SWPF) by crediting 1.23 percent of state sales tax revenues (approximately $53 million) directly to the fund. The bill directs funds to two new programs for three years: $5 million to a water technical assistance fund, and $15 million to a water projects grant fund. Before passing it as Senate Substitute for House Bill 2302, the Senate removed the sales tax funding mechanism and replaced it with annual transfer of $35 million to the SWPF from SGF. This transfer is in addition to the $8 million the SWPF currently receives from SGF and EDIF, and the $12 million in fees collected annually from agricultural and municipal water users – providing for a total SWPF funding of $55 million each year for five years. The Senate also directed an additional $52 million transfer from state general funds in fiscal year 2023 to retire debt on two state reservoirs. The bill will sunset in 5 years. Governor Laura Kelly has signed the bill into law. Last week, the legislature passed its omnibus budget for state fiscal years 2023 and 2024. In the budget, the legislature appropriated $18 million from the state water plan fund to the Kansas Water Office in fiscal year 2024.
Water Policy and New Reporting Requirements on GMDs
House Bill 2279 amends the groundwater management district act to place new annual reporting and conservation action plan requirements on the GMDs. Kansas Agribusiness Retailers Association joined other stakeholders in successfully amending the bill in the House to make it more reasonable for the GMDs. The House passed the bill as amended 116-6. The Senate Committee on Agriculture and Natural Resources further amended the bill before passing it out of committee. Find a description of the Senate amendments here. The Senate passed the bill, as amended, 35-5. The bill was placed in a conference committee to discuss the differences between the House and Senate versions. The Senate and the House passed Conference Committee Report on HB 2279 and Governor Laura Kelly signed the bill into law.
Water Bank Participation in MYFA
Senate Bill 205 amends the Kansas water banking act to authorize certain water rights in a water bank to temporarily participate in multi-year flex accounts. The language addresses an issue from a Kansas Attorney General’s opinion during the 2022 calendar year. The bill was necessary when the 2022 drought created challenges for water users within GMD5 who had utilized the water bank in prior years and had exceeded their water right’s authorized annual quantity. Those irrigators then filed applications to enroll into a multi-year flex account. After passing the Senate on a vote of 39-0, the House Water Committee amended the bill to remove criteria that a bankable water right must not currently be enrolled in an active MYFA. The amendment would allow a water right to be bankable even if the water right is currently enrolled in a MYFA. After passing the House 39-0, the Senate concurred with the House amendments. The governor signed the bill into law on Monday, April 24.
Kansas Promise Scholarship Expansion for CDL Training
House Bill 2132 expands the Kansas Promise Scholarship Act to add new eligible fields of study, including transportation and commercial driver license training. Scholarships could total $8 million this academic school year, with the program likely reaching a statutory cap of $10 million next year as interest and demand for scholarships builds. The House Education Committee amended the bill before passing it out favorably. The full House passed the bill on a vote of 124-0. The bill was then placed into Conference Committee Report on SB 123 and passed by both chambers. Governor Laura Kelly has signed the bill into law.
Apprenticeship Tax Credit
HB 2292 establishes a three-year Kansas apprenticeship tax credit to encourage the development of apprenticeship programs by participating businesses. The credit is up to $2,500 for each apprentice so employed, and may be awarded up to 20 apprentices per year. The program will be administered by the Kansas Department of Commerce. Kansas Grain and Feed Association and Kansas Agribusiness Retailers Association joined other stakeholders in support of the measure which passed the House on a vote of 115-7. The Senate amended the bill to place a cap on the amount of the grant provision per year and added a provision that any unused balance in the fund would be transferred to the state general fund. The Senate passed the bill 30-7. The bill was placed into Conference Committee Report on HB 2292 and passed by both chambers. Governor Laura Kelly has signed the bill into law.
State Budget Bill
Last week, Governor Laura Kelly signed into law House Bill 2184 – the state’s budget bill for state fiscal years 2023, 2024, and 2025. According to Kelly, the budget allows the state to continue its path of economic growth through targeted investments in workforce development, health care, and affordable housing. Among other things, the budget directs $52 million to the State Treasurer for retiring reservoir debt at Milford and Perry Lakes which will save Kansas taxpayers nearly $30 million in future interest payments; adds $600 million to the state’s Budget Stabilization Fund, increasing the fund balance to more than $1.6 billion; directs $20.5 million toward modernization of the state unemployment insurance system; transfers $50 million to the Build Kansas Matching Grant Fund for infrastructure grants to local communities; adds $200,000 to the Kansas Dept. of Agriculture for the Soil Health Initiative; and adds $5 million to the COOP Extension service account for the KSU 105 program for fiscal year 2024.
Omnibus Budget Bill
The legislature passed Conference Committee Report on SB 25 – the omnibus budget for state fiscal years 2023 and 2024. The bill passed overwhelmingly in the House and Senate and is on its way to the governor for consideration. It is estimated to produce an ending balance for state fiscal year 2024 of nearly $2.6 billion – the largest ever for the state. Among other things, the bill directs an additional $18 million to the Kansas Water Office from the State Water Plan Fund; directs an additional $5 million to KDOT for the Rail Service Improvement Fund for increased assistance to short line railroads; and provides $120 million for state employee salary adjustments. Find a bill explainer here.
New State Revenue Estimates
State revenue forecasters have added more than $237 million to the revenue estimates. The estimates increased previous estimates, made last fall, by $128 million for the current fiscal year ending June 30, 2023, and by $109 million for the end of state fiscal year 2024. These revenue estimates could result in a state ending balance of $1.9 billion this year, and an estimated $2.6 billion ending balance the following year. This would be the largest ending balance in state history.
Government Competition Tax Exemptions
Senate Bill 252 would provide property and sales tax exemptions to certain businesses located in cities where a facility owned or operated by the government competes against an establishment. Businesses qualifying for the exemptions would be limited to child care centers, entertainment businesses, exercise businesses, health clubs, recreation businesses, or restaurants. In order to qualify for the exemptions, the competing government operation would be required to have begun after the business started using the real property for the qualifying purpose. This controversial bill is the latest development in a longstanding debate over whether local governments are competing against the private sector. The bill was placed into Conference Committee Report on Senate Bill 8 which is before the governor for consideration.
State and Local Tax Clarification
House Bill 2465 would clarify the determination of taxable income and the pass through of tax credits to electing pass-through entity owners for purposes of the state and local tax (SALT) parity act. The bill was introduced under the premise that the state department of revenue was not correctly applying the SALT parity act passed last year. The House passed the bill 124-0. The Tax Conference Committee placed the contents of the bill into CCR on SB 8 which is before the governor for consideration.
Single Rate Income Tax Legislation
House Sub for Senate Bill 169 was the legislature’s major tax reduction bill this session, and made various changes to income, sales, and property taxes. The bill created a single 5.15% individual income tax rate, removed the state sales tax on food, lowered the corporate income tax rate, increased the individual income tax standard deduction with a cost-of-living adjustment, removed the social security income tax cliff, lowered the bank privilege tax, and increased the amount of appraised value of residential property exempt from the statewide school finance levy. The bill decreased state revenues by $300 million in FY 2024, $570 million in FY 2025, and $480 million in FY 2026. After passage by the House and the Senate, the bill was presented to Governor Kelly for consideration. On April 24, the governor vetoed the bill comparing it to “failed tax experiments” under previous administrations. Last week, on a vote of 26-14, the Senate failed by one vote in its attempt to override the governor’s veto.
Property Tax Valuation Notice and Appeals
House Bill 2002 was introduced to extend reimbursement from the taxpayer notification costs fund for printing and postage costs for county clerks for 2024. The bill would also modify and prescribe the contents of the revenue neutral rate hearing notice. After passing the House, the Senate amended the bill to allow property owners to make payments under protest appeals even if the property owner taxpayer had previously appealed their property valuation through an informal equalization appeal. After passing the Senate, the bill was sent to a conference committee which added in the contents of five other non-controversial bills, creating Conference Committee Report on HB 2002. The Senate passed the bill 37-0, and the House passed the bill 122-0. The measure will soon be presented to the governor for consideration.
Maximum Property Valuation Annual Increase
SCR 1611 would amend section 1 of article 11 of the Kansas Constitution to limit annual increases in real property valuations to 4 percent. The bill was introduced as a means to help control the increase in ad valorem property taxes. The bill would require a ballot question for voters to approve the measure during the next state-wide election. The Senate passed the resolution on a vote of 28-11 and it is now with the House. No further action was taken on the measure this session.
Short Line Rail Grant Program
In 2020, the legislature passed the Eisenhower Legacy Transportation Program which included a $15 million, three-year, cost-share grant program for qualified track maintenance and improvements to short line rail and rail siding. Kansas agribusinesses have greatly benefited from this program. This year, in coordination with KDOT, Kansas Grain and Feed Association introduced House Bill 2335 to restructure the Short Line Rail Improvement Fund program to combine it with KDOT’s Rail Service Improvement Fund Program. The bill dedicates $10 million annually from the state highway fund for the program. Under the bill, grain shippers and other owners of rail siding adjacent to short line rail would be able to apply for program funding. The measure passed the House 117-5, and the Senate 38-2, with only Senators Alicia Straub (R- Ellinwood) and Mark Steffen (R-Hutchinson) opposing. KGFA joined other shippers in successfully lobbying the legislature to ensure that provisions from Senate Bill 271 were not added to the bill. Governor Laura Kelly has signed the bill into law, and the legislature has appropriated the new funding for state fiscal year 2024, beginning July 1.
Maximum Train Length and Minimum Set Back on Rolling Stock
Senate Bill 271 would limit the length of trains on any main line or branch line to 8,500 feet and establish a for minimum distance for stored rolling stock of 250 feet from a crossing. While the bill drew opposition from Class 1 rail and rail customers, the Senate Transportation Committee chairman testified as a proponent. The committee amended the bill to: (1) clarify that the 250-foot setback only applies at crossings without electronic warning signals, (2) remove KDOT’s duties under the bill, and (3) sunset the maximum train length provision on July 1, 2027. The Senate passed the bill 27-13, but the House did not hold a hearing on the bill. KGFA joined other shippers in stressing their opposition to the maximum train length provisions of the bill as they would disrupt the rail transportation network and that this must remain a federally regulated issue.
Transmission Delivery Charges on Energy Users
House Bill 2225 was introduced to limit Evergy’s direct recovery of costs related to electric public utility transmission projects. The House Utilities Committee passed the bill out with an agreed amendment by Evergy and rate payer stakeholders. As amended, the bill (1) reduces Evergy’s authorized return on equity (ROE) on local transmission projects, (2) sets up a project review process at the KCC, and (3) requires Evergy to submit testimony on competitive rates and impacts on economic development during any rate case. The major consumer concession was allowing Evergy to continue to assess annual increases through its transmission delivery charge (TDC). The KCC estimates the bill will provide ratepayer savings of $40 million to $45 million over three years. That includes the cumulative impacts of about $10 million per year in upfront savings and approximately $2 million per year in annual savings from new projects at the lower ROE. The House passed the bill on a vote of 120-1, and the Senate passed the bill on a vote of 37-2. Governor Laura Kelly has signed the bill into law.
Retailer Collection of Credit Card Fees
Kansas law prohibits the seller or lessor in a retail sales or lease transaction from imposing a surcharge on a person who elects to use a credit or debit card to make the purchase. House Bill 2133 would eliminate this prohibition and allow the imposition of the surcharge. Kansas Grain and Feed Association and Kansas Agribusiness Retailers Association supported the bill which passed the House on a vote of 87-35. The bill was referred to the Senate Committee on Financial Institutions and Insurance which had previously passed out a Senate companion bill Senate Bill 104 favorably. No further action was taken on these bills this year.
Prohibiting Foreign Ownership of Real Property
Senate Bill 283, as introduced, would prohibit the future conveyance of real property in Kansas to “foreign adversaries”, as the term is defined by federal law, beginning on July 1, 2023. This issue is a high priority item of new Kansas Attorney General Kris Kobach, who stood as a proponent to the bill. The Senate Judiciary Committee held a hearing on the bill and amended it before putting the contents of the bill into House Bill 2069, creating Senate Substitute for House Bill 2069. While no further action was taken on the bill this session, similar legislation was passed this year by the State of Texas.
Electric Utility Rates and the Right of First Refusal
Kansas has the highest energy rates in our region, and multiple bills have been introduced to address high electric utility rates while ensuring reliable service. This year, Senate Bill 68 was introduced by state energy producers to provide them with a Right-of-First-Refusal for projects to build out new electric transmission line assets in the state. Renew Kansas, Kansas Grain and Feed Association, and Kansas Agribusiness Retailers Association joined other commercial and residential utility rate payers in opposing the measure arguing that the bill would remove competition from the build process and result in higher electric energy rates. The Senate Utilities Committee advanced the bill out of committee, but the bill has not been brought up for debate by the full Senate. The bill is likely to be discussed during an energy and utilities interim committee meeting this summer. The Iowa Supreme Court recently upheld a temporary injunction against a similar law in that state finding that the law was likely to be found in violation of Iowa’s state constitution.
Third-Party Funded Litigation
Senate Bill 74 would provide for joint liability of costs for third-party funded litigants and also allow for sanctions on third-party funded litigants. The bill would also require certain discovery disclosures and payment of certain costs for nonparty subpoenas. The bill was heard in the Senate Judiciary Committee, but no further action was taken on the bill this session.
Scrap Metal Theft Reduction Act Extension
House Bill 2326 extends the sunset date on the current scrap metal theft reduction act and clarify that catalytic converters are covered by the act. Kansas Grain and Feed Association, Kansas Agribusiness Retailers Association, and Renew Kansas Biofuels Association joined other affected industries in supporting the measure. Agribusiness groups supported the initial passage of the measure when it was passed five years ago. The bill passed the House and Senate, and Governor Laura Kelly signed the bill into law.
Cotton Bale Secure Load Requirements
HB 2160 exempts the transport of cotton bales from certain secured load requirements. The House passed the bill 121-3 and the Senate passed the bill 40-0. Governor Laura Kelly signed the bill into law.
State Preemption of Local Plastic Regulations
House Bill 2446 would prohibit cities and counties from regulating plastic and other containers designed for the consumption, transportation, or protection of merchandise. The House amended the bill before passing it 72-51. No further action was taken on the bill this session.
State Preemption of Regulation Lawful Products or Services
House Bill 2447 would prohibit cities and counties from banning the sale of products or services otherwise allowed by state law. The House Commerce Committee amended the bill to narrow its scope by excluding sales of services from the prohibition and to otherwise limit the prohibition as it relates to sales of products. The bill did not advance, and no further action was taken on the bill this session.
Motor Carrier Independent Driver Status
House Bill 2020 was introduced to clarify that the employment status of a driver of a motor carrier does not change as a result of the inclusion of safety improvements made to the vehicle. The House passed the bill 122-0. The Senate amended the bill and then passed the bill, as amended, 35-1. The bill was placed into Conference Committee Report on HB 2020 before final passage, and Governor Laura Kelly signed the bill into law.
House Bill 2401 would (1) define the “benefit year” and “temporary unemployment” in the employment security law, (2) require electronic filing of reports for employers with 25 or more employees, and (3) extend the time required for establishment of a new account due to a business acquisition. The House Commerce Committee amended the bill by adding in language from House Bill 2333 that would allow for extensions of temporary unemployment for up to 12 weeks. The House passed the bill 119-4, but the bill did not advance further. Last week, however, proviso language was inserted into the omnibus budget bill, CCR on Senate Bill 25, which authorizes the Kansas Department of Labor to (1) recalculate the rate of both employers in a full or partial successorship, pursuant to K.S.A. 44-710a(b)(4)(A), on the first day of the next calendar year following the date of transfer of trade or business; and (2) determine the benefit year, including any subsequent benefit year, under K.S.A. 44-703(d), with respect to an individual as beginning with the Sunday of the first week for which such individual files a valid claim for benefits. The omnibus budget bill has been presented to Governor Laura Kelly for consideration.
Workers Compensation Permanent Disability Benefit
The Senate Commerce Committee held a hearing on Senate Bill 38, a bill that would increase the maximum Kansas workers compensation benefits payable by an employer for permanent total disability suffered by an injured employee. Under current law, the maximum workers compensation benefit that is payable by an employer to an employee for permanent total disability is $155,000. SB 38 would increase the amount to $350,000. The bill would take effect upon its publication in the Kansas Register. According to the Department of Administration, permanent total disability is paid out over time using an average weekly wage up to the statutory cap. Using the maximum average weekly wage, it would not reach $155,001 in either FY 2023 or FY 2024. It was understood that the bill was intended to initiate conversations between labor and industry. No further action on the bill was taken this year.
ADA Website Access Abusive Litigation
S Sub for House Bill 2016 enacts the Act Against Abusive Access Litigation to create a civil action for determining whether litigation that alleges any website access violation under the federal Americans with Disabilities Act (ADA) or similar law constitutes abusive litigation and authorize penalties for such abusive litigation. The House passed the bill on a vote of 122-0. The Senate amended the bill before passing it 33-5. The House concurred with the Senate amendments, and Governor Laura Kelly signed the bill into law.
Eminent Domain Approval by County Commission
Senate Bill 312 would require the board of county commissioners prior to the exercise of the power of eminent domain by certain public utilities. The Senate Committee on Local Government held a hearing on the bill, where Kansas Farm Bureau and Kansas Livestock Association testified as proponents to the bill along with Representative Carrie Barth (R-Baldwin City) and many private citizens. Standing in opposition to the bill were ITC Great Plains, Polsinelli Energy Practice Group, and Kansas Power Alliance. While the bill is unlikely to advance further this year, it allowed the proponents to place themselves on the record as standing in strong opposition to any expansion of eminent domain powers in the state. In addition, this issue may be discussed during an energy and utilities interim committee meeting this summer.
Prohibiting Mandatory ESG Criteria in State Contracts
As introduced, Senate Bill 291 enacts the Kansas public investments and contracts protection act concerning environmental, social and governance (ESG) criteria. The bill prohibits the state and political subdivisions from giving preferential treatment to or discriminating against companies based on such ESG criteria in procuring or letting contracts, requires KPERS fiduciaries to act solely in the financial interest of the participants and beneficiaries of the system, restricts state agencies from adopting ESG criteria or requiring any person or business to operate in accordance with such criteria, and directs registered investment advisers to provide ESG criteria notice to clients and providing for enforcement of such act by the attorney general. The bill language was placed into Conference Committee Report on House Bill 2100. The bill passed both chambers and was presented to Governor Laura Kelly for consideration. On Tuesday, April 25 the bill became law without the governor’s signature.
Municipal Fees on Vacant Properties
House Bill 2083 would amend the Kansas vacant property act to prohibit municipalities from imposing any fees or registration requirements on unoccupied commercial or residential property. The bill passed the House on a vote of 87-36. The bill was passed out of the Senate Local Government Committee and was debated by the full Senate before a motion was made and passed to send the bill back to committee. No further action on the bill was taken this year.
HB 2350 establishes the crime of human smuggling and aggravated human smuggling and creates penalties for such activities. The bill passed the House and then was amended and passed by the Senate. The bill was placed into Conference Committee Report on HB 2350 and then passed in both chambers. Upon consideration, Governor Laura Kelly vetoed the bill. On motion to override the governor’s veto, the House passed the bill 85-39, and the Senate passed the bill 30-9, overriding the veto.
Initiative and Referendum
Senate Concurrent Resolution 1606 was introduced to amend the Kansas constitution to establish an initiative and referendum process in the state. The bill did not receive a hearing.