26 Mar 2023 Kansas Capitol Review – Week 11
There was frenzied committee activity inside the Kansas statehouse this week as the 2023 legislature reached its March 24 deadline for committees to meet and evaluate bills. Next week will include hours of floor debate in the House and Senate. With the legislature’s first adjournment scheduled for April 6, lawmakers contemplated numerous bills concerning rail infrastructure, personal and commercial tax policy, the state budget, public health, and much more.
Water Bank Participation in MYFA
Senate Bill 205 would amend the Kansas water banking act to authorize certain water rights in a water bank to temporarily participate in multi-year flex accounts. In a Senate Agriculture Committee hearing, Big Bend GMD5 testified that the proposed language in Section 1 would address an issue from a Kansas Attorney General’s opinion during the 2022 calendar year, and that language in Section 2 of the bill worked to partially address the issue from the AG’s opinion. 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 held a hearing on the bill. During the hearing, the Kansas Dept. of Agriculture testified in support, indicating that the bill would allow for a one-time fix for irrigators enrolled in the Central Kansas Water Bank by allowing them to enroll unused portions of their authorized water into a multi-year flex account. Big Bend GMD5 was also a proponent to the bill. On March 22, 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 when the water right is currently enrolled in a MYFA. The bill now goes to the full House for consideration. If the House passes the bill, it will be returned to the Senate where they will either concur to the changes made by the House or send the bill to a House and Senate Conference Committee.
Water Policy and New Reporting Requirements on GMDs
House Bill 2279 would amend the Groundwater Management District act to place new annual reporting and conservation action plan requirements on the districts. 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 held a hearing on the bill and then amended it before passing it out of committee to be considered by the full Senate next week. The committee amendments would do the following:
- Change from January 31 to January 25 of each year the date by which a GMD board would submit a written report to the legislature;
- Include “budget” as a topic the report to the Legislature would need to address;
- Remove certain other information the required written report would have needed to address;
- Require a GMD board report to include the most recent approved audit prepared in accordance with current law, an accounting of all assets currently held by the GMD board, the budget adopted for the current year pursuant to current law, and a detailed description of the activities of the GMD district, in addition to a detailed statement regarding expenditures in the bill;
- Require the report to summarize the action plans and activities undertaken pursuant to Section 2 of the bill beginning in January 2025;
- Remove the requirement for submitting a second annual written report to the Legislature that would have begun on January 15, 2025;
- Change from July 1, 2024, to December 31, 2024, the date by which the GMD board of each district would identify all priority areas of concern with the GMD district and set reasonable boundaries for each area of concern using data from the KGS or other source approved by the Chief Engineer;
- Remove language authorizing the Chief Engineer to grant extensions;
- Add similar aquifer conditions exist as evidenced by water level decline and water use data provided by the KGS to priority areas of concern;
- Clarify that at least every five years, each GMD board would review existing priority areas of 9- 2279 concern and update its priority areas of concern and action plan as necessary;
- Clarify that all areas within a district that have adopted a LEMA pursuant to law on July 1, 2023, would be considered to be a priority area of concern with an approved action plan in compliance with the requirements of the bill until the first action plan review;
- Establish that all areas within a GMD district that have an established IGUCA established pursuant to law on July 1, 2023, would be considered to be a priority area of concern with an approved action plan in compliance with the requirements of the bill until reviewed by the Chief Engineer pursuant to a schedule established through rules and regulations;
- Prohibit a member of a GMD board that owns, purchases, or otherwise acquires land from farming the land for profit unless the GMD board issues an RFP for farming the land; and
- Require the GMD to annually publish on the GMD’s website the budget proposed by the GMD and the GMD’s annual report, including the financial statement.
State Water Plan Funding Bill
House Bill 2302 would enhance funding for the state water plan fund by crediting 1.231 percent of current state sales tax revenues (approximately $53 million) directly to the fund. The bill would also modify the distribution of revenue into the fund and create a water technical assistance fund and a water projects grant fund for water infrastructure projects. The dedicated state sales tax revenue would be added to the current fees collected from agricultural and municipal water users. The bill would sunset in five years. Specifically, the bill would set aside the following funds, annually, from the state water plan fund for three years: $5 million to a water technical assistance fund, $15 million to a water projects grant fund, and at least $15 million to the retirement of water supply storage debt for two state reservoirs until the debt is retired. The House passed the bill 119-3. This week, the Senate Committee on Agriculture and Natural Resources amended the bill multiple times before passing it out favorably as Senate Substitute for House Bill 2302. The committee amendments would do the following:
– direct $52 million of state general funds in the current fiscal year for the state reservoir debt, freeing up the state water plan funds that the bill had set aside for that purpose ($15M annually);
– removes the sales tax transfer as the funding mechanism for the water plan and replaces it with a direct transfer of $35 million from the state general fund for fiscal years 2023 through 2027;
– returns unused funds in excess of $30 million in the state water plan to the state general fund;
– prioritizes use of stockwater fees paid into the fund for stockwater conservation projects;
– require the Director of the KWO to certify to the Director of Accounts and Reports any excess funds in the Assistance Fund when its unencumbered balance exceeds $15.0 million and, upon receipt of the certification, the Director of Accounts and Reports to transfer the certified excess amount from the Assistance Fund to the SGF; and,
– include an unincorporated area with a national park site or state historic site to places to which the KWO could offer services or provide grants for technical assistance.
The full Senate will consider the bill before it goes to a House and Senate Water Committee next week for final deliberation.
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 has been referred to the Senate Committee on Financial Institutions and Insurance which had previously passed out a Senate companion bill Senate Bill 104 favorably. These bills might be considered in a House and Senate Conference Committee next week.
Prohibiting Foreign Ownership of Real Property
Senate Bill 283 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. The Senate Judiciary Committee held a hearing on the bill. On Friday, the committee amended the bill before putting its contents into House Bill 2069, creating Senate Substitute for House Bill 2069. The committee passed the bill out favorably and it now goes to the full Senate for consideration.
Apprenticeship Tax Credit Act
HB 2292 would establish a three-year Kansas apprenticeship tax credit to encourage the development of apprenticeship programs by participating businesses. The credit would be up to $2,500 for each apprentice so employed, and the tax credit may be awarded up to 20 apprentices per year. The program would be administered by the Kansas Department of Commerce. The House passed the bill on a vote of 115-7. The Senate Commerce Committee held a hearing on the bill where Kansas Grain and Feed Association and Kansas Agribusiness Retailers Association joined other stakeholders in support of the measure. Prior to passing the bill out of committee, Senators amended the bill to cap the amount of the grant provision per year and added a provision that any unused balance would be transferred to the State General Fund. The bill could be taken up for consideration by the full Senate next week.
Point of Diversion Legislation
House Bill 2459 was introduced by Representative Kenny Titus (R-Manhattan) to amend the Kansas water appropriation act to prohibit the change of the point of diversion of a water right if such change would cause the safe yield of the source of water supply to be exceeded. A hearing in the House Committee on Water this week was cancelled and the bill is now dead for the year.
House Tax Bill
This week, the House Tax Committee considered a tax bill that included various tax cuts. After multiple amendments, the committee placed the contents of its bill into a senate bill and passed it out as House Substitute for Senate Bill 169. The bill is estimated to reduce taxes by around $500 million in state fiscal years 2024, 2025, and 2026. The bill removes the state sales tax on food and food ingredients, inserts a flat tax on individual income, lowers the corporate income tax rate, increases the residential property tax exemption, removes the social security income tax cliff, increases the individual income tax standard deduction, and lowers the bank privilege tax. The Senate has passed three tax bills that, together, would provide more than $1.1 billion in cuts to income tax, social security tax, and food sales tax. These tax bills will be debated in a House and Senate Tax Conference Committee next week.
State and Local Tax Clarification
Senate Bill 313 would clarify the determination of taxable income and the pass through of tax credits to electing pass-through entity owners for purposes of the SALT parity act. The bill was introduced under the premise that the state department of revenue was not correctly applying the SALT parity bill that was passed last year. The Senate Tax Committee advanced the bill for consideration by the full Senate. In addition, the House Tax Committee considered and advanced a companion bill House Bill 2465 to the full House for consideration.
Maximum Property Valuation Annual Increase
This week, SCR 1610 was introduced by Senator Caryn Tyson (R-Parker), Chair of the Senate Committee on Assessment and Taxation. The resolution would amend section 1 of article 11 of the Kansas Constitution to limit annual increases in real property valuations to no more than 3 percent. The bill was introduced as a means to help control the increase in ad valorem property taxes. The Senate Tax Committee held a hearing on the bill and passed it out favorably to the full Senate for consideration.
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. In 2020, 2021, and 2022 the Kansas Dept. of Transportation (KDOT) set aside a percentage of the $5 million program funds specifically for rail siding projects. This year’s approved projects were announced this week by the Governor’s office. Kansas agribusiness infrastructure has greatly benefited from this program. 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 makes it easier to administer the cost-share grant program and would dedicate $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 directly apply for program funding. KGFA joined Renew Kansas Biofuels Association, Kansas Agribusiness Retailers Association, and the Kansas Cooperative Council in supporting the measure which passed the House 117-5. The Senate Transportation Committee held a hearing on Thursday, March 16, where KGFA, Renew Kansas, and KARA served as the lead proponent on the legislation. The bill drew no opposition. On Tuesday, the committee amended the bill and passed it out of committee favorably for passage. The bill is up for debate by the Senate of the Whole on Monday.
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 storage rolling stock of 250 feet from an intersection. The Senate Transportation Committee held a hearing on the bill on March 7 where the committee chairman stood as a proponent. There was significant committee discussion on whether, and to what extent, this area of law might be preempted by federal regulations. The committee amended the bill to: (1) clarify that the 250-foot setback only applies at crossings without electronic warning signals, (2) remove Kansas Dept. of Transportation duty to serve as the inspection and enforcement agency for the bill, and (3) sunset the maximum train length provision of the bill on July 1, 2027. The bill continues to draw additional opposition from rail customers as it moves forward. The bill is up for debate by the Senate of the Whole on Monday.
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.
Electric Utility Rates
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:
- House Bill 2154 would reform the Kansas Corporation Commission by allowing for the election of commissioners and establishing a utilities regulation division in the office of the attorney general to represent and protect the collective interests of utility customers in utility rate-related proceedings. A hearing was held on the bill, and the Senate Utilities Committee held a hearing on its companion bill, Senate Bill 88.
- Senate Bill 54 allowing a 0 percent sales tax rate on commercial utilities, was passed out favorably by the Senate Tax Committee. House companion bill House Bill 2221 has not been scheduled for hearing.
- Senate Bill 68 would allow state energy producers a Right-of-First-Refusal 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 during multi-day hearings, 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.
Transmission Delivery Charges on Energy Users
House Bill 2225 was introduced in an attempt to limit Evergy’s direct recovery of costs related to electric public utility transmission projects. The House Utilities Committee passed the bill out favorably, but stakeholders were asked to work with Evergy to find a compromise position. The bill was then referred back to committee and, on Thursday, an agreed amendment was added to the bill before being passed out favorably. 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 $40M to $45 million over three years. That includes the cumulative impacts of about $10M/year in upfront savings and approximately $2 million per year in annual savings from new projects at the lower ROE. The full House voted to pass the bill favorably on a vote of 120-1. This week, the Senate Utilities Committee held a hearing on the bill and advanced it out of committee to the full Senate for consideration.
Scrap Metal Theft Reduction Act Extension
House Bill 2326 would extend 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 House passed the bill 120-1. The Senate Judiciary Committee held a hearing on the bill this week. The Committee amended the bill and then passed it out favorably for consideration by the full Senate.
Cotton Bale Secure Load Requirements
HB 2160 would exempt the transport of cotton bales from certain secured load requirements. The House passed the bill on a vote of 121-3. The bill Senate Committee on Transportation held a hearing on the bill and then amended it before passing the bill out to the full Senate for consideration.
State Preemption of Local Plastic Regulations
House Bill 2446 would prohibit cities and counties from regulating plastic and other containers. The House Committee on Federal and State Affairs held a hearing on the bill and then amended it before advancing the bill to the full House for consideration.
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 Transportation Committee held a hearing on the bill and then amended the bill to make it effective upon publication in the Kansas Register. On Wednesday, the full Senate passed the bill on a vote of 35-1. The bill now returns to the House on a motion to concur with the Senate changes, or have the bill sent to a House and Senate Conference Committee.
Eminent Domain Approval
Senate Bill 312 would require the board of county commissioners prior to the exercise of the power of eminent domain by certain public utilities. This week, 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. The bill is unlikely to advance further this year.
Other Bills We Are Monitoring:
SB 166 requiring public disclosure of a transmission line siting permit. Passed out of Senate Utilities. Blessed.
SB 311 prohibiting use of 1031 exchange sale information in property valuation. Sen Tax passed out.
SCR 1606 establishing an initiative and referendum Constitutional Amendment. No hearing.
HB 2002 various property tax valuation and notice changes. Senate committee passed out.
HB 2083 creating the KS vacant property act to prohibit municipal fees on vacant properties. Passed House/Senate Comm.
HB 2192 creating a Kansas Secretary of State website for grants, applications, awards. No hearing.
HB 2350 establishing the crime of human smuggling. Passed House, passed Sen Jud.
HB 2388 requiring licensing bodies to provide electronic credentials. Passed the House, to Senate.
HB 2436 prohibiting public contracts from giving preferential treatment based on ESG criteria. Passed the House 85-38, to Sen.
HCR 5009 amending the Kansas constitution to decrease residential assessed value for real property to 9 percent. House Tax Hearing.