AEP

2008 LEGISLATIVE UPDATE

Bill Tracker
May 14, 2008

Legislative Wrap-Up

The Legislature returned for eight days starting April 30. The major issues of the session were still unresolved: immigration, the Holcomb power plant, health care, taxes and the budget. After eight days, the Legislature did nothing on immigration, lost ground on the veto override attempt on the Holcomb power plant, tinkered around the edges of health care and taxes and passed a budget that spends $380 million more than the state will bring in.

The late-night, start and stop session had plenty of drama, but in the end failed to accomplish most Legislators' stated goals.

Ethanol Producer Incentive Fund

The Kansas Department of Revenue has agreed to transition the ethanol producer incentive fund from a quarterly program to an annual program. Under the current system, ethanol plants report quarterly on their production and are paid up to 7.5 cents per gallon of production on the first 15 million gallons in a year for seven years. The total amount of money in the fund is $3.5 million, which is not enough to cover all of the payments to ethanol plants without prorating the fund. Since the fiscal year starts on July 1, plants that originally began producing in the 3rd or 4th quarter of the calendar year are less likely to be prorated than plants that started in the 1st or 2nd quarter.

The KAEP board decided this year to request legislation or an administrative change to make all payments once a year. This change will reduce the amount any individual plant is prorated. In addition to fairness for members of the industry, it also allows the association to seek additional revenue based on more precise fund balances. We will know exactly how much additional funding is needed to prevent prorating the fund.

Each of the last three years, the Governor has added $1 million to the $3.5 million through a Governor’s Budget Amendment. The last two years, the Legislature has agreed to the funding. However, this year the Legislature stripped the additional funding from the budget during the debate about the Omnibus budget. Virtually all new spending that was not for social services was removed from the final budget due to the unexpected drop in revenues. The biodiesel incentive fund was stripped of all of its funding. KAEP managed to keep the $3.5 million for the fund, but the Legislature would not agree to increase the funding for ethanol while cutting funding for everyone else.

Since the Department of Revenue is changing the payout schedule for the state’s 2009 Fiscal Year, we believe the $3.5 million will be sufficient to prevent any prorating of the fund this year. This year, ethanol plants will report their production quarterly, but the payment will not be made until the end of the 2009 Fiscal Year. The fund should have enough money in it at that time to cover the growth of the program.

Alternative Fuel Vehicle Tax Credit

The Kansas House passed legislation this year that would have radically changed the alternative fuel vehicle tax credit. The current $750 tax credit is claimed by an individual who purchases a Flex Fuel Vehicle (FFV) and collects receipts for 500 gallons of E-85 in a year. Less than 1% of FFV buyers take advantage of the credit.

KAEP worked with the Kansas Automobile Dealers Association and the Petroleum Marketers of Kansas on a proposal that would substitute the $750 income tax credit with a $500 debit card that could only be used to purchase E-85. This proposal died in the tax conference committee due to the budget concerns. The innovative approach is one that would guarantee that all FFV owners would seek out E-85 fueling stations and purchase the fuel. The increased demand could help spur fueling stations to add E-85 or blender pumps.

KAEP will seek funding for this proposal from the Kansas Bioscience Authority’s ethanol working group.

Immigration

Several bills were introduced this year to reform immigration at the state level. Unfortunately, the bills did not only crack down on businesses that intentionally hired illegal immigrants. The bills required every business or farm that hired anyone to use the federal e-verify system to check their immigration status. Failure to follow the new mandate without making mistakes, would result in a loss of every license and permit held by the business. The penalties applied even if the business in question never hired an illegal immigrant. They could be punished for simply failing to follow a new set of state hiring mandates, essentially paperwork violations. The bills also would make businesses responsible for every other business they interact with. The new paperwork would require sworn affidavits to the Secretary of State that you are properly following the new hiring mandates. Sworn affidavits to any state agency that you contract with that you are following the mandates and that each contractor that you do business with is following the mandates. Sworn affidavits would be required with your tax returns that you are following the mandates and that each business that you are claiming a business expense for contracting with also is following the mandates. Penalties that applied for mistakes included losing all legitimate business deductions and possibly all permits and licenses. Multiple violations would prohibit you from ever doing business in the state again.

We worked with almost 40 other associations in a business and ag coalition to oppose these bills and come up with a reasonable solution. After lengthy debates in committees in the House and Senate and on the floor of both chambers, both the House and Senate passed legislation acceptable to the business coalition. The final package would have cracked down on businesses that repeatedly and intentionally hire illegal aliens. It would have cracked down on those that steal or create, sell and use false or identification.

After several attempts, the House of Representatives failed to muster the votes necessary to debate the final business-friendly package. In the end, no bill passed and the issue will remain until next year. It was always clear that several legislators saw this as a wedge issue for the elections and a solution would not have been as beneficial as the campaign issue.

KAEP's goal through the entire process was to not allow legislation to pass that would unfairly target our members and put their businesses at risk for inadvertent paperwork violations. We supported reasonable attempts to reform immigration laws in Kansas, but ultimately no bill is a victory for the association.

Corporate Taxes

The Legislature backed away from attempts to make major changes to the tax code, but KAEP's goal of making sure any changes to the corporate tax code that increased revenue to the state was offset by corporate rate tax cuts was achieved. The Legislature did pass a corporate tax rate reduction that will be phased in over three years. The rate will drop from the current 7.35% to 7.1% in 2008; 7.05% in 2009 and 2010; and 7.0% in 2011. The revenue is offset by making Kansas the final state to include the functional test for out of state corporations when they determine business / non-business income. Every other state with a corporate income tax figures theirs the same way and most corporations doing business in Kansas already elect that method. It is a minor tweak to the tax code that only effects an out-of-state corporation that has income from the sale of assets within Kansas that is not normally considered part of their regular business.

Attempts to change the HPIP tax credits to make them more streamlined failed. The Administration wanted to streamline the credits by reducing the number of entities that qualified for them. With the budget problems the state is currently having, the Legislature could not afford to improve the effectiveness of these credits.

CO2 Regulation / Holcomb

KAEP joined several other business, ag and labor groups in an attempt to override the decision of KDHE Secretary Rod Bremby that prevented the construction of two coal-fired electric plants in Holcomb. Bremby denied the permits on the grounds that CO2 emissions contribute to global warming despite the fact that no state or federal law or regulation listed CO2 as a pollutant or gave him the authority to regulate it. KAEP is concerned about the precedent set from having a state agency use its emergency powers to unilaterally change the laws of the state without notice, hearings or any discernible standards.

The Legislature passed three bills that would allow the plants to be built. The Governor vetoed two of them and will certainly veto the 3rd when it reaches her desk. The Senate twice overrode the Governor and the House twice failed to override. At various times, the House has mustered 83 of the 84 votes necessary and a handful of legislators have expressed a willingness to help. However, so far they have not been able to get the 2/3 majority required. They will have one last opportunity on May 29 when the Legislature returns for its formal adjournment.

Commodity Commission Check-offs

KAEP again supported attempts by the Kansas Wheat Association and eventually, the Soybean, Corn and Sorghum associations to increase the check-off authority. The wheat commission will dedicate research dollars to biotech improvements in wheat and conversion of wheat straw to cellulosic ethanol. The corn commission does not plan to use their increased authority at this time. The sorghum and soybean commissions wanted their state authority to be the same as the federal authority. The state check-offs for these commodities only is collected if the federal check-off is repealed. HB 2897 has been signed into law.

Coming Next Year

Storm clouds are clearly on the horizon for the 2009 Legislature. After a tough election where all 165 members of the Legislature must stand for reelection, there almost certainly will be challenges to the current leadership of both the House and Senate.

The bad news for next year is the budget that was passed spends $380 million more than it brings in. The state’s ending balance on July 1, 2007 was $935 million. On July 1, 2008 the ending balance is projected to be $533 million and on July 1, 2009 it is projected to be just $119 million. As the economy softens, taxes are coming in slower and demand for social services is increasing. When the ending balances get below $100 million, the Governor can cut the budget across the board. When they get below $50 million, she can cut whatever she wants. The state is not allowed to go below $0. When this happened in 2002, the state ended up raising numerous taxes. So next year, we can expect to see several attempts to raise taxes.

KAEP will continue to work to maintain the ethanol producer incentive fund. Legislators will likely look at ethanol as a potential source of revenue either through reduced expenditures or by removing tax and fee exemptions we currently enjoy.

March 31, 2008

Week in Review

Last week was the final week for committees to meet for the 2008 Legislative Session and legislators spent all of Wednesday, Thursday and Friday debating legislation on the floor of the House and Senate. The Senate passed its version of the budget to start a week of negotiations with the House. Both chambers had lengthy and emotional debates on immigration and passed similar bills that crack down on criminals but do not unfairly target businesses. The House introduced a new bill to allow the building of the Holcomb power plant. Both the House and Senate have passed health care reform measures and tax relief proposals. In a busy week that had both chambers working late into the night, including one session that lasted well after midnight, the House and Senate set the stage for a timely adjournment of the session at the end of this week. Negotiators will spend the week hashing out differences between the House and Senate versions of major legislation with a planned adjournment on Friday.

Alternative Fuel Vehicle Tax Credits

Substitute for House Bill 2694 passed out of the House Taxation Committee last week and will be debated on the floor of the House on Monday morning. The bill reduces the flex fuel vehicle tax credit from $750 to $500, but makes it much easier to receive payment. Currently, a FFV owner must provide receipts for 500 gallons of E-85 in order to claim the credit. Only 1 in 300 FFV owners in Kansas claim the current credit. Under the new proposal, the state will issue a $500 debit card to the purchaser of each new FFV. The debit card would only be good for purchases of E-20 or higher blends of fuel. This new proposal will greatly increase the number of FFV owners that 1) are aware they own an FFV, and 2) use E-85 or at least use a blender pump. The state will provide owners with a map of the gas stations that provide E-85 or blender pumps at the time of purchase.

Ethanol Production Incentive Bill

The Senate Ag Committee canceled the hearing last week on a bill that would allow the Department of Revenue to only pay the ethanol producers incentive annually rather than quarterly. The KAEP-sponsored legislation is designed to make the fund fair to all members so that if there is a proration of the fund, it will effect all members in the fund equally regardless of what quarter they begin operations. The bill will not have a hearing because the Department of Revenue has determined that they can enact the change without further statutory approval. KAEP will work with the Department to implement the new program.

Immigration Update

The biggest issue of the week was immigration. The Senate started the action on Wednesday with over seven hours of debate. The final product passed by the Senate, Sub. SB 458, is much more reasonable than the version introduced at the beginning of the session. The original bill would have mandated the flawed and inaccurate federal E-Verify system and stripped a business of all licenses and permits the first time they made a paperwork error on their I-9 or made a mistake using the new E-Verify system that resulted in hiring an undocumented worker. The new version makes it illegal to knowingly hire an illegal immigrant, but penalties only apply to employers who knowingly engage in a pattern and practice of hiring illegal immigrants. The higher standard means simple paperwork errors will not be prosecuted by the state. Under the bill passed by the Senate on a vote of 40-0, a business that is found to violate the law will be placed under a court order to fire all unauthorized workers and not hire any new ones. A violation of that court order would result in a contempt of court violation that carries fines and possible jail time.  A business that uses E-Verify could not be prosecuted under the bill and a business that properly fills out all of their I-9 documentation has an affirmative defense they did not break the law. The bill also cracks down on criminals that steal, sell and use stolen identities to get a job and cracks down on those that manufacture fake documents. It makes it illegal to bring illegals into the state for profit and creates several crimes related to exploiting illegal immigrants. The bill is designed to catch those individuals that aid and abet illegal immigrants coming into the state and obtaining employment through fraud.

The House on Thursday responded with its own 6-hour debate on immigration. The House also passed a much more business friendly version of the bill than it originally considered. The House bill, Sub. SB 329, also makes it a crime to knowingly and intentionally hire illegal immigrants. Like the Senate, the penalty for violating the law includes a court injunction and then possible fines and jail time. Also, the bill prohibits prosecution of any business that properly files their I-9 documentation, or uses E-Verify. The bill includes many of the crimes that are included in the Senate version of the bill as well. It passed by a vote of 96-27.

Both bills prohibit illegal aliens from receiving public benefits that are not required to be provided by federal law. The House bill includes a new provision that would make it a state crime to misclassify an employee as an independent contractor. The new definition of an employee is in conflict with IRS guidelines, meaning a business could be required by the IRS to count an individual as an independent contractor but be required by the state to count them as an employee.

The conference committee is scheduled to meet on Tuesday to work out the differences in the bills. There are a handful of technical issues the business community will be working to clean up, and we will try to get the misclassification provision removed. Considering where these bills started, the business and ag community has come a long way towards helping the state pass meaningful, but fair immigration reform.

New Holcomb Bill

As the deadline to override the Governor's veto approaches this coming Friday. The House introduced a new bill Sub. for SB 148, that would allow the power plant to be built. The bills are virtually identical with a couple of "green" provisions added into the bill. The new bill was intended to pick up a handful of wavering legislators in order to get a veto-proof majority in the House. However, the leadership pulled the bill from the calendar Tuesday morning because the bill still did not have 84 votes. More negotiations are taking place this week as House leadership and the business community scramble to find five more votes to guarantee an override.

Corporate Taxes

The tax committees finished up work on bills to establish a conference position for this week. So far, the House has passed a corporate tax relief package that the Senate has heard, but not worked. The Senate has passed some small tax credits for Research and Development and tax relief for seniors. Both chambers have expressed an interest in keeping the total fiscal cost to these bills close to neutral. Even though neither side has passed it, it is possible that the conference committee will attempt to decouple Kansas from the federal economic stimulus package in order to find the necessary revenue for their tax cut bills. The conference committees will begin meeting on Tuesday to work out a package.

Coming this Week

This is the last week of the Legislative Session. Legislators will spend most of the week working out the differences between House and Senate versions of similar legislation. Big issues like immigration, health care, taxes and the budget should all be resolved this week. The Legislature will break until April 30 when they return to pass their Omnibus budget (all of the spending they approved earlier this year) and consider overriding Governor Sebelius' vetoes. There is a possibility, though slim, that the Holcomb power plant will be resolved this week as well. However, most likely we will not have that resolved until the Veto Session.

March 25, 2008

Week in Review

This week the Senate President's father passed away and the services were on Thursday. The Senate did not have a session that day, while the House had a brief session to vote on their budget. Both the House and Senate met briefly on Friday before the holiday weekend allowing most legislators to leave for the Easter weekend as early as Wednesday evening in the Senate and Thursday morning in the House. Senate Ways and Means Committee members did come in Friday to complete work on the budget. As a result of the unexpected schedule change and the holiday weekend, several big issues were delayed a week. The House did debate the budget and pass it, but the Senate is not likely to debate its version until Tuesday. The House also passed corporate tax relief by a vote of 109-13. The House put off its debate on Health Care until next week, and both chambers delayed discussing immigration. The Governor did veto the Holcomb bill starting the 30-day clock for an override. Since the Legislature will be on break for most of the 30 days, they effectively have until April 5 to attempt the override. Negotiations in the House have continued as House leadership is trying to find what is believed to be the five necessary votes to override a veto.   For the most part, not much progress was made this week leaving only two weeks until the Legislature's first adjournment to pass a budget, immigration reform, health care reform, corporate tax relief and find a solution to the Holcomb issue.

Corporate Taxes

House Bill 2762 was passed on Monday by a vote of 109-13. The bill only had one amendment added during floor debate. The amendment gives a 10% non-refundable tax credit on capital investments made in cities affected by the recent flood and tornado disasters (House Bill 2640). The amendment applies within a one mile radius of those cities and gives the option of taking a 5% refundable credit instead and does not apply to businesses that have already received state assistance.

The underlying bill combines several tax bills that have been considered throughout the year. First of all, it changes the definition of income to include the functional test when determining business vs. non-business income. This change will slightly increase taxes on a handful of corporate rate payers, so the bill offsets that increase by decreasing the corporate rate by 1/2 of 1%. The bill also stops the practice of "churning" investments in order to make the percentage of total business transactions in Kansas appear smaller than they truly are.  The bill also includes SB 578 which allows corporations to share HPIP tax credits within their unitary group. This change could have prevented much of the $300+ million in unusable HPIP tax credits if it had been the law in past years. Since fixing the problem retroactively would break the budget, the fix is only for future tax credits earned. They also included the contents of HB 2739 which exempts machinery and equipment used for research and development from the state sales tax. The version thatpassed the House on Monday would save businesses in Kansas $26 million in corporate income taxes and other taxes. Chairman Kenny Wilk indicated that he expects the final product that comes back from the conference committee to be revenue neutral.

Coming this Week

This week is the last week for committees to meet. The House and Senate will be debating bills on the floor of their respective chambers all day starting on Wednesday. They only have two weeks until First Adjournment meaning they have a lot of work to do prior to leaving. It appears less likely that an immigration bill will be agreed to before First Adjournment, although both the House and Senate will likely pass a bill this week. The tax conference committee could start meeting as early as this week to try to pass a comprehensive tax package. Negotiations are continuing on the Holcomb issue and it's possible we may see an entirely new bill rather than attempt to override the Governor's veto. The Senate will debate the budget on Tuesday, and the conference committee on the budget will start meeting as early as Wednesday. The two sides are very far apart since both the House and Senate watched to make sure they did not adopt the same position on most issues as the other chamber. Health care will be debated on the House floor this week and we might start seeing a resolution to that issue. It's going to be a busy last two weeks of the session.

March 17, 2008

Week in Review

This week focused mostly on immigration and taxes as we move quickly towards the end of the regular session on April 5th. Lot's of bills are moving, being merged together and receiving quick action as legislators try to have most of their work completed before the April break. The Governor received the Holcomb bill late this week and is expected to veto it early next week. There is rampant speculation in the Statehouse about who is willing to cut a deal for an override vote and what topics could be considered. This week, speculation focused on a deal with the unions to vote on some anti-business work comp legislation. A motion was made in the House to pull the bill out of committee but the motion fell 20 votes short of the number needed to consider the issue. If the unions actually deliver enough Democrats to override the Governor's veto, we're almost certain to see the issue debated on the floor of the House. Meanwhile, the Governor is using her vast political power and popular appeal to convince wavering Democrats to hold the party line. Health care legislation came out of committee late Friday afternoon requiring the Kansas Health Policy Authority to find ways to reduce Medicaid benefits to Kansans who don't lose weight, stop smoking or using drugs. It also requires insurers in Kansas to offer young adults cheap, reduced coverage policies and offers tax credits for insurance premiums for families earning $60,000 or less per year.

Ethanol Incentive Plan Annual Payments

KAEP introduced Senate Bill 674 to allow the Department of Revenue to pay the ethanol incentive fund on an annual basis rather than on a quarterly basis. Plants would still be required to report quarterly, but any year the fund is prorated, it would be prorated equally for all ethanol plants still in the fund. This change would also make it easier for the association to demonstrate to legislators the need for additional resources in the fund. KAEP is working with the Department of Revenue to make the change internally rather than through statute, but if a bill is needed, SB 674 is available.

Immigration

By far the most controversial and emotional topic in the Legislature this year is immigration reform. The federal government's failure to pass comprehensive immigration reform that secure's our nation's borders and provides a reliable, steady stream of legal workers has forced states to attempt to tackle the issue. The federal government preempts states from doing much in the area of immigration, which is logical because protecting the nation's borders and defining national citizenship is clearly the role of the federal government.

However, there is a role the state can play to reduce illegal immigration and to protect the state from the perceived burden on social resources. After weeks of hearings and debate in both the House and Senate committees on Federal and State Affairs, both committees have passed similar versions of immigration reform.

A 37 member coalition of businesses and agriculture associations opposed to many of the original proposals introduced on the topic. Our objection was due to the harsh penalties that accompanied simple paperwork violations, the requirement of businesses to be responsible for every independent contractor and subcontractor they use, the lack of due process in the bills for accused businesses, the lack of tax certainty due to the attempt to enforce the law through the tax code, and the mandating of the federal E-Verify system for every business in the state.

The good news is the Senate bill addressed every one of our concerns and can now be supported by the coalition. That bill, Substitute for SB 458, focuses on the true problems that is within the control of the state to address. It includes harsher penalties for anyone who steals legitimate identification for illegal immigrants to obtain employment. It cracks down on those that create, sell and use fraudulent identification. It makes it a crime to transport illegal immigrants into Kansas in order to obtain employment. It makes it a crime to exploit illegal immigrants by paying them below minimum wage or in violation of the maximum hours laws. It prohibits illegal immigrants from receiving social and welfare benefits from the state. It creates a new division within the Attorney General's office to investigate immigration related complaints. It makes it a crime for a business to knowingly engage in a pattern or practice of hiring illegal immigrants with the first penalty being a court injunction requiring the business to terminate all illegal immigrants and cease hiring them and the second penalty being contempt of that court injunction. Contempt of court includes the potential for substantial fines and jail time. Businesses that use E-Verify would not be punishable under the law. E-Verify is not mandated under the bill, but the immunity makes a strong incentive for businesses to use the federal program. If signed into law, this would be the most comprehensive illegal immigration bill ever passed in Kansas.

In the House, the coalition made substantial progress, but was not as successful as the Senate and we still oppose the bill, Substitute for SB 329. The House committee still mandates the use of E-Verify, but it requires the Kansas Department of Labor to act as the designated agent for all employers so the business does not have any new burden placed upon it. Any business can opt out of using the Department of Labor by agreeing to use E-Verify on their own. Businesses will not be responsible for their independent contractors and none of the bill is enforced through the tax code. Businesses can receive an absolute defense to any state charges if they use E-Verify and the first penalty is only probation. However, a second penalty would include a 10 day suspension of all business licenses held by the business and the third violation would be a permanent revocation of all business licenses and the corporate charter if applicable. The bill does clarify that paperwork violations no longer put the business at risk and most of the due process concerns have been addressed. The coalition, however, cannot support suspending business licenses due to the potential unintended consequences. For example, a local telephone company such as Embarq broke the law, every one of the communities they serve would lose all phone service, including 911 for 10 days. An electric company that had its license suspended would result in all of their customers losing service. The patient at nursing home or hospital would be sent home or have to find a new facility. A 10,000 head feed yard would be forced to depopulate which would destabilize the cattle market.

As you can see, we have succeeded so far in protecting businesses from losing their business licenses or being harshly punished for simple paperwork violations. We have reduced the paperwork demands of these bills by stripping out the requirements of affadavits to several state agencies and as part of your income tax return. We have stripped out all of the provisions that would use the tax code to enforce immigration law and stripped out all of the provisions requiring a business to be responsible for 3rd parties. Both of these bills are much better than the previous versions. The Senate bill, if it is not amended, would be acceptable to anyone that is not intentionally breaking the law. The House bill only punishes law breakers directly, but their punishment could have a severe negative impact on other businesses, customers and the general public. We will continue to work to make sure the final package does not have these unintended consequences.

Corporate Taxes

House Bill 2762 was debated on the House floor on Friday and passed with one amendment. The amendment bives a 10% non-refundable tax credit on capital investments made in cities affected by the recent flood and tornado disasters (House Bill 2640). The amendment applies within a one mile radius of those cities and gives the option of taking a 5% refundable credit instead and does not apply to businesses that have already received state assistance.

The underlying bill combines several tax bills that have been considered through the year. First of all, it changes the definition of income to include the functional test when determining business vs. non-business income. This change will slightly increase taxes on a handful of corporate rate payers, so the bill offsets that increase by decreasing the corporate rate by 1/2 of 1%. The bill also stops the practice of "churning" investments in order to make the percentage of total business transactions in Kansas appear smaller than they truly are. The bill also includes SB 578 to the bill which allows corporations to share HPIP tax credits within their unitary group. This change could have prevented much of the $300+ million in unusable HPIP tax credits if it had been the law in past years. Since fixing the problem retroactively would break the budget, the fix is only for future tax credits earned. They also included the contents of HB 2739 which exempts machinery and equipment used for research and development from the state sales tax. The version that received tentative approval on the House floor on Friday would save businesses in Kansas $26 million in corporate income taxes and other taxes. Chairman Kenny Wilk indicated that he expects the final product that comes back from the conference committee to be revenue neutral.

Coming this Week

The House and Senate both are planning to debate immigration on the floor of their respective chambers. The House is also going to consider their health care reform bill during the week. The Governor is expected to veto the Holcomb bill this week and the Legislature may attempt an override by the end of the week. This week the budgets are expected to be debated on the floor of each chamber giving legislators an opportunity to insert popular election year projects into the budget. As the controversial legislation is debated this week, we'll start to see the House and Senate mark their negotiating territory for the final end game at the close of the session. We're still a long way from concluding the session, but the next week should give us a pretty good idea what will need to be done to wrap it up.

March 10, 2008

Week in Review

The Legislature returned after their Turnaround Deadline to get back to work as they race to finish the first week of April. The Senate finished hearings on the immigration debate setting the stage for simultaneous debate in the House and Senate Committees this week and possibly even floor debate on the bills. Both the House and Senate passed a bill to allow the Holcomb power plant to be built and sent it to the Governor, although the House was nine votes short of a veto proof majority. The House Taxation Committee passed a comprehensive tax package out of committee on Friday that could be debated on the floor of the House this week. The House Subcommittee on Alternative Vehicle Tax Credits met again and came to an agreement in principle that would make it easier for FFV owners to qualify for their tax credit by reducing the number of gallons they have to prove they purchased from 500 to 200 but would reduce the value of the credit from $750 to $500. They also now allow anything E-20 or above to qualify for the credits, so FFV owners that go to the new blender pumps can still receive the credit.

Immigration

The Senate Federal and State Affairs Committee held the last day of hearings on the controversial illegal immigration legislation. As written SB 458 would place a new mandate on every employer in Kansas to use the currently voluntary federal E-Verify system when they hire any employee. The federal E-Verify system is inaccurate forcing legal workers and US Citizens to visit federal agencies in order to prove they are legal to work while doing nothing to stop illegal immigrants from using stolen identities to get jobs. An employer who makes a simple paperwork mistake when they fill out the federal I-9 form or fail to properly use E-Verify (85% of current users of the program make simple mistakes) would be subject to losing their business license in a state court proceeding where they would not have full due process rights. The bill would give an incentive to illegal immigrants to steal US Citizens' identities, would give illegal immigrants with stolen identities preferential treatment over naturalized US Citizens and would expose employers to risk of losing all of their licenses and permits over simple paperwork violations.  37 business and agriculture organizations testified in opposition to the bill and supported a more reasonable bill that would crack down on identity theft, fraudulent identity manufacturing, use and sale.

Holcomb Plant

House and Senate negotiators agreed to a compromise bill that would require the Secretary of Health and Environment to reconsider the Holcomb expansion's air permit without considering CO2. The bill also requires utilities to use the best available practices to mitigate CO2 emissions, although none currently exist. The bill passed the House with 75 votes, nine short of a veto proof majority and passed the Senate with 31 votes, two less than it had when the original bill passed. While the Senate still has four votes to spare in order to override an almost certain veto, the House lost ground despite the Speaker's proclamation to the press that he had enough votes to override. Some of the votes in the House were clearly from supporters that were attempting to get leadership to take favorable action on other legislation. The media is also focusing on reports about both the Governor and the Speaker who are trying to find the votes to prevent an override (Governor) or to override a veto (Speaker.) The media coverage implies that politics has never before entered into the statehouse and that deals on unrelated items never occur. Of course, ever since Kansas became a state, legislative leadership and the Governor have cut deals with individual legislators in order to get thier priorities passed. There is a lot of time left in the session before the final deal is cut on the Holcomb plant. This week, the Legislature took a major step towards building the plant. It was certainly not the last vote they will take on the issue, and there could potentially be several more.

Corporate Tax Package

The House Taxation Committee on Friday passed a comprehensive corporate tax package out of committee.  HB 2762 combines several tax bills that have been considered through the year. First of all, it changes the definition of income to include the functional test when determining business vs. non-business income. This change will slightly increase taxes on a handful of corporate rate payers, so the bill offsets that increase by decreasing the corporate rate by 1/2 of 1%. The bill also stops the practice of "churning" investments in order to make the percentage of total business transactions in Kansas appear smaller than they truly are. Then the committee added SB 578 to the bill which allows corporations to share HPIP tax credits within their unitary group. This change could have prevented much of the $300+ million in unusable HPIP tax credits if it had been the law in past years. Since fixing the problem retroactively would break the budget, the fix is only for future tax credits earned. They also included the contents of HB 2739 which exempts machinery and equipment used for research and development from the state sales tax. The new bill would save businesses in Kansas $22 million in corporate income taxes.

Coming this Week

The Senate Agriculture Committee will hold hearings on the Commodity Commission Assessment bill. The focus of the week will be on the House and Senate Federal and State Affairs Committees working on immigration bills. Leadership in both chambers has indicated they would like the bills out of committee and debated on the floor of their respective chambers this week. We expect the debates in committee on the floor to be long and emotional. Tensions have been running high on the bills with some overtly racist testimony on one side and proponents charging businesses with wanting to exploit illegal aliens and businesses fighting to protect businessmen who make honest mistakes from being put completely out of business by overzealous prosecutors. Just like school finance and expanded gambling led to difficult debates in past years, how this issue is resolved will be the turning point of the legislative session.

March 5, 2008

Week in Review

Last week was the first major deadline of the Legislative Session known as Turnaround. This is the deadline when most House bills must advance to the Senate and vice versa in order for the other chamber to have time to consider them. The first part of the week saw committees scrambling to finish their work before the deadline in order to give their respective chambers time to debate the bills. The Senate finished debating and voting on bills by Thursday night. The House waited until Friday morning to debate 4 ethics bills before sending them to the Senate. Both the House and Senate Federal and State Affairs Committees began hearings on several immigration proposals. Since these committees are exempt from the deadlines, they will not likely pass anything for at least another week. The conference committee on the Holcomb bill made steady progress towards an agreement that will likely lead to a showdown with the Governor as early as next week.

Alternative Fuel Vehicle Tax Credits

The House Taxation Committee has a subcommittee studying the value of the alternative fuel vehicle tax credit. Of the more than 48,000 flex fuel vehicles on the road in Kansas, less than 160 have claimed the $750 credit. KAEP has suggested eliminating or at least reducing the amount of receipts that are necessary for vehicle purchasers to qualify for the credit. Under current law, a FFV owner must prove they purchased 500 gallons of E-85 to get the credit. The subcommittee hopes to report a bill back to the full House Tax Committee by late this week.

Environmental Assurance Fee Fund

The Kansas Department of Revenue has been notifying ethanol producers that the Environmental Assurance Fee fund will begin collecting $0.01 per gallon of petroleum products produced or delivered into Kansas on April 1st. This is not a tax that should apply to ethanol plants, since ethanol is not a petroleum product. KAEP is working with the department to ascertain why the notice was sent to our members.

If you have any questions regarding the notice, please contact Duane Simpson at Duane@KansasAg.org.

Immigration

Hearings began on several bills that are intended to crack down on illegal immigration. The hearings were packed with standing room only in the largest committee room in the Capitol. The hearings were long and emotionally charged and the Legislature brought State Troopers into the room for security purposes. 37 business and agriculture organizations supporting a balanced approach to immigration reform that cracks down on those criminals that steal, create and sell false identification that is used by illegal immigrants to get jobs. Below is a primer on the issues that are being debated on immigration.

• E-Verify - The Department of Homeland Security has been offering businesses a voluntary web-based program to verify the work eligibility status of employees since 1996. To enroll in the voluntary program, businesses must relinquish their 4th Amendment Rights under the US Constitution. Specifically, the Employer agrees to allow the Department of Homeland Security and Social Security Administration, or their authorized agents or designees, to make periodic visits to the Employer for the purpose of reviewing E-Verify related records, i.e., Forms I-9, SSA Transaction Records, and Department of Homeland Security verification records, which were created during the Employer's participation in the E-Verify Program. In addition, the Department of Homeland Security reserves the right to conduct Form I-9 compliance inspections during the course of E-Verify, as well as to conduct any other enforcement activity authorized by law. Several of the bills require all Kansas businesses to enroll in the voluntary E-verfiy system, whether or not they have ever had a hiring violation.

• Independent Contractors - Several of the bills require every business that hires an independent contractor to verify that the contractor is using the E-Verify system. These bills already require the independent contractor to certify to the state that they are using E-Verify, yet they require businesses to help enforce the new law.

• Tax Uncertainty - Several of the bills require every business to verify that they are using E-Verify when they file their taxes. The wages and benefits for any employee that turns out to be an undocumented worker would not be deductible from state taxes. In addition, businesses would be required to sign an affadavit that all of their independent contractors used E-Verify. If any independent contractor hires an undocumented worker, the business would not be allowed to deduct the business expense the work performed by the contractor.

• Loss of Business License - The first penalty in most of the bills is the loss of a business' license to operate in the state. In two of the bills, the third offense by any subsidiary or branch of the same business, no matter how many years separate the offenses, results in the permanent loss of the business license for the entire company.

Holcomb Plant

The conference committee on the Holcomb plant bill has been working to narrow the differences between the two bills. The Senate passed a very narrow bill that did little more than force Sec. Bremby's to reconsider his decision to deny the air permit and leave him little, if any grounds to deny it. The House's bill included some requirements that utilities use the best practices available to mitigate carbon dioxide emissions. The conference committee is expected to reach an agreement early this week with a vote coming as soon as Wednesday.

The Governor is certain to veto the bill when it reaches her desk and the Senate clearly has the votes to override the Governor. The House, however, was 7 votes short of a veto-proof majority. The Speaker was quoted this week in the papers saying he now has enough votes to override the Governor. Speculation is centering on Johnson County Moderate Republicans that voted against the bill the first time. These legislators are normally pro-business and may be willing to trade their support of the Holcomb power plant for other legislation.

Interestingly, the Speaker overruled his conservative Majority Leader to allow debate and passage of ethics legislation on Friday. The underlying bills were non-controversial, but they were amendable to reporting requirements for the conservative Americans for Prosperity. Moderate Johnson County Republicans listed that legislation as one of their top priorties, the Speaker allowed them to have the debate hours before telling the press he had the votes to override the Governor.

Coming this Week

The Senate will finish hearings on the immigration reform bills, but they will likely not debate them until the House takes action either late this week or early next week on the bills they heard last week. The House and Senate Conference Committee on the Holcomb bill is expected to reach agreement early this week with a vote as early as Wednesday. There appears to be some movement on tax issues, with corporate income taxes being quietly negotiated with the Department of Revenue. A package may be released as soon as Wednesday. The House and Senate will not be in session on Monday and the House will only have a ceremonial session on Tuesday. However, the slow start to the week is only to give staff enough time to catch up with all of the work done at the Turnaround deadline. The session has about a month to go so both chambers will be working furiously over the next several weeks.

February 18, 2008

Week in Review

The Legislature took a major step forward this week toward breaking the logjam on issues when the Senate approved a bill to overturn KDHE's decision on the Holcomb power plant on a vote of 33-7. Although legislative leaders deny that any bills are being held back until the Holcomb plant is decided, both chambers have had an unusually light work load. With likely debates on immigration, health care and the budget looming, the debate over the Holcomb power plant has dragged virtually everything else to a standstill. Now that the Senate has passed a bill and the House will be debating one on Monday, we expect the Legislative Session to speed up dramatically.

Meanwhile, the tax committees continue to debate how business investments should be incentivized. They are considering revamping the current tax credit system to make it more streamlined, but they are also considering allowing businesses to fully expense investments in the year they are made rather than taking tax credits or depreciating out equipment over time. As expected, more immigration legislation was introduced in the House. This time, not only could a business lose its license for hiring an illegal alien, they could lose their tax deductions for using contractors that hire illegal aliens; and they can be sued by legal employees if they hire an illegal alien.

Tax Credit for Alternative-Fueled Vehicles

On Thursday, the House Tax Committee held a hearing on HB 2694. This is the bill for an income tax credit for alternative-fueled vehicles and fueling stations. KAEP testified in a neutral position on this bill. A subcommittee was formed at the request of KAEP to look for ways to make the tax credit for efficient.

Holcomb Power Plant

The Senate overwhelmingly approved Senate Substitute for House Bill 2066 to overturn the Secretary of KDHE's decision to deny an air permit for the Holcomb power plant expansion. The bill clarifies that the law the Secretary used does not give him the authority to regulate CO2. It requires the Secretary to reconsider the permit and make a decision in 15 days that does not take CO2 into account. It also sets up a commission to study the state's energy policy. The bill passed 33-7 with support from half of the Democratic Caucus and virtually every Republican. The predicted East-West split in the state did not materialize as Senators from Johnson and Wyandotte Counties, Lawrence, Topeka and Southeast Kansas joined Western Kansas Senators in approving the bill. Governor Sebelius will likely veto the bill if it reaches her desk, but she will need twice as many Senators as she currently has in order to sustain the veto in the Senate.

The debate now moves to the House where they will be debating a broader version of the bill.  House Substitute for Senate Bill 327 includes a provision to require all utilities in the state to use the best available carbon capture technology. The phrase "best available carbon capture technology" is not defined in the law but it will likely give the KDHE Secretary the authority to deny any permit that fails to use any available technology to capture carbon, regardless of expense, effectiveness or reliability. The new requirement will be paid for by ratepayers in the utility's service area. The House debates the bill on Monday and will likely take final action on Tuesday.

Business Taxes

On Tuesday, the House Tax Committee held a hearing on House Bill 2762, a bill that adds the functional test in determining business vs. non-business income, and addresses “churning” by clarifying the definition of gross receipts. Kansas is one of the few states that does not use both tests. The functional test would include income from one-time events, such as a sale of a plant or another asset. There is a $20-22 million gain to the state in this bill. The Kansas Chamber of Commerce testified in support of this bill, only if that excess is used to buy down the corporate income tax rate. The bill would reduce it from 7.35% to 6.85%. The Committee Chairman has made remarks about taking that $20 million and offering it to the committee to decide what to do with it.

On Wednesday, the Senate Tax Committee was briefed by the Department of Revenue on the Federal Stimulus Package and its affects on Kansas. The federal law allows for businesses a one-time 50% accelerated business deduction on assets in 2008. This would be on top of their regular depreciation. The federal law is aimed at assisting small businesses. The Department of Revenue estimates it will have an $87 million fiscal note to Kansas. A bill has been introduced in the Senate that would allow Kansas to decouple from the new Federal bonus depreciation, denying Kansas businesses the same tax benefits that other states have. There will likely be a hearing on this bill early this week.

The House Tax Committee also considered legislation that would allow businesses to expense their investments in the year they make them in lieu of depreciating equipment over time and taking investment tax credits. This approach would make it much easier for all businesses to receive the same tax treatment that large corporations that are recruited to the state get. Combined with the Federal Stimulus Package, the bill would spur investments in the state.

Coming this Week

On Monday and Tuesday, the House will debate its version of the Holcomb power plant bill. The Senate Tax Committee will consider legislation to deny Kansas businesses all of the federal stimulus package. The coalition of businesses and ag groups that have been working on immigration issues will introduce a bill that protects employers who follow federal hiring guidelines from state penalties.

February 11, 2008

Week in Review

Kansans caucused this week to crown Barack Obama and Mike Huckabee as the winners of their respective party caucuses. The rest of the week focused on the Holcomb power plant hearings in both the House and Senate. Other topics occasionally grabbed a headline with the House Taxation Committee holding hearings on a 50 cent per pack cigarette tax increase, press conferences on more illegal immigration legislation, and the fight between the bankers and the credit unions heating up. However, everything in the Legislature has apparently slowed down to watch the outcome of the Holcomb power plant debate. With the House and Senate holding unprecedented simultaneous hearings on identical bills, each providing four days of hearings, the Legislature virtually shut down to watch the outcome.

Holcomb Power Plant

The House Energy and Utilities Committee and the Senate Utilities Committee each held four days of hearings on identical bills designed to overrule KDHE Secretary Bremby's decision to deny the air permits for the expansion of the Holcomb coal fired power plant.

The 28-page bills, HB 2711 and SB 515 go far beyond simply requiring KDHE to reconsider the permits without abusing the Secretary's emergency powers or regulating CO2. The bills codify several energy efficiency proposals for state and local government buildings and vehicles. In addition, they create the first carbon emissions regulatory system by limiting the amount of CO2 emissions a new fossil-fuel based electric generation facility can emit per kilowatt hour of electricity generated. Any new facility built must meet this new standard and then has 10 years to meet an even stricter standard. In order to help facilities meet the new regulations, the bills create a carbon offset trading system. The new trading system sets values for various types of carbon offsets and grants credits based on multiples of the actual carbon offset depending upon how the carbon is sequestered, stored or displaced. For example, electricity generated from wind gets one and a half times the actual carbon displaced as a credit.

Most disturbingly, the carbon offset program gives three times the actual carbon sequestered to farmers that convert cultivated land to pasture land. Once again, despite historic worldwide lows in stores of wheat, corn and soybeans, the state of Kansas is attempting to give incentives to farmers to stop farming.

The bills also create the nation's first carbon tax as a penalty for utilities that fail to meet the new regulations. In addition, several proposals to require utilities to give credit to consumers for electricity they produce on their own are included in the bill. Each of these new regulations will add cost to the generation of electricity by the new facilities. The increased costs will be passed on to electric customers in the utility's service area.

KAEP testified in support of the parts of the bill that solve the regulatory crisis caused by KDHE's decision to deny the air permit for the Holcomb Station Expansion. We opposed any attempt to idle more productive ag land.

All of the carbon mitigation language in the bill did little to convince environmentalists to support it. Every environmental group in the state testified in opposition to the bill. They were joined by state and federal anti-tax groups opposed to the carbon tax.

On Friday, the House committee was supposed to work the bill but adjourned only seconds after the meeting started when the Chairman announced he had, "been ordered not to work the bill." The Senate committee will work the bill on Monday. Legislative leaders huddled on Friday to figure out how to put together either a bill the Governor would sign or one that could garner enough votes for an override. They are expected to strip the bill of all of the carbon regulations and tax as well as the codification of energy legislation unrelated to the Holcomb plant.

Immigration Debate

A coalition of business and agricultural associations signed a letter to legislators urging them to not overburden business as they debate immigration reform. The business community should not be responsible for enforcing federal immigration law, nor should they be burdened with new government mandates that have been proven ineffective in other states. The coalition will be introducing legislation that punishes those people that create and use false identification. It will also support the state investigating complaints of businesses hiring illegal immigrants and turning any evidence over to the federal government for prosecution. Debate on the numerous illegal immigration bills will begin in committees the last week of February.

Investment Tax Credits

Hearings continued on SB 497, the Governor's bill to streamline investment tax credits. The Kansas Chamber will offer amendments to improve the bill by putting "micropolitan" communities into the opportunity zones, adding the training credit back to the bill and lowering the $300,000 investment threshold in areas outside of opportunity zones. The committee will likely work the bill on Friday.

The House Taxation Committee will have hearings on HB 2751 which would allow businesses to expense their investments in property they would otherwise depreciate. Last week, Dr. Art Hall from the University of Kansas gave a presentation on the proposal. It allows businesses to choose between expensing the investment in the year it is made or taking advantage of current tax credits and depreciating the investment. The bill will save businesses an estimated $50 million in the first year. Unlike tax credits, every business that makes an investment will qualify without having to jump through any bureaucratic hoops. They would simply write off the investment on their taxes.

Coming this Week

The Senate is expected to take the first action on the Holcomb power plant bill. The Tax committees in the House and Senate will begin working various investment tax credit bills. The House Agriculture Committee will likely debate the wheat commodity commission bill that will increase funding for research into cellulosic ethanol.

February 4, 2008

Week in Review

This week started with Governor Sebelius giving the Democrats official response to President Bush's State of the Union address. The honor is widely seen as a recognition of the Governor's potential to rise into the national spotlight. Her endorsement later in the week of Barack Obama has led many to speculate about the potential for her to be on the Democratic ticket if Obama is nominated. At a minimum, she would be under consideration for a potential cabinet position if either Obama or Clinton is elected in November.

The Senate President shocked the agribusiness community during a Senate Agriculture Committee hearing when he asked a conferee about "price gouging" in the ag input industry. He later made it clear that he does not blame ag retailers for high prices, and that he should not have used the term "price gouging" even with respect to manufacturers. However, high prices for fertilizer, seed, pesticides and petroleum has left many farmers grumbling and legislators may attempt to respond to the complaints with hearings and maybe even legislation.

The Legislature's response to the Administration's denial of the air permit for Sunflower's expansion of the Holcomb station was revealed this week. The extension of the KARB extension bill passed the Senate unanimously this week and is awaiting hearings in the House Agriculture and Natural Resources Committee.

Ag groups met with the Kansas Corporation Commission this week to discuss their new interpretation of interstate commerce. Association staff and the Kansas Coop Council met with the Secretary of Transportation to discuss the Kyle Railroad track lease issue this week, and we will be introducing legislation next week to resolve the problem.

The House and Senate Tax Committees were briefed this week by the Secretary of Transportation regarding the department's concerns about the future viability of the motor fuels tax both at the state level and the national level. As the cost of construction continues to rise, and fuel economy from vehicles gets better, the fuel tax fails to keep up with the demand for improvements and maintenance. The Secretary argued that the state should consider various ways to increase transportation funding including using GPS devices to track your distance traveled and tax you accordingly or increasing toll roads charges.

The Senate Commerce Committee and Assessment and Taxation Committees held joint hearings on legislation to repeal the state's HPIP tax credits and replace them with a streamlined Investment Tax Credit.

Kansas Bioscience Authority Working Group

KAEP hosted a preliminary meeting of the Kansas Bioscience Authority’s new Energy Working Group. The Authority has been tasked by Governor Sebelius with helping Kansas produce 20% of the nation’s biofuels. That goal would result in 7.2 billion gallons of ethanol being produced if the RFS is fully implemented. The KBA is willing to make incremental investments to help grow the industry in the short term as well as invest in long-term research projects that can aid in growth over the next decade.

KBA intends for this process to be driven by the needs of the biofuels industry. We could use a couple of volunteers to be on the Working Group, we’ll forward names to the KBA and they will select a representative sample from the industry. Please contact Tom at Tom@KansasAg.org or Duane at Duane@KansasAg.org if you would like to be included.

Holcomb Power Plant

This week the Legislature responded to the Kansas Department of Health and Environment's denial of the air permit for the Sunflower Holcomb station power plant expansion. The House and Senate introduced identical bills and will each begin four days of hearings on Monday. The 28-page bills, HB 2711 and SB 515 go far beyond simply requiring KDHE to reconsider the permits without abusing the Secretary's emergency powers or regulating CO2. The bills codify several energy efficiency proposals for state and local government buildings and vehicles. In addition, they create the first carbon emissions regulatory system by limiting the amount of CO2 emissions a new fossil-fuel based electric generation facility can emit per kilowatt hour of electricity generated. Any new facility built must meet this new standard and then has 10 years to meet an even stricter standard. In order to help facilities meet the new regulations, the bills create a carbon offset trading system. The new trading system sets values for various types of carbon offsets and grants credits based on multiples of the actual carbon offset depending upon how the carbon is sequestered, stored or displaced. For example, electricity generated from wind gets one and a half times the actual carbon displaced as a credit.

Most disturbingly, the carbon offset program gives three times the actual carbon sequestered to farmers that convert cultivated land to pasture land. Once again, despite historic worldwide lows in stores of wheat, corn and soybeans, the state of Kansas is attempting to give incentives to farmers to stop farming.

The bills also create the nation's first carbon tax as a penalty for utilities that fail to meet the new regulations. In addition, several proposals to require utilities to give credit to consumers for electricity they produce on their own are included in the bill. Each of these new regulations will add cost to the generation of electricity by the new facilities. The increased costs will be passed on to electric customers in the utility's service area.

KAEP will be testifying in support of the parts of the bill that solve the regulatory crisis caused by KDHE's decision to deny the air permit for the Holcomb Station Expansion. We will be opposing any attempt to idle more productive ag land.

Investment Tax Credits

The House and Senate Tax Committees were briefed this week by the Departments of Revenue and Commerce on the Governor's Tax Incentive Package, SB 497. A joint hearing of the Senate Commerce and Assessment and Taxation Committees was held on Friday and will be continued on this coming Friday. The Governor's package has four objectives: to establish a tax credit cash refund program, create opportunity zones, replace existing HPIP and Business & Job Develpment Credits with a broader Investment Credit, Jobs Credit and Sales Tax Exemption, and simplifying the process of receiving the tax credits.

• The cash refund program allows businesses that currently qualify for tax credits that they cannot use, to take an up-front cash refund worth 40% of the tax credit. If they decide to accept the cash, they forfeit the remaining 60% of the credit. This program is only on a prospective basis so the $300+ million in tax credits that cannot currently be claimed by businesses would not get any relief from this program. In addition, only $10 million would be allowed to be received by all businesses under this program and whether or not a business qualifies will be at the discretion of the Secretary of Commerce.

• Opportunity zones will be established in rural, economically disadvantaged areas that allow for lower threshholds to qualify for the investment and job tax credits and also eliminates the limits on what types of business qualifies for each credit.

• Investment Tax Credit and Job Creation Credit programs will replace our current HPIP program. Similar to the HPIP, businesses can receive an investment tax credit worth 10% of the qualified investment. The threshold for the investment is raised to $50,000 in an opportunity zone and $300,000 in the rest of the state (counties with metropolitan and micropolitan areas ranging from Johnson County to Ellis County). The Job Creation Credit program would award $3500 per new employee with a minimu of 2 new jobs created in an opportunity zone, $1500 per new employee with a minimu of 5 new jobs in the rest of the state and $2500 per new employee with a minimum of 20 new jobs for corporate headquarters or ancillary support centers.

• These credits still need to be prequalified, meaning that the Department of Commerce has to agree to the credit prior to the investment being made. That process has not changed from current law. However, the annual requalification would be dramatically simplified as the business would only need to self-certify that they still qualify.

The Kansas Chamber is planning on introducing an amendment that allows businesses to transfer past earned tax credits within a unitary group. In other words, parent corporations will be allowed to use any credit earned by their subsidiaries and vice versa.

Coming this Week

Hearings will begin on the Holcomb legislation and action may be taken as early as Friday on the bills. Two committees will hold four days of hearings each to try to keep the process moving. If everything works as quickly as possible, the Holcomb plant could conceivably be approved March 1.

January 28, 2008

Week in Review

Last week was a short week in Topeka as the Legislature honored Dr. Martin Luther King, Jr. on Monday and left early on Friday for the annual Republican Kansas Day celebration. Despite the short work week, the Legislative Session began to take shape. A couple of immigration bills were introduced with at least two more expected in the next week. The House Tax Committee had hearings and passed out legislation to provide tax relief to businesses recovering from natural disasters. The House Democrats announced their agenda for the legislative session and the Kansas Wheat Association introduced its bill to increase their authority from 1 cent per bushel to 2. The House Taxation Committee held a hearing and passed HB 2641 to punish Missouri for its treatment of Kansas residents that work in Missouri. If the bill passes, Kansas will tax Missouri residents that work in Kansas an additional $5 million by denying them a deduction for property taxes paid to Missouri. This is in retaliation to an identical bill passed by Missouri last year and will automatically go away if Missouri repeals their law.

Post Secondary Technical Authority Provides Update

Last session, the legislature passed a law to create the Post Secondary Technical Authority, with an objective of improving technical education in Kansas. This week the House Education Committee heard from Joseph Glassman, chairman of the newly formed Authority, about their progress.

The Authority is composed of representatives from businesses, government and technical education. Their task is to reform our technical education system to be more uniform, while using industry assistance in creating standards of excellence so students can work toward certification by discipline.

Technical education provides career-centered curriculum, based on the needs of industry. It provides excellent advancement and education opportunities for students who may not be well suited to a traditional liberal arts university setting. The Authority will use its members as liaisons with each Kansas technical school and college, working with school districts served by the institutions. There also will be a partnership between industry, government and higher education to fund a high quality, effective technical education system.

The Authority is making a number of recommendations for improvement. Generally, we must constantly assess the needs of the market for skilled workers, constantly assess our technical programs to assure that students are properly prepared for the workplace, and work closely with industry and business to assure the quality and applicability of technical education.

Below are more specific recommendations:

• Develop areas of excellence for each school that serves its geographic area.
• Replace outdated equipment- some technical programs are still using equipment that is decades old. This renders its application in our 21st century world useless.
• Attract those students who want and need technical skills to our technical education institutions.
• Constantly reinforce the need to renew and improve skills in order to remain competitive in the national and global marketplace.
• The Authority intends to have employers rate the performance of individuals who are graduating from state technical education programs and thereby rate the performance of the schools.
• The Authority is also looking at K-12 education with plans to do early assessment of students to identify those who are best served by technical and vocational education, mentoring of those students to encourage them along the proper educational path, and connect technical education institutions with K-12 parents, teachers and counselors.

House Democrats Announce Agenda

This week the House Democrats announced their agenda for the 2008 Legislative Session. The plan focused heavily on health care and education calling on the Legislature to have a full hearing on the Kansas Health Policy Authority's proposals and for all-day Kindergarten and a 4th year of the school finance plan. In addition, House Democrats support the Governor's renewable energy plan and a state-led effort to expand broadband in rural areas. They are pushing for a state affordable housing plan to address pressing housing needs throughout the state but in natural disaster areas in particular. They focused on raising the minimum wage and addressing a work comp court case that favored businesses.

Finally, they proposed property tax relief to low-income seniors and closing of tax loopholes for out-of-state corporations. The House and Senate Republicans have already introduced their agendas for the year. The Governor laid out her agenda during the State of the State. We expect the Senate Democrats to announce their agenda some time in the coming days.

Immigration Bills Introduced

Ten House Democrats led by Ann Mah, Topeka, introduced HB 2680, which they titled the Immigration Accountability Act. Like previous House Democratic efforts, this 18-page bill focuses on employers as a means to enforce federal immigration law. It requires all employers in the state to use the e-verify system and has strict punishment for businesses who hire illegal immigrants.

In the Senate, five Republicans led by Peggy Palmer, Augusta introduced the 14-page SB 458, which they titled the Illegal Immigration Relief Act. Not to be outdone by the Democrats in the House, the conservatives in the Senate go well beyond employment issues to try to eliminate any state or local government support or even recognition of illegal immigrants and to make several new crimes for assisting them.

Both bills have substantial new mandates for businesses in Kansas and strict penalties that can result in literally putting you out of business if you fail to follow the mandates in the law properly. The business community will be introducing legislation in the next few days to make sure that businesses who attempt to follow federal hiring guidelines and civil rights laws do not find themselves facing severe state penalties. In addition, Rep. Brenda Landwehr, R-Wichita, is expected to introduce a comprehensive immigration measure as well.

Wheat Assessment Bill Introduced

The Kansas Wheat Association introduced HB 2661 this week to grant the Wheat Commission additional assessment authority. The bill would increase the authority from 1 penny per bushel to 2. The additional revenue is intended to be used to fund biotech research on wheat and the potential for using wheat straw for cellulosic ethanol.

January 21, 2008

Week in Review

The 2008 Legislative Session started last week with the Governor laying out her agenda for the year before a joint session of the Kansas Legislature. On Tuesday, she released her budget which is traditionally the basis for legislative budget negotiations and included over $80 million in projected revenue from casino gambling that was approved by the Legislature last year but is being challenged in court. Senate Republicans announced their agenda for the year, limiting their agenda to those items with broad consensus within the 30 member caucus. By Thursday afternoon the Legislature was ready to go back home for the holiday weekend with only a handful of members present for early morning sessions on Friday. On Friday, the Governor announced Judge Stephen Six, from the 7th Judicial District, to be the new Attorney General replacing Paul Morrison on January 31.

Governor Announces Plans in State of the State

On Monday night, the Governor layed out her agenda for the 2008 Legislative Session in a speech to a joint session of the Kansas Legislature. The Governor focused her speech around twins Kimberlin and Samuel Lovell who happened to be born on the day the Governor was sworn into office to begin her second term. She noted, "the decisions we make in the months ahead and in the years to come will help to determine what opportunities these two young Kansans - and thousands more like them - will have as they grow up in the Sunflower State."

According to the Governor, the key to the future for Kansas children is education that will allow them to compete in a global economy where innovation and work ethic is more important than geography. Much of her speech was dedicated to discussing education related initiatives.

The Governor also announced that the first Center for Rural Opportunity has opened at Sterling College, and centers at Colby Community College and Neosho Communicy College will also open. These centers are intended to concentrate on attracting investment, job growth and business development in rural areas. They work by having undergraduate business students help aspiring entrepeneurs write business plans.

The Governor called on the Legislature to begin planning for the next Comprehensive Transportation Plan to replace the one that will expire next year.

She created by Executive Order the Kansas Innovation Consortium that is supposed to bring business leaders together with educators and government officials to help industry advance in the plant, animal and life sciences sector and bio-fuels.

On health care, the Governor endorsed the 21-point proposal from the Kansas Health Policy Authority that includes a statewide smoking ban, a 50 cent per pack increase in the cigarette tax and a 570% increase in cigar taxes.

She funded a Bioenergy Research Grant Program that is intended to spur development of innovative new technologies producing the most cost-efficient renewable fuels. In addition, she called on the Kansas Bioscience Authority to develop an aggressive plan to have Kansas produce 20% of the nation's biofuels. Last year, Kansas produced 480 million gallons of ethanol. If the nation meets the new Renewable Fuel Standard of 36 billion gallons by 2022, Kansas would have to produce 7.2 billion gallons to meet the 20% goal.

She endorsed wind energy and energy conservation, but she avoided the topic of the rejected coal plant at Holcomb. The closest she came to the controversial topic was when she called on Kansas to, "Join the 36 states that have begun or completed development of a comprehensive climate change action plan." She continued, "It is clear the people of Kansas welcome an informed discussion about our energy future, economic opportunities, and the protection of our environment. We can rise to the challenges we face only if we commit ourselves to moving forward."

Senate Republicans Announce Agenda

Senate Republicans released their agenda for the session and did so without listing a lot of detail. They chose to focus on the things they could agree to amongst the caucus so it's a pretty good bet that they'll be able to at least pass these items out of the Senate.

The 11-point plan called for a comprehensive energy policy that focuses on baseload power - in other words, electricity generated from something other than wind. They called for a $65 million increase in education in 2010, the first year not covered under the $1 billion, 3 year plan passed two years ago. On health care, they promised full and fair consideration of all of the 21-point Kansas Health Policy Authority proposals, but they stopped short of endorsing any of them.

They joined House Republicans in their call to create a Commission on Rural Policy to develop long range strategies to promote economic development in rural Kansas. This item is the centerpiece of the Kansas Farm Bureau's legislative agenda and has received enthusiastic support from Republicans in the Legislature but a cool reception from the Administration.

They called for incentives for housing development in storm damaged areas and in rural Kansas in general. They want a commission to study the affordability of the state issuing debt. They want a more limited approach to immigration - basically filling the gaps in federal law. They echoed the Governor's call for preliminary planning for the next transporation plan. They finished their plan with increased veteran benefits and stepped up public safety initiatives.

Coming This Week

This week will be shortened due to the Martin Luther King, Jr. holiday on Monday. We expect to see a few of the proposals for immigration reform introduced early this week. The budget committees will begin reviewing state agency budgets and both the Kansas Department of Agriculture and the Kansas Water Office will have their budget hearings this week in the House. Republicans will celebrate Kansas Days at the end of the week where the focus will be on which candidate for the Kansas 2nd District appears to be a stronger challenger to Democrat Nancy Boyda.