AEP

LEGISLATIVE UPDATE

All of the bills being tracked by your Association are logged on the Bill Tracker page of our website. You can read a brief summary of the bill, the actual text of the bill, the history of the bill and upcoming actions by following the link. If you have any problems using the Bill Tracker, please contact Mary Jane Stankiewicz maryjane@kansasag.org or Ron Seeber at Ron Seeber ron@kansasag.org.

May 12, 2010

Veto Session Concludes

The Kansas Legislature wrapped up it’s work for the 2010 legislative session Tuesday evening, May 11.   Facing the challenges of a $500 million budget deficit and election year politics, this was one of the contemptuous and heated legislative sessions in recent history. In reality, the Kansas is not comprised of the traditional two party system. It is instead a political comparison of the war torn Baltic Republics, where our state is a compilation several rival geographical and philosophical factions that often join alliances to promote shared agendas and leave political casualties in their wake. This can be seen this veto session in the many examples of unconventional coalitions skirting traditional methods to obtain policy and political objectives. Please read below for the actions that transpired during the eleven day veto session.

One Cent Sales Tax Increase Approved: Industry Targeted Multi Million Tax Increases Defeated

The House (64-61) and Senate (23-17) approved S. Sub. For HB 2360, a bill that increases the state sales tax by one cent for 3 years. As approved, the state sales tax will go from 5.3 cents per dollar to 6.3 cents per dollar for three years, starting July 1. 2010. Then on July 1, 2013, the tax will decrease to 5.7 percent with revenue from 0.4 of a cent going toward the state transportation plan. The measure is estimated to bring in an additional $314 million to the state coffers. The tax increase was approved by a coalition of moderate Republicans and Democrats in both the House and the Senate. After the Senate approved the bill, the bipartisan House coalition broke with the wishes of House Republican leadership to avoid a tax increase during a recession and approved the bill after many hours of passionate debate. The Governor has announced he will approve the tax increase.

Most members of Senate Republican and Democrat Leadership blessed the sales tax increase and, in fact, promoted additional tax increases that specifically targeted Kansas businesses. Certain members of leadership in both parties numerous times cited the perception that businesses have not contributed enough to the state coffers and “don’t have enough skin in the game”. Therefore, in addition to the sales tax, certain leaders specifically proposed industry targeted tax increases including eliminating the ability to recognize the IRS section 199 deduction for domestic production and removing the sales tax exemption for grain warehouses. This industry specific targeted tax increases were immediately addressed by your association staff, the Senate recognized the error of their ways, and refused to include the provisions from the underlying bill. The Associated General Contractors Association also convinced the Senate to exempt already existing construction contracts from the sales tax increase.

Budget Approved Requiring Tax Increase

Against the desire of House Leadership to approve a budget without a tax increase, the House Democrats and moderate Republicans banded together to approve a $13.6 billion budget that restores much of the money to public education and social service programs not included in the House’s original budget. The House approved SB 572 by a vote of 71-52 and the Senate approved the bill by a vote of 21-17.

In addition to the $314 million tax increase to balance the revenue shortfall, additional cuts were made many state agencies to fill the $500 million budget shortfall. The Kansas Department of Agriculture will take an approximate $300,000 cut. This is a substantial hit to the agency’s bottom line and may needed result in layoffs and program eliminations. The budget does include an additional $75,000 to ensure adequate administration of the program and an additional $29,000 to fund the Agricultural Statistics program.

Transportation Bill Approved

The Senate approved and House Concurred to HB 2650, a bill that authorizes and funds the 10 year statewide comprehensive transportation plan. It funds a $8.2 billion plan that entails 1.7 billion in bonds, a .4% statewide sales tax increase (from 5.3 to 5.7 % starting in 2013) included in the one cent sales tax increase approved by the legislature and sent to the Governor that expires in 2013. The sales tax replaces the motor fuels tax currently in statute. Other revenue enhancements for the transportation bill include increasing registration fees for trucks from 12,000 to 54,000 lbs. by $100 ($50 in 2013 and $50 in 2014) and increasing registration fees for trucks larger than 54,000 lbs. by $135 ($85 in 2013 and $50 in 2014). The revenue generated will pay for road, rail, and public transit projects for the next decade. The Senate approved the bill by a vote of 25-13 and House approved it 86-38.

Blending Bill Runs Out of Time

Even though Kansas Association of Ethanol Processors and the Petroleum Marketers were successful in obtaining Senate approval our blending bill multiple times, stiff opposition from well financed anti-ethanol interests well able to keep a fair and balanced debate from occurring in the House by influencing Republican leadership. This bill would have allowed for gas retailers to continue to blend ethanol. A tax bill was on the House calendar making it applicable to a blending bill amendment and we were prepared have an amendment offered. However, once leadership learned of the bill’s susceptibility to common sense ethanol policy, it was quickly pulled from the calendar preventing any action.

Prohibiting Texting While Driving

This House and Senate approved the conference committee report for SB 300, a bill that changes several provisions in the law concerning motor vehicles including a prohibition on texting while driving. The bill would prohibit a person who is operating a motor vehicle on a public road or highway from “texting,” using a wireless communications device to write, send, or read a written communication. The bill would define “wireless communications device” to include any type of device that sends or receives messages but to exclude voice-operated devices. The fine for texting while driving is $60.

Primary Seatbelt Law Passes

The House and Senate approved the conference committee report for HB 2130 . This bill makes wearing a seatbelt a primary violation. It changes the law requiring every occupant of a passenger car manufactured with safety belts to wear a safety belt. The bill also would allow a law enforcement officer to stop a passenger car for a violation of safety belt requirements by anyone in the front seat and by anyone under age 18. Current law does not require adults in the back seat to wear safety belts, and a law enforcement officer can stop a vehicle and issue a citation for failure to wear a safety belt only if another law has been violated. The bill would continue to require that a citation be issued for failure to wear a safety belt by an adult passenger in the back seat only if another law has been violated.

May 3, 2010
Week in Review

The Kansas Legislature came back on Wednesday, April 28, for the veto session and did relatively little work on the House and Senate floor saving most of the time for committees to wrap up budget bills to address the estimated $500 million plus shortfall to state coffers for fiscal year 2010 and 2011. The legislature only has three days worth of pay for the 90 day legislatives session so any legislative days that they remain in session after May 5 will be done without pay. On Friday, April revenue estimates just came out $65m less than inspected two weeks ago which will complicate things as the budgets and tax increases are debated this week and they work down to the wire.

Blending Bill Update

As you recall, at the end of the legislative regular session, the Kansas Association of Ethanol Processors and the Petroleum Marketers were successful in obtaining Senate approval of Sen Sub HB 2058, the ethanol blending bill language that was inserted into a House bill by the Senate Agriculture Committee. This bill will allow for gas retailers to continue to blend ethanol. The Speaker of the House ruled it materially altered (this is a power that he has should the substance of the bill differ substantially from the original bill the provisions were inserted into) and referred it to the House Utilities Committee. We continue to work to find a parliamentary procedural method to allow a fair and balanced debate on the bill’s merits.

Senate Tax Bill Approved

Due to the lack of votes to pass a tax increase bill out of the Senate Taxation Committee, Senate leadership referred tax bills to the Senate Ways and Means Committee where the committees make up is much more accepting to tax increases. After no public hearings, the committee approved a bill, HB 2630, on Friday afternoon that raises $417m for 2011 in new revenue by doing the following:

1) Eliminating the ability to recognize the IRS section 199 deduction for domestic production. Currently, such federal deductions flow through to the Kansas state income calculations when the state recognizes federal adjusted gross income. This raises an estimated $17m. The business community is receiving feedback that provision this is much more harmful and costly to business than estimated. Attempts will be made to eliminate this provision when the full Senate debates the bill.

2) Increase the state sales tax by one cent for 3 years then eliminate all but .3% of a cent dedicated to the state highway fund. Raises and estimated $344m.

3) Increase the tax on cigarettes and other tobacco products. Raises and estimated $63m.

The Senate will debate this bill early this week.

Budget Bills

The House and Senate both made final tweaks to their respective budget bills and will be debating them early this week. The House’s budget, House Sub SB 572, is reliant on budget cuts and federal assistance. It does not require a tax increase. It does include a provision that allows the Grain Warehouse program to remain whole. The Senate’s bill, Sen Sub HB 2631 requires a tax increase to balance the books.

Transportation Plan

The Senate Transportation Committee approved a bill, HB 2650, that authorizes and funds the 10 year statewide comprehensive transportation plan. It funds a $8.2 billion plan that entails 1.7 billion in bonds, a .3% statewide sales tax increase (from 5.3 to 5.6 % starting in 2013) included in Senate Tax bill, and increases for car/light truck ($20) and large truck ($100) registration. The revenue generated will pay for road, rail, and public transit projects for the next decade. The Senate is much more enthusiastic than the House with regard to raising taxes.

March 31, 2010
Blending Bill Ruled Materially Altered

Last week, the Kansas Association of Ethanol Processors and the Petroleum Marketers were successful in obtaining Senate approval of Sen Sub HB 2058, the ethanol blending bill language that was inserted into a House bill by the Senate Agriculture Committee. This bill will allow for gas retailers to continue to blend ethanol. The Speaker of the House ruled it materially altered (this is a power that he has should the substance of the bill differ substantially from the original bill the provisions were inserted into) and referred it to the House Utilities Committee. Attempts were also discussed to place the bill in a non-related conference committee report. We will continue to work to find a parliamentary procedural method of allowing a fair and balanced debate on the bills merits.

Regular Session Ends

The Kansas Legislature ended its regular session early Wednesday morning without passing a budget to address an estimated half billion revenue shortfall. The legislature will reconvene April 28 after the April revenue forecast is determined. They now have the difficult decision of raising taxes, cutting additional government programs, or a combination of the two. Other key issues to be addressed include a ten year renewal of a statewide comprehensive transportation plan and yet another revenue stream to accomplish that goal.

During this last week of the regular session, joint House Senate conference committees met and negotiated differences between House and Senate versions of the bill. The remainder of the week was spent with the House and Senate debating those agreements late into the night. The legislative leadership purposely ended a week early so that cost savings can be obtained by not running over the 90 days statutorily allotted during what is likely to be a lengthy and contentious wrap up session.

Senate Transportation Kicked Out of Committee

The Senate Transportation Committee approved Sen Sub for HB 2650, a bill that authorizes and funds the 10 year statewide comprehensive transportation plan. Sen Sub for HB 2650 funds a $8.2 billion plan that entails 1.7 billion in bonds, a .3% statewide sales tax increase (from 5.3 to 5.6 % starting in 2013), and increases for car/light truck ($20) and large truck ($100) registration. The revenue generated will pay for road, rail, and public transit projects for the next decade. The Senate is much more enthusiastic than the House with regard to raising taxes. The House has an alternative that relies on additional bonding until the economy improves.

Animal Health Department Fees to Governor

The full House approved HB 2666 has been sent to the Governor for approval of one of two identical bills that raise the amounts the Animal Health Department can charge for various inspections. Should the bill be signed, it becomes effective upon being published in the Kansas Register.

Highway Damages Bill Remains In Conference

The House has not debated SB 462, the bill that would allow KDOT to recover damages caused by someone that is driving illegally on the highways. Since the bill is in conference, we will watch diligently and continue to voice our concerns to conferees on the unintended liability consequences of such a dramatic change in public policy.

March 29, 2010
Blending Bill Odyssey Continues

The Kansas Association of Ethanol Processors and the Petroleum Marketers were successful in obtaining Senate approval Sen Sub HB 2058, the ethanol blending bill language that was inserted into a House bill by the Senate Agriculture Committee. The bill now becomes eligible for being debated in a joint House Senate Conference Committee should the Speaker of the House not rule it materially altered (this is a power that he has should the substance of the bill differ substantially from the original bill the provisions were inserted into). Should the bill be eligible for conference, this is our best chance of obtaining a fair debate on the merits of the bill in the House. Last week, SB 425 was stricken from General Orders on the House Calendar. As you will recall, SB 425 was the first blending fuels bill that was gutted by House Commerce Committee and replaced with unemployment insurance language. By striking it from the calendar, House leadership effectively eliminated any chance of the bill being brought up for debate through parliamentary tactics. Our greatest challenge now is convince the speaker to allow the bill to be debated on its merits instead of squelching debate at the request of well funded special interests.

Regular Session Nearing End – Heavy Lifting Pending

The Kansas Legislature is nearing the end of the regular session with still much to be accomplished. Committees have wrapped up most work on bills and Monday through Wednesday was spent in each chamber debating and amending an abundance of bills. The remainder of the week was spent with conference committees meeting and negotiating differences between House and Senate versions of the bill. Next week will entail conference committees continuing to meet and House and Senate bills voting on conference committee agreements. The House and Senate leadership plan to resolve as many legislative issues as possible before tackling budget items at the beginning of the wrap up session. With an estimated half billion dollar budget shortfall, legislators are waiting for the April revenue numbers to come in order to have the most accurate snapshots of the state’s financial situation. The wrap up session will begin April 28 and usually lasts a week to ten days. However, this year’s may go much longer.

KDA Administrative Hearings Goes to Governor

The full House approved SB 393, a bill that a bill would make changes to current law regarding the emergency adjudication procedures of the Kansas Administrative Procedure Act under certain circumstances for the Kansas Department of Agriculture. The bill now goes to the Governor for signature. KDA proposed the bill so that they do not have to have a hearing prior to suspending or revoke a license - they will only be required to give the person an opportunity for a hearing. KDA will still be required to give notice and an opportunity for a hearing however it will be up to the licensee or registrant to request a hearing. This is a fairly common practice in administrative law.   KDA indicates that the bill would reduce the costs of administrative proceedings because a hearing may not be required in each case.

KDA Lab Fee Fund Signed

The Governor signed SB 396, a bill which would allow the Kansas Department of Agriculture to transfer up to 10 percent carryover fees to the lab equipment fee fund with a cap of $500,000. KGFA and KARA both supported the bill due to the importance of this equipment to the functioning of our industry.

Senate Transportation Bills Pending

The Senate Transportation Committee plans to send to the full Senate, a comprehensive transportation plan. The bills, SB 498 and SB 515, will fund the next 10 year comprehensive transportation plan. Two plans are being considered as a final committee product. The first plan entails a 6 cents per gallon motor fuels tax, increases for car ($20) and truck ($100) registration, a .2% sales tax increase, 1.7 billion in new bonding, and a $100 fee increase for oversize/overweight permits. This plan raises and estimated $2.28 billion for the plan. The second plan entails a .3% sales tax increase, increases for car ($20) and truck ($100) registration, $1.7 billion in new bonding, and a $100 fee increase for oversize/overweight permits. This plan raises and estimated $2.74 billion for the plan. The Senate is much more enthusiastic than the House with regard to raising taxes. The House has an alternative that relies on additional bonding until the economy improves.

Green House Gas Resolution

The Senate approved SR 1809, a resolution opposing the United States Environmental Protection Agency's greenhouse gas regulation by rulemaking. This is a nonbinding resolution aimed at expressing the will of the Kansas Senate to the federal government. During the committee hearing, KARA, KGFA, Kansas Cooperative Council and other Ag related groups testified in favor of the resolution.

Water Litigation Fund

The full Senate approved SB 574. This bill, as amended, would require the Director of Accounts and Reports to transfer $2 million from the State General Fund (SWPF) to the Interstate Water Litigation Fund of the Attorney General on July 1, 2011. On each July 1 from 2012 through 2016, $3 million would be transferred from the State General Fund to the Attorney General’s Interstate Water Litigation Fund, for a total of $17 million over the six-year period. This is in response to a budgeting error allowing the $17 million to be lost to the state general fund 3 years ago, but only noticed this year.

Tax Bills Referred to Tax Friendly Committee

Using the “there are more than one way to skin a cat” brand of legislating, Senate leadership referred the tax bills rejected last week by the Senate Tax Committee to the Senate Ways and Means Committee. The Ways and Means Committee deals with all spending matters and has a makeup that is more open to tax increases and to follow the direction of Senate leadership. In order to find revenue to fund the estimated half billion dollar revenue shortfall, these bills raise the state sales and cigarette tax (SB 516), raise the tax on sweetened beverages or concentrate (SB 567), and raise the tax on alcohol (SB 569). It is feasible to predict that Ways and Means will approve these tax increases in some shape or form in the future allowing for full debate in the Senate.

Highway Damage Bill

The House has not debated SB 462, the bill that would allow KDOT to recover damages caused by someone that is driving illegally on the highways. During committee hearings concerns were raised about two provisions in the bill: 1) that KDOT could seek damages “regardless of whether a ticket had been issued or not” and 2) the ability of KDOT to seek indirect damages that did not specifically limit what damages could be sought. While the language that was approved by the House committee is better that than the original bill, we have concerns that the final product is a major shift in public policy that has the potential to astronomically increase the liability potential of any driver, not just business drivers. Such a public policy shift should not be done without the full debate of both chambers and not be placed in a conference committee without a thorough vetting.

March 22, 2010
Blender Bill Informational Hearing

The House Agriculture Committee held an informational hearing on the contents of what was previously of SB 425, the ethanol blending bill. The original bill was killed at the request of House Leadership, but remains alive due to strong support from many legislators. Steve McNinch, Kansas Association of Ethanol Processors, and Tom Palace, Petroleum Marketers and Convenience Store Association, testified in favor of the bill. Palace cited that his members’ need non blended gas at terminals so they can blend higher levels of ethanol its at retail stations. He cited Kansas blends about .8 of 1percent of ethanol in the nation. And the bill does not stop terminals from blending ethanol. Members want the option to purchase clear fuel and blend. McNinch testified that blending at the pump guarantees that RIN savings are passed on to the consumer. Otherwise, they are absorbed by the oil companies.

Opponents included Ken Peterson, Kansas Petroleum Council, and Galen Menard, NCRA Refinery. Peterson testified that this is contractual matter between oil companies and marketers and should stay as such. Menard testified that ethanol blending away from terminals is the best way to blend. He cited that NCRA has invested a lot of money and capital for blending and opposes the mandate that this bill requires.

Tax Debate Postponed

The House postponed a debate on a tax increase bill until May 3^rd. Last week, the House took up HB 2549, a bill that requires that all residential customers pay sales tax on utilities, all non-profit and religious organizations pay sales tax on their purchases and consumers pay taxes on miscellaneous items, such as lottery tickets, bingo, and coin-operated laundries. It is estimated that taxpayers will pay an additional $160 million in taxes previously exempt. After stripping the bill of all measures except a tax on coin-operated laundries, a motion was made by Rep. Nile Dillmore to postpone any further action on the bill until May 3^rd when new revenue estimates are available. The motion was approved and the bill will be debated at that time. It is widely believed my many that a tax increase will be needed to balance the forecasted half billion state revenue shortfall. However, House Republicans have provided a budget that finds the savings through additional cuts and budget adjustments.

Senate Moves on Transportation Plan: Adds New Taxes and Fees

The Senate Transportation Committee continued its hearings on SB 498 and SB 515, bill aimed at funding the next 10 year comprehensive transportation plan. After several days of hearings and discussion, the committee tentatively agreed to two different plans.

The first plan entails a 6 cents per gallon motor fuels tax, increases for car ($20) and truck ($100) registration, a .2% sales tax increase, 1.7 billion in new bonding, and a $100 fee increase for oversize/overweight permits. This plan raises and estimated $2.28 billion for the plan.

The second plan entails a .3% sales tax increase, increases for car ($20) and truck ($100) registration, $1.7 billion in new bonding, and a $100 fee increase for oversize/overweight permits. This plan raises and estimated $2.74 billion for the plan.

During committee hearings, proponents included the SW Kansas Coalition, Ford County, the short line railroads, KS General Contractors, Dustrol industries, Beachner Construction, Reece Construction, Amino Construction, Kansas City Heavy Construction Association, several cities and chambers of commerce and Kansas Aggregate Producers. They cited the need to raise revenue to maintain and expand transportation infrastructure committee. Opponents included the KS Chamber, NFIB, Petroleum Marketers, Casey's General Contractors, Kansas Motor Carriers Association and Americans for Prosperity. They opposed the bills as written due to the increased taxes called for in the legislation.

House Transportation Plan Approved by Committee

The House Transportation Committee approved a scaled back version of a transportation (compared to the Senate) that includes enabling legislation, ability to obtain loans from transportation revolving fund, and bonding authority. It differs from the Senate version in that it does not include a tax increase and increased small and large vehicle registration fees. The language was placed into SB 302, which previously was the intermodal revolving fund bill which was approved in another form last year. Rep. Virgil Peck voiced strong concerns about using bonding due to added debt load to the state.

Animal Health Department Fee Increase

The Senate Way and Means Committee held a hearing, amended, and approved SB 571, the bill that raises the amounts that can that the Animal Health Department can charge for various inspections. The bill was amended to make it effective upon being published in the Kansas Register. Livestock Commissioner George Teagarden testified in support of the bill citing the decrease in SGF funding going towards the agency. He related that the Animal Disease control program will primarily benefit from the increase and would max out the limits.   Senator Taddiken estimated that the fee increase will be more than what the agency actually needs and questioned why the agency needs additional funds. Teagarden said the remainder would go for IT upgrades required by the USDA at a later date. Teagarden asked that the bill become effective upon being printed in the register in order to expedite implementation of the fee. Tim Stroda, Kansas Pork Association testified in support of the bill citing the need to assist the agency in spite of the last two years of difficulty. Mike Beam, Kansas Livestock Association also testified in favor of the bill citing the need for keeping a adequate animal disease program and avoiding furloughs of KAHD employees. There were no opponents.

Senate Committee looks at Sales Tax Exemption Repeal

The Senate Ways and Means Committee held hearings on SB 476, a bill removing certain sales tax exemptions and imposing a sales tax on certain services that under current law are not subject to sales tax. The bill includes requirements that all residential customers pay sales tax on utilities, all non-profit and religious organizations pay sales tax on their purchases and consumers pay taxes on miscellaneous items, such as lottery tickets, bingo, and coin-operated laundries. Groups specifically mention by name would also be required to pay sales tax. It is estimated that taxpayers will pay an additional $168 million in taxes previously exempt. The lion’s share of which comes from the utilities tax.

Business testified in support of stripping provisions in the bill that remove the tax exemption on the servicing of certain equipment. Currently, businesses do not pay sales taxes to service, maintain or clean machinery and equipment (tangible, real property), but this bill would have change that and amount and has the potential to cost our businesses possessing such equipment.   We have heard of different definitions on whether our industry would be affected and fear that an incorrect interpretation could have unintended dire consequences. Opponents included ag related organizations, Kansas Chamber, and several other business related groups. Proponents include teachers unions, school boards, social service organizations and other groups dependent on government assistance.

State Fair Workers Compensation Stopped

The House Commerce Committee chose to not take action on HB 2658, a bill that allows the State Fair Board to bid on workers compensation insurance. Several business groups expressed concerns that this bill could be amended to include workers compensation language very unfriendly to business. When a vote was taken to poll interest in working the bill, the committee voted on party lines (with Republicans prevailing) to not proceed.

Senate Tax Bills Fail

The Senate Tax Committee held hearings on and voted down several bills that would raise the statewide sales tax and other targeted items. They considered a proposals:

·         To increase the statewide sales tax to 6% (from 5.3%) for 3 years then it reverts back to 5.5%. .2% would be targeted to the state goes to the state highway plan. It was estimated to raises $260 million in 2011, $290 million in 2012, and $304 million in 2013.

·         To increase Cigarette Tax by 30 cents to 1.09 per pack. It was estimated to raise $30 million.

·         To increase liquor taxes by increasing the liquor enforcement tax from 8% to 12% and liquor drink tax from 10% to 15%. It was estimated to raise $35.5 million.

·         To place a tax on sweetened beverages and liquids by imposing a .4 cent increase per teaspoon of sweetener. It was estimated to raise $40million.

Senator Jeff Colyer offered to vote the Governor’s sales tax and Cigarette tax (SB 516) out of committee if ranking members and 2010 Gov. Candidate Holland would second motion. Holland refused to support the motion.

House Appropriation Committee Republican Proposal brings in $720m

The House Republican led appropriations committee approved a budget that brings $720 million in the state budget without a tax increase. Their proposals includes but not limited to: 1) concurring with the governor’s recommendation to cut $76.7m from the state budget; 2) Transfer $50m from highway fund; 3) Delete the governors increase for K-12 base state aid. ($32.8m); 4) 5% pay cut for all state employees except corrections, highway patrol, state hospital workers ($21.1m) by closing on Fridays at 3pm; 5) Maintain current education funding ($171.9m); 6) Freeze the states retirees rate ($37.9m); 7) Delay disaster payment until omnibus ($24.8m); 8) 1% State General Fund cut across the board except education and caseloads ($15.9m); and 9) Assume Congress gives 6 month extension on Medicaid $131m. The full House will debate the proposal this week.

Green House Gas Resolution

The Senate Natural Resources Committee held a hearing on and approved SR 1809, a resolution opposing the United States Environmental Protection Agency's greenhouse gas regulation by rulemaking. This is a nonbinding resolution aimed at expressing the will of the Kansas Senate to the federal government. Kansas Agribusiness Retailers Association, Kansas Grain and Feed Assocation, Kansas Cooperative Council and other Ag related groups testified in favor of the resolution.

Water Litigation Fund

The Senate Ways and Means Committee held a hearing, amended and approved SB 574. This bill, as amended, would require the Director of Accounts and Reports to transfer $2 million from the State General Fund (SWPF) to the Interstate Water Litigation Fund of the Attorney General on July 1, 2011. On each July 1 from 2012 through 2016, $3 million would be transferred from the State General Fund to the Attorney General’s Interstate Water Litigation Fund, for a total of $17 million over the six-year period. This is in response to a budgeting error allowing the $17 million to be lost to the state general fund 3 years ago, but only noticed this year.

March 15, 2010
Blending Bill

Options are being weighed on SB 425, the ethanol blending bill. As we previously reported, House leadership affectively killed the bill under pressure from well financed anti-ethanol special interests. We anticipate further action on the bill in the near future through alternative legislative procedures.

Migration of Natural Gas

The Senate Natural Resources Committee held a hearing on SB 553, a bill that deals with the issue of underground migrating natural gas. SB 553 would amend authority granted the Corporation Commission to adopt rules and regulations regarding the storage of natural gas by putting procedures in place to allow for the recovery of migrating natural gas. This bill stems from a situation in Pratt and Kingman County where there is a large underground storage cavern used to store natural gas. Royalty owners claim they have mineral rights to gas they are obtaining from wells drilled near the cavern and are supporting the bill to ensure they remain receiving payments. Natural gas companies oppose the bill testifying that the stored gas is actually their private property and the royalty owners are tapping into and getting paid for illegally obtaining refined, stored gas. They also argue that this is a Federal Energy Regulatory Commission issue.   KAEP has not taken a position on this bill, but we are watching closely. The hearings will continue next week.

Department of Agriculture Budget

The Senate Ways and Means Committee approved the Kansas Department of Agriculture’s Subcommittee’s proposed budget. The committee chose to cut the agency’s budget by an additional 2.5% or $233,800. Approved in the budget report was a statement stressing the need for a strong and credible state grain warehouse program. Also, in the Kansas Animal Health Department budget report was a request to recommend introduction of a bill to increase the statutory maximum feed within the animal disease control program.

Lab Equipment Fee Budget

The House approved 112-1 SB 396, which would allow the Kansas Department of Agriculture to transfer up to 10 percent carryover fees to the lab equipment fee fund with a cap of $500,000. Ag-related groups spoke in favor of the bill at the committee hearing due to the importance of this equipment to the functioning of our industry. This bill now goes to the Governor.

State Fair Workers Compensation Bill

The Senate Business and Labor Committee held a hearing on SB 364, a bill that allows the State Fair Board to bid on workers compensation insurance. This bill is similar to HB 2658 which received a hearing last week. The State Fair Board testified that the fair could save up to $100k. This is considered non controversial bill. However, like the House version, business groups are concerned that this bill could be amended to include workers compensation language very unfriendly to business.

Sales Tax and Cigarette Tax Increase Hearings

The Senate Tax Committee held a series of hearings on SB 516, a bill requested by the Governor that raise the tax on cigarettes and a one cent statewide sales tax. The cigarette portion of the bill was stripped out of the bill and placed in HB 2388. The sales tax component increases the sales tax one cent for two years then decreases to a .02 cents increase that is dedicated the state highway fund. The governor hopes to raise over $300million from the sales tax increase. Proponents included the school teachers' union, the Kansas Association of School Boards, social service organizations, and other groups reliant on government assistance. Hearings will continue next week when opponents will be given the opportunity to address the committee.

Texting Ban and Primary Seatbelt Bill

The full Senate approved 27-12 HB 2437. This bill would enact a ban on texting while driving and would allow an officer to stop a vehicle if each occupant, including all adults, is not properly restrained. The bill would prohibit text messaging while operating a moving motor vehicle. The bill would provide that a first conviction would be a traffic infraction subject to a $100 fine. Subsequent offenses could result in higher fines and possible license suspension. The seatbelt provisions require each adult occupant of a passenger car manufactured with safety belts to have a safety belt properly fastened around the occupant’s body when the car is in motion. Current law requires those under 18 and adults in the front seat to use safety belts and includes certain exceptions, which would not be amended by the bill. The bill also would allow a law enforcement officer to stop a vehicle if any adult occupant is not properly belted, by removing a provision that prohibits such a stop.

Transportation Funding Bills Heard

The Senate Transportation Committee held a hearing on SB 498 and SB 515, bills to fund the Kansas Comprehensive Transportation Plan. Attempts to reauthorize the program last session have been delayed due to budgetary concerns and a recent multimillion dollar cuts in KDOT’s budget by Governor Parkinson.   There are several channels of thought for any enhancements: 1) Maintain current infrastructure; 2) Expand, enhance and modernize; and 3) Move forward on a high priority/low priority bases. Funding sources included in these bills include a new motor fuels sales tax that replace the current gallonage tax, increased registration fees for large ($100 increase) and small vehicles ($20 increase), and increased bonding. Tax increases would not kick in until 2013, but the bonding will start upon passage of the bill. KDOT estimates the bills will raise from 3.2 to 3.8 billion dollars. Hearing will continue next week with proponents and opponents and further explanation from the agency.

During the cigarette tax portion of the hearing, HB 2388, staff testified the 55 cent per pack cigarette tax increase is estimated to raise over $70 million in new revenue. Proponents included the above mentioned groups. Opponents included convenience and grocery stores, smoke shops, tobacco companies, and anti-tax organizations. They cited lost jobs and lost tax revenue to neighboring states.

Property Tax Stabilization Bill ALMOST approved by Committee

The House Taxation amended and approved HB 2630, the Property Tax Accountability Act. However, the day after the committee, Representative Tom Hawk invoked a procedural motion to reconsider the bill. The motion passed and the Chair announced he would address the bill again next week. This bill allows that the base mill rate (excluding 20 mills collected statewide for schools, 1.5 mills for state building fund and any mill rate approved by voters) move proportionally in the opposite direction of change in total appraised values on existing property (mill rate declines if values increase / mill rate increases if values decline) so that total tax on existing property remains the same as the prior year. The bill was amended to allow counties to increase the mil levy equal or less than changes Consumer Price Index increase and calls for a protest petition should a mil levy increase exceed the CPI.

During the hearing, proponents included the bill’s sponsors Representatives Steve Brunk, Arlen Siegfreid, Sharon Schwartz. Other proponents included Kansas Grain and Feed Association, Kansas Agribusiness Retailers Association, the Kansas Policy Institute, and Kansas Association of Realtors. They testified that total property taxes in Kansas have far outpaced the population growth and rate of inflation in the last ten years. This bill will allow for better tax stability for our members by allowing valuation increases to be moderated by mill levy adjustments. Opponents include the Kansas Association of School Boards, the Kansas League of Municipalities, and the Kansas Association of Counties. They cited their needs to allow local control and flexibility

Coming Next Week: Lots of Tax Bills

In order to find revenue to fund the estimated half billion dollar revenue shortfall, the Senate has scheduled several hearings to look at the repeal of certain non ag related sales tax exemptions (SB 476), raising the state sales tax (SB 516), raising the tax on sweetened beverages or concentrate (SB 567), and raising the tax on alcohol (SB 569). There are also hearings scheduled to look at replacing the motor fuels tax with a sales tax on fuels and raising vehicle licensing fees to fund a comprehensive highway plan (SB 498 and SB 515). We will watch closely as every moving part in the state house has the ability to hurt the industry.

March 8, 2010
Blending Bill Setback by Special Interests

The House Commerce Committee effectively killed SB 425, the blending bill, in its current form. House leadership ordered the Committee Chairman Representative Steve Brunk to gut the provisions of SB 425 and replace them with the provision of an Unemployment Insurance Bill. This was done specifically to kill the bill and was accomplished through pressure applied by well financed, anti-ethanol special interests.

There is a saying in the statehouse that nothing ever dies and KAEP and the Petroleum Marketers are reviewing options to resurrect our bill. Now that the rug of democracy and the traditional legislative process has been yanked from underneath us, we will need to find an inventive way to accomplish our goal.

Agriculture Related Budgets

The House Appropriations Committee delayed making any decisions on the Kansas Department of Agriculture, State Conservation Commission and Kansas Water Office budgets until the veto session. Lawmakers want to see what the April Revenue estimates look like before they complete the 2011 fiscal year budget. This means any cuts or transfers of money until mid to late April.

Interstate Water Litigation Fund

Senate Ways and Means discussed SB 558, which is to provide a special fund for the interstate water in the hopes that it won't be "misappropriated" or "lost" in the shuffle like the previous $17m that was transferred into the state general funds. The bill would also allow the fund to keep any interest earned.

Supporters of bill included Attorney General Six, Kansas Grain and Feed Association, Kasnas Agribusiness Retailers Association, Kansas Farm Bureau, Kansas Cooperative Council, Kansas Livestock Association, Groundwater Management 3, Groundwater Management 4, and the Secretary of the Kansas Department of Agriculture.

Lab Equipment Fee Budget

The House Agriculture and Natural Resounces Committee held a hearing regarding SB 396, which would allow the Kansas Department of Agriculture to transfer up to 10 percent carryover fees to the lab equipment fee fund with a cap of $500,000. Leslie Kaufman with the Kansas Coop Council and Mary Jane Stankiewicz, with KGFA and KARA both spoke in favor of the bill due to the importance of this equipment to the functioning of our industry. This bill has already passed the Senate.

Repeal of Residential Utilities Sales Tax Exemption

The House Tax Committee amended and voted out of committee with recommendation HB 2549, a bill removing certain sales tax exemptions and imposing a sales tax on certain services that under current law are not subject to sales tax.   Included in the bill are requirements that all residential customers pay sales tax on utilities, all non-profit and religious organizations pay sales tax on their purchases and consumers pay taxes on miscellaneous items, such as lottery tickets, bingo, and coin-operated laundries. It is estimated that taxpayers will pay an additional $160 million in taxes previously exempt. The lion’s share of which comes from the utilities tax.

Businesses were successful in stripping provisions in the bill that remove the tax exemption on the servicing of certain equipment. Currently, businesses do not pay sales taxes to service, maintain or clean machinery and equipment (tangible, real property), but this bill would have change that and amount and has the potential to cost our businesses possessing such equipment.   We have heard of different definitions on whether our industry would be affected and fear that an incorrect interpretation could have unintended dire consequences. The Committee also stripped from the bill a repeal all of exemptions granted “by name” to a specific organization and non profits. The bill now goes to the House floor where it may be debated should House leadership choose.

Unemployment Tax Relief Approved by Senate

The Senate unanimously approved HB 2676, a bill that provides employers needed unemployment insurance for 2010 and 2011. The bill amends the Employment Security Law regarding contribution rates, penalties, and interest. The bill would provide that for calendar year 2010 and 2011 the charge for contributing employers in rate groups 1 through 32 (employers with a positive retention history) would be that of the 2010 original (lower) tax rate computation table. Contributing employers in rate groups 33 through 51 (employers with a high turnover rate) would be capped at a 5.4 percent contribution rate. In addition, employers would have 90 days past the due date to file their contribution without being charged a penalty or interest. The bill will soon go to the Governor for signature

KDOT Damage Bill

The House Transportation held a hearing on SB 462, the bill that would allow KDOT to recover damages caused by someone that is driving illegally on the highways. Opponents raised concerns about two provisions in the bill: 1) that KDOT could seek damages “regardless of whether a ticket had been issued or not” and 2) the ability of KDOT to seek indirect damages that did not specifically limit what damages could be sought. Opponents also asked the committee to limit the indirect damages to only certain items that would be listed in the bill. After the hearing, Chairman Hayzlett stated that he would wait to hear if the parties were able to come to some agreement before working the bill. Those in opposition to the bill were: Kansas Grain and Feed Association, Kansas Agribusiness Retailers Association, Kansas Manufactured Housing and the Kansas Cooperative Council. Only KDOT testified in favor of the bill.

State Fair Workers Compensation Bill

The House Commerce Committee held a hearing on HB 2658, a bill that allows the State Fair Board to bid on workers compensation insurance. The State Fair Board testified that the fair could save up to $100k. This is considered non controversial bill. However, business groups are concerned that this bill could be amended to include workers compensation language very unfriendly to business on the House floor.

March 1, 2010
Week in Review

This week started slowly with the legislature taking Monday off after turnaround, but quickly gained momentum. After lengthy debate, the House approved and sent to the Governor a bill that bans smoking in most public locations. Certain exemptions apply including private clubs, smoke shops, nursing homes and state owned and operated casinos. Proponents cited the dangers of second hand smoke. Opponents noted the irony of the government telling business owners their place of business must be smoke free, yet allows their own state owned casinos patrons to smoke.

Ethanol Blending Bill

After full Senate approved SB 425, the bill requiring terminals to offer all grades of fuel in Kansas, the Speaker of the House received the bill from the Senate and referred the bill to the House Commerce Committee. This committee is made up of a chairman and several members with interests very supportive of petroleum producers and a hearing seems unlikely in that committee. KAEP and the Petroleum Marketers have been in communication with House leadership and urged referring the bill to a more appropriate venue for a hearing. We will continue our communication with leadership to ensure a fair hearing on the bill.

Property Tax Stabilization Bill

The House Taxation committee held a hearing on HB 2630, the Property Tax Accountability Act. This bill allows that the base mill rate (excluding 20 mills collected statewide for schools, 1.5 mills for state building fund and any mill rate approved by voters) move proportionally in the opposite direction of change in total appraised values on existing property (mill rate declines if values increase / mill rate increases if values decline) so that total tax on existing property remains the same as the prior year. Proponents included the bill’s sponsors Representatives Steve Brunk, Arlen Siegfreid, Sharon Schwartz, the Kansas Policy Institute, and Kansas Association of Realtors, Kansas Grain and Feed Association and Kansas Agribusiness Retailers Association. They testified that total property taxes in Kansas have far outpaced the population growth and rate of inflation in the last ten years. This bill will allow for better tax stability for our members by allowing valuation increases to be moderated by mill levy adjustments. Opponents include the Kansas Association of School Boards, the Kansas League of Municipalities, and the Kansas Association of Counties. They cited their needs to allow local control and flexibility.

Rainy Day Fund

The Senate Ways and Means Committee held a hearing on SCR 1627. This an amendment to the Kansas Constitution creating a budget stabilization fund. It would require that 1% of state revenue be placed into a "rainy day" fund. The fund would be capped at 7.5% of total annual revenue. The legislature would vote to transfer funds from the fund to the state general fund only when there is a budget deficit and that the deficit not be caused a tax cut. State Treasurer Dennis McKinney testified in support, but suggested the limit be raised to 15%. The Kansas Chamber also testified in support and suggested a spending stipulation, in addition to the tax cut provision, be placed on the amendment as well.

KDA Administrative Hearings Bill

The House Agriculture Committee held a hearing on SB 393, a bill would make changes to current law regarding the emergency adjudication procedures of the Kansas Administrative Procedure Act under certain circumstances for the Kansas Department of Agriculture. KDA proposed the bill so that they do not have to have a hearing prior to suspending or revoke a license - they will only be required to give the person an opportunity for a hearing. KDA will still be required to give notice and an opportunity for a hearing however it will be up to the licensee or registrant to request a hearing. This is a fairly common practice in administrative law.   KDA indicates that the bill would reduce the costs of administrative proceedings because a hearing may not be required in each case.

February 22, 2010
Turnaround Week

This week was “turn around” week. It is when all “non exempt” bills must be passed by the chamber of origin by Saturday or they are dead for the session. The House and Senate wrapped up on Friday after several late evenings of debate. Several hot button topics were debated including the passage of a bill banning texting while driving and an unsuccessful attempt to repeal the death penalty. The legislature will take Monday off and return on Tuesday.

Ethanol Blending Bill Approved

The full Senate approved SB 425, a bill a bill requiring terminals to offer all grades of fuel in Kansas. This bill was introduced by the Petroleum Marketers and endorsed by the Kansas Association of Ethanol Processors. After a vigorous debate about RINs, monopolies, government control in our lives, the Senate approved the bill with a 23-16. The bill will now go to the House.

House Unemployment Insurance Relief Tax Approved

The full House approved HB 2676, a bill that provides Unemployment Insurance Tax relief for 2010 and 2011. The bill amends the Employment Security Law regarding contribution rates, penalties, and interest. The bill would provide that for calendar year 2010 and 2011 the charge for contributing employers in rate groups 1 through 32 (employers with a positive retention history) would be that of the 2010 original (lower) tax rate computation table. Contributing employers in rate groups 33 through 51 (employers with a high turnover rate) would be capped at a 5.4 percent contribution rate. In addition, employers would have 90 days past the due date to file their contribution without being charged a penalty or interest. KARA and KGFA were part of a coalition of businesses supporting this legislation.

Senate Unemployment Compensation Bill

Senator Wagle, Chair of the Senate Business and Labor Committee, held hearings and discussed adding the following items to the House unemployment compensation bill recently approved (HB 2676) or a similar piece of legislation. She would like the bill to: increase the taxable threshold of income to $9000 in 2011 and $10,000 in 2012, impose a surcharge on employers to pay the interest on federal loans to keep to fund solvent, eliminating the waiting week for benefits, remove the automatic cost of living adjustment, eliminate the “trailing spouse” (benefits for a relocated out of state spouse) for Fiscal year 2010 and 2011, and require the Kansas Secretary of Labor report to House and Senate Leadership regularly.   The committee’s work is not complete and we will continue to monitor.

Highway Damage Bill Approved

The full Senate approved SB 462, a bill specifying indirect costs as costs for which the owner and driver of any vehicle or object being illegally operated on any highway or highway structure would be liable if that operation causes damage to the highway or highway structure. The owner and driver would liable for reasonable costs associated with repair of damages regardless of whether a ticket was issued. Current law makes the driver and owner liable for “damage” caused by illegal operation. The bill would include in indirect costs the reasonable costs associated with damage assessment, engineering and design, mobilization, traffic control, and detours. The bill still has flaws but the approved is better than originally written. We will work with House transportation committee members to perfect the bill.

Shifting the Burden of Proof in Tax Appeals Bill Stopped

The Senate Judiciary Committee to “table” or effectively stop SB 528, a bill that shifts the burden of proof in the tax appeal process. Under current law, county appraisers are required to produce evidence that demonstrates by a preponderance of the evidence, the validity and correctness of the valuation assigned to the property. SB 528 would require the property owner, rather than the county appraisers, produce this evidence. During the hearing, opponents explained the burden should remain with the government who has the information.

Laboratory Fee Fund Approved By Senate

The full Senate approved SB 396, which allows a fee fund to be established to acquire, maintain or replace lab equipment. The bill does not increase fees or establish new fees but instead allows the KDA to move 10 percent of the carry over balances from the fee funds go into this fund. The bill also caps the fee fund at $500,000.

Workers Compensation Bill Introduced

Senator Kelly Kultala introduced SB 545, a bill very costly to business that raises all compensation caps and gives the employee choice of a physician. Senate Committee Chair Susan Wagle is aware of its presence, dislikes the bill, and will not hear it at this time. The labor unions and trial lawyers have already scheduled a rally/protest at the statehouse on February 25 to bring attention to the bill. It is, after all, an election year so business is prepared to square off against those groups whose primary goal is to increase the cost business.

February 15, 2010
COMING THIS WEEK

Bill Requiring the Sale of All Fuel Grades

The Senate Agriculture Committee will take action on SB 425, a bill requiring terminals to offer all grades of fuel in Kansas. The Kansas Association of Ethanol Processors has endorsed this bill. It is scheduled for continued hearing and action: Tuesday, 2/16/2010, 8:30 AM, Rm 144-S, the statehouse.

Turnaround Week

This upcoming week is what is referred to as “turn around” week. It is when all bills must be passed by the chamber of origin by February 20 or they are dead for the session. The original turnaround day was February 27, but House and Senate leadership moved the date up to allow for extra days at the end of the session to debate the budget. The exceptions are bills that have at any point of time been referred to committees exempt from bill deadlines. These committees include House Appropriations, Calendar and Printing and Taxation, House and Senate Federal and State Affairs, Senate Ways and Means, or other select committee. Committees will wrap up their work by Wednesday and the remainder of the week will be spent debating bills on the House and Senate floors. This will make for long sessions and may roll over to Saturday.

WEEK IN REVIEW

Sales Tax Exemption Repeal

The House Tax Committee held and is continuing to hold hearings on HB 2459, a bill removing certain sales tax exemptions and imposing a sales tax on certain services that under current law are not subject to sales tax. The Kansas Chamber, KGFA and KARA will testify against the bill on provisions in that removes the tax exemption on the servicing of certain equipment. Currently, businesses do not pay sales taxes to service, maintain or clean machinery and equipment (tangible, real property), but this bill would change that and amount and has the potential to cost our businesses possessing such equipment.   They have heard of different definitions on whether industry would be affected and fear that an incorrect interpretation could have unintended dire consequences. The Secretary of Revenue, School Labor Unions, and social service organizations testified in favor of the bill. Over 60 entities opposed to the bill will testify this week. They are opposed to the items following items included in the bill:

Repeal the state tax exemption on residential utilities.

Repeal all exemptions granted “by name” to a specific organization. Either replace it with an exemption for all organizations similarly situated, or revoke the exemption.

Tax all admissions to recreation activities or events, whether operated by a non-profit organization, city, county or private organization. These changes should be made in the 2010 legislative session.

Reestablish the policy that all non-profit and religious organizations pay sales tax on their purchases.

Repeal miscellaneous consumer exemptions, such as lottery tickets, bingo, and coin-operated laundries.

Highway Damage Bill

KGFA, KARA, The Kansas Cooperative Council and The Manufactured Housing Association will continue to meet with representatives of KDOT to further discuss SB 462. This bill places in states that when a highway or highway structure is damaged, the responsible party is liable for all costs associated with the repair of damage, including direct and reasonable consequential costs. Consequential costs include, but are not limited to, costs associated with damage assessment, engineering and design requirements, mobilization, traffic control, and detour costs. The expansion of this policy could bare excessive and unwarranted costs to “responsible” parties.

Shifting the Burden of Proof in Tax Appeals

The Senate Judiciary Committee held a hearing on SB 528, a bill that shifts the burden of proof in the tax appeal process. Under current law, county appraisers are required to produce evidence that demonstrates by a preponderance of the evidence, the validity and correctness of the valuation assigned to the property. SB 528 would require the property owner, rather than the county appraisers, produce this evidence. This bill stems from a property tax controversy with appraisals dispute between Nebraska Furniture Mart, Best Buy, and other “big box” commercial entities and taxing entities. Proponents included the League of Municipalities, city of Lenexa, and the city of Overland Park. They explained the bill establishes a more fair tax system and current law states that no presumption shall exist in favor of the county appraiser with respect to the validity and correctness of such determination. Opponents included the Kansas Grain and Feed Association, Kansas Agribusiness Retailers Association, Kansas Cooperative Council Kansas Realtors, Kansas Farm Bureau, Kansas Livestock Association, and Manufactured Housing Association. They explained the burden should remain with the government who has the information. The Realtors stated that the appraisers would be less apt to negotiate if you allow the government decision to have a presumption of validity.

KDOT to Expand Rail Loan Plan

The Senate Transportation Committee held a hearing SB 502, a bill that expands the list of entities who qualify for funding under KDOT's freight rail plan. The bill opens up the plan to industrial parks, cities and counties. The bill allows more flexibility in expanding shortline infrastructure. KDOT testified in favor of the bill but also explained they could accomplish the same outcome through the rules and regulations process. Kansas Grain and Feed and the Kansas Cooperative Council testified in strong support of the bill, but related that they are comfortable going through the regulatory process if the same results are accomplished. KDOT assured stakeholders that they would move forward regulation promulgation process immediately. The Committee approved going down the regulatory route and urged KDOT to move forward immediately. There will be no need for legislative action.

Capping Benefits

The Senate Business Committee held a hearing on SB 529, a bill that caps the maximum weekly benefit through (no cost of living adjustment). The Kansas Chamber testified in favor of the bill citing that Kansas are in top 5 states of unemployment insurance fund tax increases and a cap would assist in keeping the balance in check.

Moratorium on New Tax Exemptions

The House Taxation Committee held a hearing on House Concurrent Resolution 5028, a resolution that places a three year moratorium on the granting of new tax exemptions, tax credits or economic development incentive programs. Secretary of Revenue Joan Wagnon testified in support citing the decrease in the tax base and the need to keep revenues flowing into the state coffers. Other proponents included education, social service, and childrens advocacy organizations. Opponents testified that flexibility is need in tax policy during trying economic times and cited economic development situations of which such policies have saved jobs and increased revenue as a result. They included several of chambers of commerce and like minded organizations.

UI Tax Credits for Employers Bill Dies

In the House Commerce the Department of Revenue testified against HB 2664, a bill that provide income tax credits to offset unemployment insurance tax increases, but does not provide relief of current rates. The agency expressed concerns that the state could not absorb the hit to the State General Fund during this difficult economic recession. The committee chairman, Rep. Steve Brunk, indicated that this bill will not proceed through the process.

Unemployment Insurance Relief Bill Approved by Committee

The House Commerce Committee held hearings, amended, and approved on HB 2676, a bill, as amended, implements the original 2010 (lower) unemployment insurance tax rate and provides for a 180 day window forgiving penalties and interest of late payments. The bill was introduced by Representative Aaron Jack. Other proponents included the KGFA and KARA as part of a coalition spearheaded by the Kansas Chamber, the Kansas Society of Human Resource Managers. Proponents cited that employers don’t need a huge tax hit during a recession and can address the unemployment insurance shortfall in subsequent legislation to be aggressed later in the session. Secretary of Labor Jim Garner defended the rate increase for 2010 citing the increase mechanism is specified in current law. He expressed concern that HB 2676, as written, will violate federal law and will have a extreme negative fiscal impact on the fund. The bill now goes to the full House for debate.

Laboratory Fee Fund Approved By Senate Committee

Senate Ways and Means approved SB 396, which allows a fee fund to be established to acquire, maintain or replace lab equipment. The bill does not increase fees or establish new fees but instead allows the KDA to move 10 percent of the carry over balances from the fee funds go into this fund. The bill also caps the fee fund at $500,000.

Agriculture Budget Approved

The House Appropriations Committee tentatively has approved the Kansas Department of Agriculture Budget. The Agriculture and Natural Resources budget committee recommended an additional $75,000 enhancement over and above the governor's recommendation for FY 2011 for the state grain warehousing program. The budget committee recommended diverting funds from the KDA’s contributions to the state’s monumental buildings fund to the grain warehouse and dairy programs. Kansas Grain and Feed Association and Kansas Cooperative Council supported the grain warehouse program funding and were able to include a proviso excluding the program from cuts if at all possible. The new money slated for the dairy and grain warehousing were deleted by the full Appropriations Committee, but the proviso language remained in the bill. The committee will vote on the full budget next week.

February 8, 2010

Bill Requiring the Sale of All Fuel Grades

The Senate Agriculture Committee held a hearing on SB 425. Tom Palace with the Kansas Petroleum Marketers and Convenience Store Association brought forward this bill to require terminals to offer all grades of fuel in Kansas. Others speaking in support of the bill were: Zarco 66 in Lawrence, Growth Energy, 24-7 Stores, Western Plains Energy, the Kansas Grain Sorghum Association and the Kansas Corn Growers Association. 24-7 store owner, Mark Augustine, requested the committee ensure competitive forces so that retailers are allowed to shop for the lowest price for ethanol and gas. The Kansas Association of Ethanol Processors did not have a position at the time of the hearing, but have subsequently voted to support the bill.

Sen. Janis Lee inquired to Steve McNinch, Western Plains Energy, why this bill was asking for more government control. McNinch replied that this bill asks for transparency. Sen. Lee also asked if this issue is being litigated in other states. Palace replied yes, but had heard that the court in North Carolina had upheld this language.

Opponents were Magellan Pipeline and the Kansas Petroleum Council. Magellan does not own any of the gasoline or ethanol that it handles and therefore will be impacted by SB 425 because the bill promotes splash blending as opposed to terminal blending. Kansas Petroleum Council stated this bill violates the commerce clause, mandates refiners carry certain fuels, and conflicts with federal law that requires blending of fuels. National trade association may sue if this bill is passed in Kansas.

The hearing is being held open and will be continued at a later date.

Bill Assuming Liability for Damaged Highways

The Kansas Department of Transportation introduced SB 462, a bill assuming liability to damaged infrastructure. This bill is in response to an accident in which a bridge in Hays was severely damaged. While KDOT could recover actual damages, KDOT was prevented from recovering detour costs while they repaired the damage. KDOT asked for the word "illegal" removed because property is damaged. KGFA testified that we were concerned that if we were legally operating a vehicle with an overweight and over sized permit this bill would allow KDOT to collect damages if the road was damaged. KDOT said it is not a common occurrence but it happens 3-4 times over 5 years.

State Farm insurance, KAIA, Kansas Manufacturer Association also appeared in opposition to this bill. All parties asked for the term "legal" be left in the statute. KDOT agreed to get a hold of the opponents and work out language so that someone who is operating a vehicle legally should not be liable for damages.

Kansas Department of Agriculture Budget

KDA presented its budget for fiscal year 2011 to the House Agriculture Committee and requested state general funds for the following:

$150,000 for a large scale truck

$75,000 for grain warehouse program to sustain it at the current level of service. The funds would go towards salaries.

$370,000 for a machine to analyze pesticide and feed samples

However, the Governor did recommend these changes.

KDA Administrative Hearings Bill Passes Senate

The full Senate approved SB 393, a bill that changes current law regarding the emergency adjudication procedures of the Kansas Administrative Procedure Act under certain circumstances for the Kansas Department of Agriculture. KDA proposed the bill so that they do not have to have a hearing prior to suspending or revoke a license - they will only be required to give the person an opportunity for a hearing. KDA will still be required to give notice and an opportunity for a hearing however it will be up to the licensee or registrant to request a hearing. This is a fairly common practice in administrative law.   KDA indicates that the bill would reduce the costs of administrative proceedings because a hearing may not be required in each case.   The final vote was 38-0.

Unemployment Rate Discussion

The Senate Business and Labor committee continued to receive testimony from Kansas Department of Labor Jim Garner with regard to the depleted unemployment compensation fund. The state officially runs out of money in the fund this month and has subsequently raised rates on employers and borrowed money from the federal government. Garner gave an overview of the Kansas Unemployment Rate Assessments as they relate to a positive turnover history and negative turnover balance employers. Senator Wagle questioned why employers with a positive rating were receiving such a high tax increase. He responded that only 9% of employers have a negative rating and difference had to be made up by the whole. Senator Holland asked of other states found inventive solutions to address shortfall. Garner replied that there is no easy fix. Senator Wagle polled the committee about considering a cap on the cost of living automatic increase and/or increasing the surcharge to employers with a negative balance. The committee voted to introduce a bill capping the benefits COLA for 3 years.

Kansas Streamlining Government Act

The House Appropriations Committee approved HB 2442, a bill would creating an independent commission to review and recommend when and if state programs or agencies should be consolidated, changed or even eliminated. The Kansas Veterinary Medicine Association and the Kansas Association Realtors successfully amended the bill to have all agencies that are "exclusively fee funded" to be exempted from this bill.

KBA Presentation

Kansas Bioscience Authority President Tom Thorton presented to the Senate Commerce Committee an update on agency and new developments. He testified that huge strides have been made in Kansas. However, due to the cuts of the last three years, the KBA has tightened its focus on project funding. Concerning NBAF, the KBA's goal is to maximize the collaboration of related bioscience organizations.   The KBA's end result is to have Kansas referred to as “the defender of American agriculture”.

Water Fund Money Lost

The Attorney General's office reported the Senate Ways and Means Committee that due to error in the 2007 budget bill, $19 million was inadvertently sent to the State General Fund from the Water Litigation Fund. This money was to be collected from water court settlements between Colorado and Nebraska and used to pay for future litigation. Now the fund is broke and Kansas has literally no money to defend itself with regard to water litigation. The legislature will consider stop gap funding for this fiscal year.

Budget Rescission Bill Approved by House Committee

The Appropriations Committee approved HB 2222, a bill that cuts to several agencies that could not be accomplished by the Governor without the legislature’s approval. The committee amended the bill to reduce legislative salaries by 11%. Rep. DeGraaf offered an amendment denying Planned Parenthood any state dollars. Staff reported that such an amendment may jeopardize federal Medicaid money and the amendment failed. Rep. McCleland offered an amendment funding the Judiciary $5 million with money going to public education which failed as well. An amendment cutting the voucher days for legislature by 25 days-$853,000 was approved.   Other cuts in the bill include: $250,000 cut to KTEC, $2 million cut to Kansas Housing Corporation, $80 million from the KS Department of Transportation, $500,000 from the Department of Commerce, $5 million from the Securities Commission, Cut 50% of legislators franking privileges (free postage), and $1.1 million from the legislature.

SB 396 - Lab Fee Fund

Senate Ways and Means held a hearing on SB 396, which allows a fee fund to be established to acquire, maintain or replace lab equipment. The bill does not increase fees or establish new fees but instead allows the KDA to move 10 percent of the carry over balances from the fee funds go into this fund. The bill also caps the fee fund at $500,000.

January 31, 2010

Ethanol Briefings

On Monday, January 25^th, Mary Jane Stankiewicz and Greg Krissek on behalf of the KAEP will presented to the House Agriculture a report on the current status of the ethanol industry in Kansas and the industry’s prospective outlook. On Tuesday, January 26, Abengoa Bio-energy made a presentation to the House Utilities Committee.

Sales Tax Rejected By Committee

The House Tax Committee rejected HB 2475, a bill that increases the state sales tax 1 cent sales tax for 3 years to address a $400 million budget hole for fiscal year 2011. After the 3 years, all but .02 of a cent will sunset and that remaining portion will be dedicated to transportation infrastructure funding. This does not mean that the contents of the bill are gone for good. We expect to see a sales tax increase proposed again in some shape or form prior to the session’s end. For the time being, legislators will focus on alternative proposals to fill the budget gap.

Unemployment Fund Shortfall

Several committees continued to hear testimony from the Kansas Department of Labor on the Department of Labor on the unemployment fund shortfall and the subsequent increase in the fund’s rates.   Due to the unexpected numbers of unemployed Kansans due to the recession, the Unemployment insurance fund will run out of money this. The state will need to borrow money from the federal government in order to make needed unemployment payments. We will keep you apprised of developments as legislative initiatives move forward.

Budget Rescission Bill Approved by Senate

The Senate approved HB 2222, a bill that cuts to several agencies that could not be accomplished by the Governor without the legislature’s approval. There was an attempt to restore $22 million in Medicaid cut by the Govrnor, but after lengthy debate, the amendment failed. Other cuts include: $250,000 cut to KTEC, $2 million cut to Kansas Housing Corporation, $80 million from the KS Department of Transportation, $500,000 from the Department of Commerce, $5 million from the Securities Commission, Cut 50% of legislators franking privileges (free postage), and $1.1 million from the legislature.

Kansas Streamlining Government Act

The House Appropriations Committee held a hearing on HB 2442, a bill would creating an independent commission to review and recommend when and if state programs or agencies should be consolidated, changed or even eliminated. The hope is that the independent commission would be more objective and thus real savings would occur.

The bill drew fire because it would not be subject to the Kansas Open Meetings Act. The authors, Represenative Lee Taffanelli and Senator Derek Schmidt, defended this because they believe the intent is to protect employees who might fall under the whistle blower act when they appear before the commission. The Kansas Chamber, Wichita Independent Business Association and other pro-business groups gave written testimony in favor of the bill. The Kansas Veterinary Medicine Association and the Kansas Association Realtors requested an amendment to have all agencies that are "exclusively fee funded" to be exempted from this bill.

KDA Administrative Hearings Bill

The Senate Agriculture Committee held a hearing on SB 393, a bill would make changes to current law regarding the emergency adjudication procedures of the Kansas Administrative Procedure Act under certain circumstances for the Kansas Department of Agriculture. KDA proposed the bill so that they do not have to have a hearing prior to suspending or revoke a license - they will only be required to give the person an opportunity for a hearing. KDA will still be required to give notice and an opportunity for a hearing however it will be up to the licensee or registrant to request a hearing. This is a fairly common practice in administrative law.   KDA indicates that the bill would reduce the costs of administrative proceedings because a hearing may not be required in each case.

Coming This Week:

The Petroleum Marketers and Convenience Store Association have introduced and the Senate Agriculture Committee will hold a hearing on SB 425. SB 425 would require that any terminal or bulk storage plant that sells pre-blended fuel also offer un-blended fuel for sale. The hearing will be held Tuesday, 2/2/2010, 8:30 AM, Room 144-S, the statehouse.

January 25, 2010

COMING THIS WEEK

Ethanol Presentations Monday and Tuesday

On Monday, January 25^th, 3:30pm, Mary Jane Stankiewicz and Greg Krissek on behalf of the KAEP will present to the House Agriculture a report on the current status of the ethanol industry in Kansas and the industry’s prospective outlook. The presentation will be held in room 783 in the Docking State Office Building. On Tuesday, January 26, 9am, Abengoa Bio-energy is slated to present to the House Utilities Committee in room 785, Docking State Office Building.

WEEK IN REVIEW

Secretary Svaty Confirmed

The Senate Agriculture Committee held a hearing and recommended favorably the confirmation of acting Secretary Josh Svaty to make his post permanent. Svaty was questioned on a number of issues including Biofuels, Ag tax policy, water issues, clean air, and other challenges facing the industry. The full Senate unanimously approved his confirmation. We look forward to continuing our positive lines of communication with the Secretary and the agency as a whole.

Sales Tax Increase Proposed

The House Tax Committee started hearings on HB 2475, a bill that increases the state sales tax 1 cent sales tax for 3 years to address a $400 million budget hole for fiscal year 2011. After the 3 years, all but .02 of a cent will sunset and that remaining portion will be dedicated to transportation infrastructure funding. Proponents included education and state employee labor unions, state funded social service organizations, highway infrastructure advocates, and a few private citizens with concerns about schools and the elderly. They testified that the funds are needed to support these organizations due to budget cuts they have recently absorbed in the last year. Opponents will testify on Tuesday and will carry the message that tax increases are not the answer when Kansas is trying to claw its way out of a recession. Unemployment Insurance Working Group

Your association’s staff is part of an unemployment insurance working group organized by the Kansas Chamber. We are looking at ways to legislatively lessen the blow to members because of the recent rise in unemployment fund employer tax rates. These rates were increased due to the recession and caused drastic decrease in the state’s unemployment insurance trust fund. We are discussing a variety of options and will report as things get hammered out.

“Technical Adjustments” to Income Tax Credits

The Department of Revenue requested a bill and received a hearing on HB 2465, a bill that eliminates a number of tax credits. This includes regional economic development foundations that provide tax credits.   While the Department of Revenue claimed that this was a cleanup of credits that are not currently utilized, conferees and committee members voiced concern that the bill accomplished much more than billed.   We noticed that this bill was scheduled for hearing even before the bill was printed and could be read and shared our concerns with the business committee and committee members.

Texting Ban Bill

The House Transportation committee held a hearing on HB 2439, a bill that bans the use of devices allowing texting, sending instant messages, or emailing while driving. The bill applies to drivers of all ages and would carry a $100 fine per offense.   Proponents included law enforcement officials, KS Department of Transportation, KS Department of Health and Environment, Ford Motor Companies, and AT&T. The Senate will hear a stricter texting ban bill SB 351 this week that includes provisions making texting punishable by jail time.

Budget Rescission Bill

The Senate Ways and Means Committee held a hearing on and approved SB 350, a bill that cuts to several agencies that could not be accomplished by the Governor without the legislature’s approval. The bill was amended into HB 2222, (a bill that previously dealt with a state agency fees) and was sent to the full Senate. These cuts include:

·         $250,000 cut to KTEC

·         $2 million cut to Kansas Housing Corporation

·         $80 million from the KS Department of Transportation

·         $500,000 from the Department of Commerce

·         $5 million from the Securities Commission

·         Cut 50% of legislators franking privileges (free postage)

·         $1.1 million from the legislature

HB 2428 - Reservoir Fee Bill

The House Vision 2020 Committee held a hearing on HB 2428. This bill was introduced by the Kansas Water Office and proposes a .O3/1,000 gallons of water fee to create a fund to assist in the protection and restoration of Kansas reservoirs. The fee would not apply to groundwater. The fee is estimated to cost a household approximately $.13-.24/month. The fee would generate about $2 million/year. The fee could not increase for 3 years but thereafter it could be increased up to $.02 without coming back to the legislature. The fee would be used to ensure Kansas has adequate storage in the future. The fees would be used to reduce the sediment that is going into the lakes via streambank stabilization so that these lakes have storage capacity in the next 30-50 years. According to the Kansas Biological Survey 6 out of the 20 reservoirs that provide drinking water supplies for various communities are already 30 percent filled with silt. KDOR asked for an amendment so that this fee is not treated like a sales tax.

January 18, 2010

Legislature Returns: Challenging Session

The Kansas Legislature convened Monday, January 11 and had a relatively light work week. Several informational hearings were held, parameters set for the remainder of the session, and the Governor presented his budget. This is by far the calm before the storm and we anticipated the most volatile legislative session in recent history. Please read below for details of the start of the 2010 Legislative session.

Blender Pump Bill Introduced

Tom Palace, Executive Director of the Petroleum Marketers and Convenience Store Association, introduced a bill allowing for the blending of ethanol at the pump. The bill was introduced in the Senate Transportation Committee but has not yet been assigned a bill number. Committee Chairman Mark Taddiken is extremely supportive of the bill.

Governor’s Budget Plan

The key factor of the week was Governor Parkinson State of the State Address. During which, he outline his proposal to address a near $400 million dollar state budget shortfall for fiscal year 2011. Governor Parkinson has proposed a 1 cent sales tax increase and a 55 cent per pack cigarette tax increase that should fill the budget hole. After the 3 years, all but .02 of a cent will sunset and that remaining portion will be dedicated to transportation infrastructure funding. Republican lawmakers voiced concerns over such an increase especially when we are in a deep recession. The Governor warned that if such tax increase is not enacted, he will be forced cut deeper into the budget. This bill was introduced in the House Tax Committee, but in an unprecedented move, the Senate Tax Committee denied bill introduction. Legislative committees traditionally allow for the introduction all legislation as a courtesy to those requesting the bill. Their denial of introduction of the Governor’s proposal reflects the acrimony currently existing under the dome.

Sales Tax Exemption Elimination

Kansas Department of Revenue Secretary Joan Wagnon proposed an alternative solution to the budget deficit by repealing certain sales tax exemptions equaling approximately $196 million in tax increases. The Biomass to energy tax credit is among those slated for elimination. In addition, her bill would, among other things, would:

Repeal all exemptions granted “by name” to a specific organization. Either replace it with an exemption for all organizations similarly situated, or revoke the exemption.

Tax all admissions to recreation activities or events, whether operated by a non-profit organization, city, county or private organization. These changes should be made in the 2010 legislative session.

Reestablish the policy that was set by the Hodge Commission1 that all non-profit and religious organizations pay sales tax on their purchases.

Repeal miscellaneous consumer exemptions, such as lottery tickets, bingo, and coin-operated laundries.

Clarify the original construction statute to remove “repair” and tax separately the “repair” of personal property. (Currently these services are taxed if they include the alteration or repair of tangible personal property.) The result is that washing a floor is not taxed, but waxing a floor (applying tangible personal property) is taxed. There are also problems with distinguishing labor services in the repair area from original construction. The change will rewrite those statutes for clarity and ensure that all the household labor services are appropriately taxed, with or without the application of tangible personal property.

Repeal the state tax exemption on residential utilities.

She also suggested that the following tax credits be repealed:

Assistive Technology Contribution credit

Plugging an abandoned oil or gas well credit

Swine facility improvement credit

Temporary assistance to families contribution credit

Individual Development Acct credit

Law Enforcement Training Center credit

Biomass-to-Energy credit

Integrated Coal Gasification Power Plant credit

Nitrogen Fertilizer Plant credit

Petroleum Refinery credit

Qualifying Pipeline credit

Single city port authority credit

The House Tax Committee introduced a bill containing the Secretary of Revenue’s sales tax exemption repeal. Similar to the Governor’s proposal, the Senate Tax Committee refused to introduce identical pieces of legislation.

Sales Tax Exemption Repeal on Goods and Services

During an address to the House Republicans, Secretary of Revenue Joan Wagnon fired a warning shot threatening to repeal sales tax credits on agriculture related products and services. We have learned from attendees at this closed door meeting that the Department of Revenue desires to examine all existing sales tax credits and agriculture and business in general were specifically mentioned. No legislation has been introduced requiring such a review and neither the House or Senate Tax Chairman have requested a hearing. We do anticipate action on this issue is forthcoming and your staff will diligently monitor all activities in the statehouse.

Unemployment Insurance Fund

Department of Labor Secretary Jim Garner presented to the Senate Business and Labor Committee an explanation of the increased unemployment insurance tax rates. Due to the unexpected numbers of unemployed Kansans due to the recession, the Unemployment insurance fund will run out of money next month. In order to refill the fund, Kansas employers received notices in the mail Mid-December advising them of their new contribution rates. Each employer’s tax rate will be different based upon their unique circumstances. The average 2009 tax rate was 2.02%; the average estimated tax rate for 2010 is more than doubled 4.37% (Unemployment taxes are assessed on the first $8000 of wages paid per employee). Many positive balance experience rated employers will be paying at the maximum rate of 5.4% in 2010. Employers with negative balances will pay up to 7.4% -- a surcharge of 0.2 to 2.0% is assessed based on the employers’ particular experience. These rates are expected to raise $407 million in 2010, but are still shy of the amount needed. The state, therefore, will need to borrow money from the federal government in order to make needed unemployment payments. We expect legislative initiatives to be introduced to reduce the burden on employers.

COMING THIS WEEK

Secretary of Agriculture Confirmation

This week, acting Secretary of Agriculture Josh Svaty will appear before the Senate Agriculture Committee seeking their blessing for full Senate confirmation. This position, like most high level cabinet positions, requires Senate approval. Secretary Svaty has shown to be an effective leader in acting secretary role, very supportive of the industry, and an independent voice. In fact, while addressing the Committee during his state of Kansas Agriculture address, he expressed concerns about some of the federal initiatives being proposed by the Environment Protection Agency. We are optimistic that he will be confirmed with little or no opposition.