Legislative Updates

Legislative Update - Week 5 - February 2-6, 2009

The never-ending budget negotiations finally came to an end late Thursday, with agreements on the FY 2009 rescission bill forged and savings of $326 million realized. Largely voting along party lines, Republicans supplied ample votes to advance the bill to the Governor for her consideration. The final vote was 27-11 in the Senate and 70 – 51 in the House. Highlights of the measure include:

Budget reductions of 4.25% for all state general fund programs for the remainder of this fiscal year.
A reduction of 1% for K-12 public education funding.
No reduction in funding for the Children’s Initiative Fund in FY 2009.
Addition of $2 million in programs for the physically disabled.
An additional $2.9 million in spending for the Wichita Center for Graduate Medical Education along with a requirement that the Board of Regents report back to lawmakers by omnibus on funding needed in FY 2010.
Distribute $6 million to various counties who’d been shorted in previous years by inaccurate motor fuel tax calculations at the state department of revenue.
A reduction in tax receipt transfers to the Kansas Bioscience Authority by $8 million. A total of $39 million will be transferred this year.

The question now becomes, will the governor sign the bill or line item veto parts or all of it? The governor’s previous position has been to hold K-12 harmless. The Legislature has passed a reduction to K-12 of 1%. This difference is the prime candidate for a veto. Should the Governor veto this item, and the state’s tax revenue continue its downward spiral, the state could face the possibility of a negative ending balance. As you may know, it is unconstitutional to have a negative ending balance and the Governor and the Legislature would have to, once again, “fix” the budget before June 30, 2009. This is a delicate and dangerous political high wire act that involves at least two unknowns: the effects of the recently passed stimulus package from Congress and the possibility that any reduction of K-12 spending will reopen the Montoy decision from the Supreme Court of Kansas. Stay tuned! The rest of February and all of March will be focused on shaping the FY 2010 budget. Most agency subcommittees have been well underway for the past ten days and are facing possible budget cuts of between an additional 4 to 10 percent. These additional cuts along with more accounting maneuvers are designed to let lawmakers see the real impact of such sizeable budget reductions. For many agencies that are heavily dependent on state general funds, these deep cuts will result in substantial layoffs, furloughs and elimination of many services. For local units of government, the substantial decrease in funding may lead to higher property taxes, local sales taxes or both – in other words, a tax shift, or a further reduction in services. None of which are pleasant consequences for the citizens of Kansas.

SPECULATION ABOUT GOVERNOR JOINING HHS

Lawmakers have been fairly distracted by constant and growing reports that Governor Sebelius is in line to join the Obama Administration after all. With the sudden departure of Tom Daschle as Health and Human Services Secretary, attention has focused on Sebelius as a likely top choice. Clearly the Governor is weighing the option, carefully issuing public statements that leave all doors open. Most recently, top national labor leaders threw their support behind the Governor’s possible selection. If Sebelius is selected for the position, Lt. Governor Mark Parkinson assumes the Office of the Governor and is able to select a Lt. Governor to serve with him. He has re-stated his intention not to run for Governor in 2010.

LEGISLATIVE SESSION NEARS HALF-WAY MARK NEXT WEEK

A major milestone for the 2009 session will be marked next week. Bills must be out of their House of Origin by February 21st, except those measures that were generated in committee exempt from deadlines such as appropriations, federal and state affairs and taxation. So the deadline largely applies to policy issues not tied to spending or revenue. So far, the volume of legislation that has been debated is considerably less than in past years. Fewer than ten bills have cleared the House and been sent to the Senate. The Senate has produced more activity with just over 50 measures passed and sent across the rotunda for House consideration.

MISCLASSIFICATION

The House Taxation committee held hearings this week on legislation which would repeal a law passed in 2006 which dealt with misclassification of employees. The measure originally passed allowed coordination between the State Department of Labor and the State Department of Revenue to pursue investigations of businesses regarding the misclassification of employees. This misclassification leads to the avoidance by the business of state income taxes and state unemployment taxes. Proponents of the measure argued the law was not doing what was initially intended and has led to the harassment of businesses. The Kansas Chamber of Commerce testified in favor of the repeal stating that the division was unnecessary (the net of unpaid taxes after off-setting the cost of the new division was a paltry $60,000 for last fiscal year) and that the current law does not offer clear definition of what constitutes an “employee” or a “contractor.”

Opponents of the repeal included the State Department of Revenue and the State Department of Labor who both argued that their agencies were finding businesses that misclassified employees and repealing the measure would undo their good work. The Department of Revenue also stated that the amount collected is on the rise, they have estimated that in FY 2010 they will receive $3 million in unpaid taxes and penalties.

The bill is likely to come out of committee, but it is unknown at this time if it will run on the House floor. The House Tax Committee also kicked out a couple of measures that carry difficult fiscal notes.

HB 2172 – Permanent exclusion from sales taxation of certain rebates on sales or leases of new motor vehicles. The measure had considerable committee support with committee members citing that most consumers don’t realize until after the purchase of a vehicle that they will owe sales tax on the manufacturer’s rebate. $3.5 million is the first year cost for the measure.
HB 2079 – Sales tax refund on certain purchasers of telecommunications machinery and equipment. Bill included an implementation date of 2012. The measure would phase in the tax break with first year costs at $3.2 million beginning in fiscal year 2013. It eventually mushrooms to $15 million a year. Even with the phased-in feature of the bill, it isn’t likely that lawmakers will be eager to enact tax cuts at a time when budgets are being cut by lawmakers in double digits.

SENATE D AND C COALITIONS REMAIN ACTIVE

When Senate Democrats joined forced with the conservative Republicans to pass a budget rescission bill earlier this session many observers claimed it was a one-time coalition. However, the coalition formed again this week on a floor amendment aimed directly at Senate Majority Leader Derek Schmidt who is interested in changing state law to allow his sizeable senate campaign fund to be “portable” for a statewide race to elective office (Secretary of State, Attorney General, Governor, etc.). Senate Minority Leader Anthony Hensley was successful in attaching the ban to an election bill being debated late Thursday. His Senate voting coalition attracted conservative Republicans and Democrats.

MISCELLANEOUS MEASURES OF NOTE

With committees grinding through hearings in hopes of beating the deadline for bills to clear their house of origin by February 21, a variety of measures are showing up on debate calendars:

SB 25 implementing a statewide smoking ban will be debated on the Senate floor Monday. Most expect a close vote and consideration of a variety of amendments.
SB 83 extending the state’s autism task force has cleared the Senate Public Health Committee and will not be debated by the Senate. It is likely to generate considerable debate on autism policy in the state and the growing frustration that services for families aren’t more readily available or reimbursed by insurance policies.
HB 2007 allowing the Kansas Board of Regents to authorize tuition flexibility plans for Kansas colleges and universities will be taken up in the Kansas House. The measure is designed to attract more out-of-state students whose higher tuition payments help subsidize the lower in-state tuition.
SB 134 would allow the Kansas Judicial branch to levy a docket fee to help defray the costs of court operations. This measure would alleviate pressure on the state general fund in the current and future budget years.
HCR 5005 would propose a change in the state constitution regarding the selection of justices of the Kansas Supreme Court. A current non-partisan nominating commission sends three names for consideration to the Governor. The change proposed would place the power of nominations in the hands of appointees of the leadership of the legislature and the Governor. Of the nine-member commission, only three could be members of the Bar Association. A hearing on the measure has taken place in the House Judiciary Committee, but it faces a very uncertain future.
A “mega” energy bill is being crafted in the House Energy and Utilities Committee. HB 2014 is likely to be the key measure in the House to address the controversy generated by the Holcomb coal fired power plants. SB 265 is another key energy measure that bears watching. It is directed at the electric industry and will be on center stage next week in the Senate Utilities Committee.

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