In the opening days of the 2015 session, the Kansas House and Senate adopted a joint rule which prohibited consideration of legislation after midnight with the logic being that legislators would be too tired to give adequate and clear thought to important matters. Ironically, the most important bill of the session was passed by the House by the narrowest of margins (63-45) just after 4:00 a.m. last Friday.
That bill, House Sub for SB 270 (see below under TAXES), contained most of the funding for the FY 2016 budget and had been the subject of mind-numbing consideration for hours in the House after members waived the midnight rule and allowed debate on the bill to continue. House Sub for SB 270 was actually a companion measure to another tax bill (Senate Sub for HB 2109) which had cleared both houses earlier, but without the passage of House Sub for SB 270, the very delicately balanced compromise that had been negotiated by the House/Senate conference committee would have imploded and the legislative deadlock would have continued.
The passage of both bills allowed the 2015 session to finally come to a close late Friday afternoon. The last-minute actions by the Legislature could be viewed as both good news and bad news for Governor Brownback. On the positive side, neither tax bill contained any provisions to rescind the law relating to the elimination of state income taxes on non-wage income for limited liability corporations (LLCs), sole proprietorships, Sub-S corporations or other small business and agricultural entities. The Governor had threatened to veto any bill containing elimination or major modification of that key part of his economic program. Another positive for the Governor was inclusion in the legislation of a provision eliminating state income tax liability for approximately 388,000 low-income Kansans starting in tax year 2016.
The bad news for the Governor is the need for him to cut approximately $50 million more from the FY 2016 budget in order to bring it into balance as required by law. His two weapons for accomplishing that are to line-item veto provisions in the FY 2016 budget bill which he has not yet signed and to do “allotments” in the budgets of specific agencies, institutions or departments. Since the revenue estimates on which the tax legislation is based are just that, the Governor may actually be forced to make even more cuts if the actual revenues generated in the coming months fall short of the estimates.
One of the hotly debated issues during the closing days of the session was the creation of a lower state sales tax rate for food. While HB 2109 would have allowed a lower rate, the provisions of SB 270 did not, and thus the issue has been pushed forward to the 2016 session. By including food in the new state sales tax rate (6.5%), it places Kansas in the unenviable position of having one of the highest state sales tax rate in the nation on food products.
Key appropriation bills passed earlier in the session confirmed funding for the judicial branch of state government and block grant funding for school districts. Also, in a separate piece of legislation, a “privilege” fee was imposed on the three KanCare providers, as well as other health maintenance organizations (HMOs) operating in Kansas. The fee is expected to raise approximately $47 million in FY 2016 (see Senate Sub for HB 2281 under HEALTH CARE below).
Sine die adjournment of the legislative session is scheduled for Friday, June 26th, and legislators could consider overrides that day of any budgetary line-item vetoes that may have been made by the Governor, but the chances for such overrides are very remote since it would require a 2/3 majority vote in both houses.
The legislative leadership has yet to determine what issues may be considered for interim study this summer and fall, but it is almost certain the major topic will be the much anticipated district court decision on the funding – or lack thereof – of K-12 education.
The 2015 session will likely be remembered mainly for its record length of 113 days and the passage of the largest state tax package ever. However, it is important to remember that what is done in one legislative session can be undone in the next session, and we certainly have not seen the last of the business/agriculture tax exemption argument – particularly if revenues over the next six months do not meet expectations. The sales tax on food controversy will undoubtedly resurface, as well. With 2016 being an election year for all legislators
,there will be a strong desire among incumbents to show a more positive side to the legislative process than what voters witnessed this session.
Listed below are selected bills which the Governor has signed or currently has under consideration. Additional information on any of these bills is available by clicking on the bill number.
This is the final Insights issue of the 2015 legislative session. We hope the weekly information provided has been beneficial, and we look forward to presenting Insights to you during the 2016 legislative session.
BUSINESS AND ECONOMIC DEVELOPMENT
HB 2048 – Creates the Scrap Metal Theft Reduction Act and empowers the Attorney General to implement, administer and enforce all provisions of the Act. Establishes the scrap metal theft reduction fee fund to support actions taken by the Attorney General. Prohibits local units of government from enacting resolutions or ordinances that are contrary to the Act. Amends the current regulations relating to scrap metal dealers and establishes what constitutes violations of the Act. Sets a range of civil and criminal penalties for each violation. (Passed by the House on a vote of 73-32 and by the Senate on a vote of 37-1. Awaiting action by the Governor)
HB 2154 – Permits private employers to establish policies for veteran hiring preferences. Also provides reinstatement protections and grants in-state tuition status for current members of the armed forces and their families. Includes diversion and sentencing options for veterans, as well as language relating to professional credentialing of veterans and military spouses. (Signed by the Governor. Becomes effective on 7/1/2015)
HB 2223 – Makes numerous amendments to existing wine and spirits statutes. Expands the ability to obtain a vineyard permit; allows for use of automated wine devices; bans the dispensing of powdered alcohol; expands the eligibility to obtain a liquor license; allows alcoholic sales in “core commercial districts”; facilitates the acquisition of Kansas State Fair permits; allows for the “infusing” of alcohol flavors; broadens the opportunity to sell Kansas wines at farmers markets; and allows alcohol at events in the state capitol, if approved by the legislative leadership. (Signed by the Governor. Becomes effective on 7/1/2015)
SB 206 – Empowers both the Insurance Commissioner and the Attorney General to adopt, no later than 1/1/2016, rules and regulations to carry out the provisions of the Vision Care Services Act. Makes violations of the Act an unfair trade practice. Also alters the definition of a “vision care discount plan” which could not be considered insurance or a discount card. (Passed by the House on a vote of 108-0 and by the Senate on a vote of 39-0. Awaiting action by the Governor)
Senate Sub for HB 2124 – Allows for smoking rooms at medical and research facilities and contains amendments recommended by the Attorney General to the Master Settlement Agreement (MSA) statutes in order to keep the state in compliance with the MSA. (Signed by the Governor and became effective on 6/11/2015)
Senate Sub for HB 2228 – Requires the physical presence of the physician, absent an emergency, in the administration of abortifacient drugs. (Signed by the Governor. Became effective on 6/11/2015)
Senate Sub for HB 2281 – Increases the annual “privilege” fee paid by health maintenance organizations (HMOs) from 1.0 per cent to 3.31 per cent of all premiums and charges of the HMO. Creates in the State Treasury for a three-year period a Medical Assistance Fee Fund which can only be used for Medicaid medical assistance payments. Empowers the Commissioner of Insurance to terminate the privilege fee if such fees could result in the loss of federal assistance. Also makes an alteration in the Temporary Assistance for Needy Families (TANF) cash assistance transaction process relating to ATM withdrawals. Grants the Secretary of DCF authority to coordinate the withdrawal provisions with federal law and regulation. (Passed by the Senate on a vote of 28-11 and by the House on a vote of 63-41. Awaiting action by the Governor)
HB 2352 – Amends current statutes relating to insurance coverage for Autism Spectrum Disorder. Also includes language on the mailing of termination notices on policies, outside consulting feesand taxing authority for surplus lines. (Signed by the Governor. Becomes effective on 7/1/2015)
Senate Sub for HB 2109 – The key provisions of Senate Sub for HB 2109 are as follows: (1) Increases the cigarette tax by $.50 to $1.29 per pack and imposes an inventory tax on tobacco wholesalers; (2) Establishes a tax on e-cigarettes starting on 7/1/2016; (3) Extends the sunset on the Rural Opportunity Zone (ROZ) to 7/1/2022; (4) Requires the Motor Vehicle Division (MVD) to send the paper forms for registration of motor vehicles, but allows counties to opt out; (5) Re-establishes the Individual Development Account (IDA) program for tax year 2015; (6) Creates a six-week amnesty program for delinquent taxpayers starting in September, 2015; (7) Makes “guaranteed payments” by limited liability companies (LLCs), sole proprietorships, Sub-S corporations and other small business and agricultural entities subject to state income taxes; (8) Maintains the current state income tax rates through tax year 2018; (9) Requires Social Security number to be eligible for state tax credits. Other provisions of this bill are superseded by provisions in House Sub for SB 270. (Passed by the House on a vote of 63-45 and by the Senate on a vote of 21-17. Awaiting action by the Governor)
House Sub for SB 270 – The key provisions of House Sub for SB 270 are as follows: (1) Raises the state sales tax from 6.15% to 6.5% on 7/1/2015; (2) Exempts from state income tax starting in tax year 2016 the first $5,000 of taxable income for individuals and the first $12,500 of income for joint filers; (3) Provides a formula by which income tax rates starting in tax year 2019 could be reduced if state general fund revenues reach a certain level; and (4) Requires local units of government under certain circumstances to hold a mandatory election before increasing property tax levies. (Passed by the House on a vote of 63-45 and by the Senate on a vote of 21-19. Awaiting action by the Governor)