Final Week of Regular Session

The Kansas Legislature adjourned the regular session before noon Friday and will return on May 1 for the veto session. The final week of the regular session was spent mostly in conference committees, where negotiators ironed out House and Senate positions on many bills. We also saw floor action on a few major issues…here are some highlights.

Rescission Bill to the Governor 

Senate Substitute for Substitute for House Bill2052 is on its way to the Governor’s desk. The bill makes several adjustments to the FY17 budget based on actual revenues to ensure the state closes its books in the black on June 30. After March revenues came in $12.8 million less than estimated, the projected shortfall for this fiscal year is $290 million.

The meat of Senate Sub for HB 2052 is the authorization for Budget Director Shawn Sullivan to borrow from idle state funds to ensure a $50 million ending balance. An initial agreement between the House and Senate returned to conference committee Thursday over the fourth quarter $85.9 million payment to the Kansas Public Retirement Savings (KPERS) program. Senate negotiators quickly accepted the House’s position to appropriate the funds.

The Senate approved the final rescission bill 30-10 Thursday. The House voted 108-15.

Senate Kills Flat Tax Plan 

The Senate essentially squashed any “flat” income tax idea for this year when they overwhelmingly killed Senate Bill 214 by a vote of 37-3 Thursday. The bill proposed a single bracket, 4.6% income tax rate effective January 1, 2018. The ever-popular repeal of the 2012 small business tax cuts was not enough to make Senators vote for a tax increase on low income Kansans. The current rate for filers making under $30,000 is 2.6%.

Earlier in the week Governor Brownback announced that he would sign SB 214, or something similar, so the nearly unanimous rejection of the bill carried a strong message with it. It appears that most lawmakers in both Chambers are holding firm on a multi-tier tax bracket plan like the one the Governor vetoed earlier this year.

New Budget Stabilization Bill Heard

The House Appropriations Committee held a hearing on House Bill 2419 on Wednesday. This new bill establishes the framework and guidelines around the newly-formed Budget Stabilization Fund. PEW Charitable Trusts testified during the hearing that states should save above-average collections of estimated payments on personal income tax rather than relying on this volatile and unreliable revenue to fund the general budget.

The FY17 rescission bill includes a provision that instructs the Budget Director to transfer 10% of any remaining balance in the State General Fund from the previous fiscal year into a rainy-day fund beginning in FY2020.

Looking Ahead 

The FY17 rescission bill was the key to adjourning the main portion of the 2017 Legislative Session. The Senate has passed their FY18-FY19 mega budget, but the House’s measure has yet to be considered by the full body. The House Appropriations and Senate Ways and Means Committees have scheduled joint meetings onApril 27 and 28 to review the consensus revenue estimates to be released on April 20 and begin discussions on the “omnibus” budget bill.

Now that Legislators have generally taken a position on where they stand on taxes, we expect that to be the first issue taken up when they return on May 1.

Kansas Legislature Week 10

Kansas lawmakers are beginning to gain traction on some key policies as they approach first adjournment on April 7. While budget and school finance dominated the week, some are saying that any real movement on a tax revenue package is expected to hold off until Veto Session.

Rescission Bill in Conference

The first conference committee of the year began meeting Thursday on Senate Substitute for Substitute for House Bill 2052, the rescission bill, which reconciles this fiscal year’s budget in the black. The Chair, Vice Chair and Ranking Minority Member from both the Senate and House budget committees began ironing out differences between their proposals with little contention thus far.

Negotiators have agreed on the key measure of the bill, which borrows just enough from the state’s long-term investment fund to leave an ending balance of $50 million on June 30, 2017 with the six-year repayment beginning in FY19. One remaining item of difference surrounding repayment to the Kansas Public Retirement System (KPERS) may be saved for Omnibus, the catch-all spending bill at the end of session.

Senate Advances Biennial Mega Budget

The Senate Ways and Means Committee kicked out their biennial budget for FY18 and FY19 ThursdaySubstitute for Senate Bill 189 looks little like what the Governor proposed in January and rejects some of the major provisions in his plan including: securitizing future tobacco settlement revenue, freezing state contributions to KPERS at FY16 levels, requiring joint procurement on goods and services, consolidating school health benefit plans, creating a rural teacher scholarship program, creating a KU Med Dental School, and merging some state agencies.

The key addition was combining with the judicial branch’s budget – which had been separated from the state’s mega budget in recent years – and using their requested enhancement for salaries and giving a 2% raise across the board to all state employees, totaling $22 million.

House Committee Approves Renewal of STAR Bonds

The Sales Tax As Revenue (STAR) Bond program received initial approval from the House Appropriations committee on Wednesday and is now headed to the full House.

House Bill 2184 renews the program until July 1, 2022 and eliminates language allowing a county commission or school board to protest a proposed STAR Bond project if determined to negatively impact property tax revenues. The bill also no longer requires the Secretary of Commerce to approve a city or county to use transient guest tax toward bond payments.

STAR Bonds provide Kansas municipalities the opportunity to issue bonds to finance the development of major commercial, entertainment and tourism areas and use the sales tax revenue generated by the development to pay off the bonds. We are supportive of the STAR Bond initiative and look forward to bringing projects like this to southeast Kansas.

Looking Ahead

Legislators will be on the floor all this week debating bills, while conference committees are scheduled to meet next week. First adjournment is currently set for April 7, but statehouse buzz is that the Legislature could break a few days early. Without many bills passed and in conference yet, leaders might prefer saving some days for the hard work that’s expected during the Veto Session.

KS Senate passes rescission bill on 2017 budget

It was a pivotal week in the 2017 Kansas Legislative Session, getting the state one step closer to filling the $1 billion expected budget shortfall over the next few years. The Senate passed their rescission bill last Thursday, which makes adjustments to the FY17 budget and fills the $281 million hole. Lawmakers now have the green light to turn their attention toward the next biennial budget for FY18 and FY19.

FY17 Budget Rescission Bill

The Senate passed their rescission package at 9:15 p.m. last Thursday evening, Senate Substitute for House Bill 2052, by a vote of 27-13. The bill leaves the state $50 million in the black on June 30.

Key to the debate was the Senate’s rejection to again cut spending. In an attempt to reduce impending tax increases, Senate President Susan Wagle (R-Wichita) proposed a 2%, or $104 million, across-the-board cut to all state agencies retroactive to January 1, 2017. K-12 education would have seen a $65 million cut, and Senators showed little interest in light of the Kansas Supreme Court’s recent ruling that Kansas is not funding schools adequately. Wagle’s proposal – and subsequent spending cut amendments – failed by large margins.

The Senate’s rescission bill does the following:

  • Borrows from the state’s long-term investments at the end of the fiscal year to leave a $50 million ending balance. The remaining funds in the Pooled Money Investment Board are saved for FY18.
  • Delays and layers $150 million in FY17 payments to KPERS. The re-amortized repayment will begin in FY18 to still meet actuarial target dates.
  • Repays the $115 million eliminated KPERS payment from FY16 back with interest in FY18.
  • Delays a $75 million payment to K-12 education by one day, into the next fiscal year.
  • Deletes $40 million for Medicaid waiver services. The funds are expected to be included in the FY18-19 mega budget bill.
  • Transfers 10% of the State General Fund ending balance to the Budget Stabilization Fund on August 15, 2019.

The House passed their rescission bill last month, and a conference committee is expected to meet as early as this week to negotiate a final package.

Budget Stabilization Fund Implementation

The House Appropriations Committee heard testimony Thursday on Kansas’ newly- formed Budget Stabilization Fund. House Bill 2340 would authorize the transfer of State General Fund revenue in excess of the most recent consensus revenue estimates at the end of each fiscal year into this rainy day account. The bill also restricts fund expenditures to KPERS unfunded liability and debt service payments only.

The House has already included a trigger rule in their rescission bill that 10% of the State General Fund’s ending balance – after KPERS repayments are made – be transferred into the Budget Stabilization Fund starting in FY17. The Senate passed the same provision, except to not start until FY19.

Looking Ahead

With the passage of the FY17 budget fix, things are finally starting to speed up. Next week is already packed with a number of hearings or expected committee action on key bills. Here are a few we’re watching closely:

  • Mega Budget for FY18 and FY19 – Senate Ways and Means is beginning work on SB 189 and expected to finish up on Monday. HB 2364 will be worked in House Appropriations on Tuesday and Wednesday.
  • Flat Income Tax – House Taxation will hold hearings on HB 2385 (3.9%) and HB 2395 (5%) on Monday.
  • Motor Fuel Tax Increase – Senate Assessment and Taxation heard SB 224 (five cent increase) this morning. House Taxation will hear HB 2382 (eleven cent increase) on Thursday.

School Finance, Economic Development & Transportation.

The Kansas Legislature was back in business this week, marking the start of the second half of the 2017 Legislative Session. All bills that did not pass their House of Origin before
February 23rd’s turnaround deadline, are dead for the year unless they were “blessed” to a handful of committees exempt from all legislative deadlines.

During the one week legislative session break, February tax revenues came in $40 million above estimates, shrinking the shortfall for fiscal year 2017 from $350 million projected last November to $280 million. The good news was overshadowed, however, with the Kansas Supreme Court’s decision the next day which ruled Kansas’ block grant school funding system not constitutionally adequate.

New School Finance Committee Appointed

As reported last week the Kansas Supreme Court did not include a dollar amount in their Gannon vs. Kansas ruling that would indicate how much additional K-12 funding would be considered adequate. While it did mention a lower court’s ruling that a new formula might cost the state $500 million, the opinion also stated that “total spending is not dispositive of adequacy.” This has left lawmakers puzzled this week, to say the least.

Senate President Susan Wagle (R-Wichita) appointed a Select Committee on School Finance on Wednesday to craft the new formula to replace the current block grant distribution system expiring on June 30, 2017. Senator Jim Denning (R-Overland Park) was named Chair and Senator Carolyn McGinn (R-Sedgwick) Vice Chair of the panel. The House’s K-12 Budget Committee has been meeting since the first of the year receiving briefings from staff and considering several potential plans. With the adequacy ruling issued, both committees can now start hammering out the nuts and bolts.

Senate Examines Rescission Bill

The Senate Ways and Means Committee on Wednesday heard Substitute for House Bill 2052, the Governor’s FY17 rescission bill that passed the House weeks ago and leaves a $99 million ending balance in the State General Fund on June 30.

The Governor’s proposal included an elimination of the fourth quarter FY16 repayment of $85.9 million to the Kansas Public Employees Retirement System (KPERS). Sub HB 2052 requires the state pay 50% of the state’s ending balance back to KPERS. Then if after the full KPERS repayment can be made, 10% of whatever ending balance remains is put aside in the newly-created Budget Stabilization (Rainy Day) Fund.

The Ways and Means Committee did not hear the House’s companion borrowing bill, which authorizes the liquidation of $317 million from the state’s long-term investment fund. As you recall, the Senate unsuccessfully tried to pass a bill that only borrowed $100 million from the Pooled Money Investment Board (PMIB) and cut K-12 and higher education to make up the difference.

During Wednesday’s hearing, the major heartburn among Senators was over the Governor’s proposal to delay a $75 million payment to K-12 schools. Currently paid in June, the bill would delay it one month to July – into the next fiscal year. The state currently delays $200 million in school payments to July and has been doing so for about a decade.

There’s a $280 million shortfall left in this fiscal year ending on June 30, and Legislators must pass a rescission bill leaving the state in the black and before they can begin Omnibus work for FY18 and FY19.

Governor’s Tax Plan Killed

The full Senate sent a clear picture to Governor Brownback on Tuesday killing his proposed tax plan by a vote of 37-1. Senate Bill 175 would have increased taxes on cigarettes by $1/pack, doubled it on other tobacco products and liquor, raised the LLC annual filing fee, taxed passive income on rents and royalties, and frozen the bottom income tax bracket at 2.7% (scheduled do drop to 2.6% in FY18).

Senate Hears Economic Development Bills

The Senate Assessment and Taxation Committee held hearings on two economic development bills yesterday. Both deal with the Providing Employment Across Kansas (PEAK) program that allows employers to keep withholding taxes for up to ten years for relocating to or expanding in Kansas.

Senate Bill 222 would impose a one-year moratorium on the incentive program and Senate Bill 223 would limit eligibility to companies relocating over 250 miles to Kansas. With strong opposition from local chambers of commerce, the Kansas Chamber and the Kansas Department of Commerce, the sentiment from the committee appeared to be against moving these bills forward.

Appropriators Approve KDOT Bonding Authority

The House Appropriations Committee on Monday approved a report from the Transportation and Public Safety Budget Subcommittee that gives the Kansas Department of Transportation bonding authority up to $400 million in FY18 and FY19 for TWORKS preservation projects on roads and bridges. The 10-year highway program has issued $1.1 billion out of their total approved $1.7 billion in bonds. This week’s proviso – if approved during final mega bill negotiations – would also require removing the 18% bonding cap currently in statute.

Regarding funding for transportation, two bills were also introduced this week that would raise the motor fuel tax by five cents in Senate Bill 224 and 11 cents in House Bill 2382. Hearings have not yet been scheduled for either bill.

Looking Ahead

Mark your calendars. The Senate Public Health and Welfare Committee is expected to begin hearings on Medicaid expansion on March 21. It passed the House with 81-44 votes, but it’s expected to be a tougher sell in the Senate.

2017 KS Legislature: First Half Update

The Kansas Legislature adjourned last Thursday, officially completing the first half of the 2017 Legislative Session. Turnaround break, however, did not come before some unexpected twists and turns. With the House able to pass Medicaid expansion and override a Governor veto, this week saw the new moderate Republican/Democrat majority in Kansas beginning to take shape.

Taxes

In a news conference Wednesday morning, Governor Sam Brownback officially announced his veto of House Bill 2178, the Legislature’s tax plan for fiscal years 2018 and 2019. While the House voted 85-40 to override the Governor’s veto (84 votes needed), the Senate’s vote failed 24-16 (27 votes needed) and killed the bill.

Back to the drawing board, both the Senate and House Tax committees met informally at the rail yesterday to introduce new tax plans. One is the Governor’s proposal, which raises cigarette and liquor taxes but keeps LLCs exempt. Another is identical to the vetoed bill without the retroactivity on individual income tax increases, which some believe was the reason many Senators didn’t support the override. Other ideas range from removing the top, third tax bracket, repealing the non-wage income exemption, and suspending the PEAK program (Providing Employment Across Kansas). Both Chambers are expected to start running new tax bills after the break.

Transportation

On Monday, the House Transportation and Public Safety Budget committee added a proviso directing the Kansas Department of Transportation (KDOT) to bond $400 million toward T-WORKS reconstruction and maintenance projects in FY18 and FY19.

Currently, KDOT has budgeted $42 million in FY18 and $245 million in FY19 for preservation projects. The added funding will help the department reach the average funding of $350 million per year. Chairman J.R. Claeys (R-Salina) will present the subcommittee’s report to the full Appropriations committee on Monday, March 6 for review and approval. We continue to advocate and have active involvement in an expanded four lane Highway 69 between Fort Scott and Pittsburg and onto the Oklahoma border.

Looking Ahead

Lawmakers will return to Topeka on Monday, March 6 to start the second half of the legislative session and continue tackling the $1.1 billion budget shortfall through FY19. Since the remaining tax packages on the table all raise less money than the bill vetoed by the Governor, a budget bill that includes cuts appears likely. Legislators are also anxiously awaiting a ruling from the Kansas Supreme Court on school funding adequacy, which may require millions of additional dollars appropriated to K-12 education.

It remains important not only for the university but our supporters to have continued advocacy in regard to the budget for no further cuts to higher education.

We’ll continue to provide legislative updates moving forward. For the most up-to-date information, follow us on Twitter @CapitolGorilla.

President Scott comments on state revenue projections & proposed budget cuts

On Thursday, PSU President Steve Scott issued a message to the campus community about budget cuts proposed by Gov. Sam Brownback in response to the most recent consensus revenue estimates. In a message to faculty and staff, Scott wrote,

“On Wednesday, the Kansas’ Consensus Revenue Estimating Group released its report for the remainder of FY16 and FY17. In what has become an all-too-familiar pattern, the group lowered its estimates by a combined $290 million.

At the same time, state budget director Shawn Sullivan announced three options the administration believes the legislature should consider in response to the nearly $300 million shortfall. Each of these options includes a 3 percent cut in funding for Pittsburg State University and a delay in the planned expansion of Highway 69.

The continuing cuts are placing our university and our community in an untenable position. Pittsburg State’s base funding has already retreated to levels we haven’t seen in more than a decade, and the delay of the Highway 69 project is a significant loss to our region. Its expansion over the past decade has contributed to our university’s growth, and the planned expansion is essential for the safety of many of our students, parents and alumni from the Kansas City region.

As a Kansan, and as the leader of Pittsburg State University, I am deeply troubled and concerned about the state’s lack of stability and predictability in its finances. It is making it nearly impossible to manage the budget of the university. Clearly, this environment threatens to undermine the positive momentum that is so evident on the campus and in the broader Pittsburg community.

In the coming days, we will work with our local legislators to express both our frustration and opposition to the cuts outlined by the state’s budget director. We will call on them to seek other solutions that will preserve the university’s funding and ensure a strong future for Pittsburg State. I’m optimistic they will be receptive to our pleas.

Lawmakers will return to Topeka next Wednesday to consider all options for closing the state’s deficit. In addition to local legislators, we will actively work with state legislative leaders to oppose these cuts.

The next few weeks are vitally important to the future of our university and our region. I encourage you to stay informed about the work of the legislature and, when appropriate, to reach out to your local lawmakers to let them hear your voice.

We have scheduled a Legislative Town Hall at 3 p.m. on Monday, April 25, in room 102 of Yates Hall. Shawn Naccarato, our director of government and community relations, will join me for an update on the state budget and other legislative matters. We will livestream this event on  pittstate.tv for those unable to attend.

I know you have many questions and concerns about our state’s financial issues, and how they will impact Pittsburg State. At this point, it’s too early to know for certain. Rest assured, we will continue to advocate on behalf of our university and our focus remains on the success of our students.”

PSU President Scott Responds to Higher Education Funding Cuts

On Wednesday, Pittsburg State University President Steve Scott responded to Gov. Sam Brownback’s announcement that funding for higher education would be cut to deal with continued lower-that-expected state revenues. In a message to faculty and staff, Scott wrote,

“On Monday of this week the University celebrated the completion of its 2007-15 strategic plan. Following a review of our key accomplishments, I revealed the newly adopted plan that will guide our efforts through 2022. Focusing on academic excellence, student success, partnerships, and innovation, I noted the University is well positioned to accomplish even more.

As we strive together to achieve prominence in all that we do and to define a path to achieve this vision, I recognize daily what a special place this is. We are making a difference in the lives of our students and in the life of this community. As I closed the meeting, I felt a strong sense of pride in what we have accomplished and optimism for what was to come.

Within the context of Monday’s celebration and announcement, it was painful to receive news from Topeka Tuesday afternoon that the block grant for FY16 (the year we are currently in) would be reduced by more than $1M. This reduction follows the release of the state’s February revenue figures, which were more than $53M below projections.

As you can imagine, I am both disappointed and frustrated by this development. As the Governor noted in his press release, his goal is to “help the Kansas economy grow.” We share that goal, and it’s evident we are contributing to its realization. However, this latest reduction in funding will impact our ability to contribute to the Governor’s goal. I’m sure you agree with me that investments in higher education are an essential component for moving a state forward, enhancing a state’s economy, and improving the quality of life for its citizens.

Let me be clear…our capacity to ensure academic excellence and a transformational experience for our students will be hampered by these cuts. Furthermore, the instability of state funding is impacting our ability to plan and operate the university.

With all of this noted, I recognize that we have a new reality for the FY16 budget, and we will get to work in the coming days to formulate a path through the remainder of the year. It will not be easy, and it will take all of us working together.

As we know more, we will be communicating via the shared governance structures and additional releases.

Thank you for all you do to make this place so special, and for giving me the confidence we can overcome just about anything that comes our way.”

GLN Week 5 Legislative Update

Much earlier than usual, the House and Senate budget conference committee came to a compromise budget agreement this week. Each Chamber passed the bill, and it’s now awaiting the Governor’s signature. The rest of the week was spent hearing final reports on the state’s efficiency study and committees working and debating bills before the Turnaround deadline that has been moved up to next Tuesday.

Budget Bill to Governor

The House and Senate budget conference committee began their meetings on Monday afternoon, and by 7:00 p.m. that night had come to a compromise budget package. On Wednesday, the House accepted the conference committee report by a vote of 68-53 and the Senate by a vote of 22-16. The bill is now on it’s way to the Governor’s desk for his signature. As adopted the budget holds funding to Pittsburg State stable. It leaves an ending balance of $6.5 million for fiscal year 2016 and $89 million for fiscal year 2017. However, it may need amending during the Veto session when the Consensus Revenue Estimating Group comes out with their revenue numbers in April.

The most contentious items during negotiations and amongst some legislators included the provision to allow the Governor to delay the $100 million fourth quarter payment to the Kansas Public Employee Retirement System (KPERS) to balance the budget for this fiscal year if necessary. Other hot button topics included the STAR bond prohibition that halts the moving of the American Royal to Kansas from Missouri, and whether or not the funding source for Parents as Teachers will restrict the program to lower income families only.

Efficiency Study Experts Propose Top 21 Recommendations

The staff at Alvarez & Marsal (A&M), the the chosen consulting company by the legislature in 2015 to conduct an all agency efficiency study of Kansas government, presented their final report to the House and Senate budget committees on Tuesday. They narrowed down their 105 total recommendations into three categories: highest value, transformational and long term impact. The highest value group of their top 21 recommendations would represent 87% of the total cost efficiency opportunities and where the legislature plans to spend most of their time studying the remainder of the session. Their report also included an implementation schedule and timeline.

A&M’s top recommendation to the state was to hire 54 additional tax collection agents to fill current vacancies, which could potentially produce $54 million in collections annually. Another top recommendation was to use excess cash reserves in certain school districts to offset future education funding over a five-year period. Other key recommendations revolved around consolidation of administrative services and K-12 benefits, changes to the state employee health plan, and the creation of a Governor’s Grants Office to maximize the amount and use of federal funds available to the state.

The full initial report on the efficiency study can be found here.

Session Calendar Adjusted

In an attempt to prevent a repeat of the 114- day legislative session of 2015 and to show constituents that their elected leaders are making the best use of their time, the session calendar has officially been adjusted and all deadlines moved up.

Turnaround day – when all bills must be
passed out of their respective House of origin – is on Tuesday and the first major deadline that looms three days earlier than originally planned. After Tuesday, the legislature will take a week break and return on March 2. First adjournment will now be on March 25 (originally April 1), giving legislators an entire month off between first adjournment and Veto session. Veto session will still begin on April 27, but it will only be day 69 of the legislative session. The goal is to adjourn before using the statutorily approved full 90- day window.

Senate Passes Bill to Shorten Session

Staying consistent with the theme, the full Senate on Thursday passed by a vote of 25-11 a bill that would limit the number of days in the legislative session to 100 in odd- numbered years and 60 days in even-numbered years. In a biennial budget process, a full two-year budget is written and approved in the odd year and balanced in the even year.

As previously reported, the House Appropriations committee approved a similar bill – only it contained a 75-day limit every year, should the Governor move to an annual budget process – but it has yet to be debated by the full House of Representatives.

House Tentatively Approves Resolution for Constitutional Convention

The House on Thursday approved by a vote of 77-44 a concurrent resolution that requests of Congress to call a convention for the purpose of proposing constitutional amendments and imposes limits on the federal government. Supporters of the resolution want to be the sixth state to send this message to Washington that Kansans are tired of the federal government’s overreach. The measure needs 84 votes to be adopted on final action.

Looking Ahead

With the budget completed before Turnaround, the Legislature can spend the rest of the session working through the efficiency study recommendations – paying closest attention to the ones that require legislative action – and evaluating their next move to address the Kansas Supreme Court’s ruling last week regarding equitable funding for schools.