Weekly Legislative Report
Veto Session Wrap-up

The 2021 Kansas Legislative Session adjourned just after 2:00 a.m. on the morning of Saturday, May 8. The Veto Session began on Monday, May 3 and only lasted five days instead of two weeks as some were expecting. Lawmakers went to work quickly overriding five of the Governor’s 17 vetoes by Monday afternoon.

The Legislature will return on May 26 for Sine Die adjournment, which is typically a quick, ceremonial closing of the legislative session. However, this year’s Sine Die could get complicated if Governor Laura Kelly decides to override any more of the bills sent to her from last week.

Considered one of legislative leadership’s biggest victories this year is the override on Senate Bill 50, the primary tax bill which allows for federal decoupling. The legislation also increases the standard deduction for all Kansas income taxpayers, allows itemization on state returns regardless of federal filing status, and requires online retailers to collect and remit sales and transient guest taxes. It was touch and go for a few minutes in the House. After a few changes of vote, the final roll call was right on the line at 84-39. The Senate’s vote was 30-10.

The Legislature also successfully overrode the Governor on the following bills:

• House Bill 2058 lowers the age to obtain a concealed carry license to 18 years.
• House Bill 2183 limits the number of advanced ballots delivered on behalf of another voter.
• House Bill 2332 sets requirements for the solicitation of advanced ballot applications.
• House Bill 2166 authorizes several distinctive state license plates.

There was one bill that the Legislature was unable to get to a two-thirds majority needed for an override. Senate Bill 55 created the fairness in women’s sports act and required that female student athletic teams only include members who are biologically female. The Senate vote failed 26-14, so it was never considered by the House.

There were 11 other Governor veto’s that the legislature did not attempt to override including the following:

• HB 2039-American civics test/financial literacy that required Kansas students to pass an American civics test to graduate from high school. It also would have required a personal financial literacy course for grades 10 through 12 lasting at least one semester or two quarters.
• HB 2089–Firearm safety that would have required the state Board of Education to develop guidelines for gun-safety courses that include the National Rifle Association’s Eddie Eagle Gun Safe program.
• E-verify– No attempt was made to override the veto of the state budget provision that would have required state agencies and contractors to verify the eligibility of their employees to work in the United States.
• Statehouse Meditation Room– The Legislature opted not to override the governor’s veto of language in the budget to reclaim a room for meditation on the second floor of the Capitol that the governor now uses for constituent services. It is believed the Legislative Coordinating Council still has the power to take the room back.

Below are highlights of the key bills passed during the Veto Session:

Conference Committee Report on House Substitute for Substitute for Senate Bill 273 – COVID Small Business Relief Act

The bill provides as much as $500 million in relief to Kansas businesses that were shut down during the COVID-19 pandemic. It requires the state to set aside 25% of unallocated federal COVID relief money to compensate small businesses that were financially hurt from government-imposed shutdowns or restrictions during the pandemic. Cities and counties are required to earmark 35% of their federal relief dollars. The bill applies only to businesses with 50 or fewer employees, and claims must be submitted between October 1 and December 31, 2021.

The House passed the bill 68-42, and it was passed 24-14 in the Senate. The bill now goes to the governor for her signature.

Conference Committee Report on Senate Substitute for House Bill 2313 – Disaster Declaration Property Tax Reimbursement

The bill provides property tax relief to certain small businesses that are shut down or restricted due to state declared disaster emergency declarations. This applies to small businesses that received less than $150,000 from the COVID Small Business Relief Act in SB 273. The bill is prospective and restricted for businesses with yearly revenues between $10,000 and $2.5 million. Each property tax rebate is capped at $7,500. The state would be responsible for two-thirds of the claim, and the county would pick up the other one-third. The legislation also includes the extension of the 20-mill statewide school finance levy and directs the Legislative Post Audit to study the impact of government and nonprofit organizations competing with for-profit businesses, which is an issue that the Legislature has grappled with for several years.

Conference Committee Report on House Bill 2134 – K-12 Education Funding

The bill appropriates funding for the Department of Education for fiscal years 2021, 2022, and 2023 including $5.2 billion to comply with a state Supreme Court order requiring the Legislature to adequately fund education. Other education-related policies in the bill include expansion of a tax credit for private school scholarship contributions for low-income students, and limitations on remote learning hours and corresponding state aid dollars. To get Governor Kelly to sign a proposal that includes more school choice, the Legislature negotiated a spending plan that gives her a say in how new federal COVID relief money is spent. The agreement will allow the SPARK committee to continue to oversee the relief money, however with more legislative members on the panel.

Conference Committee Report on Senate Bill 29 – Short-term Health Insurance

The bill provides for short-term, limited-duration health plans for a period of less than 12 months with an increase in the renewal/extension periods from 24 month up to a maximum policy period of 36 months. It also requires insurance companies to disclose information to consumers regarding the Affordable Care Act requirements concerning preexisting conditions and minimum essential coverage. Some are anticipating this bill will be vetoed by the Governor.

Conference Committee Report for Senate Bill 159 – Omnibus Budget

As usually happens, the Legislature passed an omnibus budget bill on the last day of the legislative session that adjusts state appropriations to state agencies for the next two fiscal years. The omnibus budget is a trailer budget bill that makes appropriate changes based on the Consensus Revenue Estimates released in late April.

The influx of federal COVID-19 relief funds had a dramatic effect on the budget, notably in higher education funding. Legislators were acutely aware that this was to be one time money. An additional $53 million was allocated to the state’s universities, community colleges and technical colleges. The dollars were split into grants and scholarships, as well as money to make up for past budget cuts, for student recruitment, and new equipment, including, $10 million for the newly passed Promise Scholarship Act and $4.3 million for technical colleges capital outlay.

Budget negotiators also agreed to a new process for the distribution of federal dollars.  The Governor had vetoed a budget provision passed in regular session that would give additional powers to the legislature in appropriating these funds.  A new SPARK Executive Committee will be formed and comprised of three appointees from the Governor’s office, two appointees from the Speaker of the House and two appointees from the Senate President.  This committee will be responsible for distribution of federal COVID relief dollars.

The largest issue that budget negotiators needed to resolve was state employee pay. House negotiators had proposed a 2.5% state employee pay raise. After a stalemate, the conference committee shifted to a narrower pay issue, salaries in the Judicial Branch. The Senate ultimately agreed to a one-time pay increase for judges. Non-judge staff and court service offices were granted a multi-year planned increase.

The conference committee also added funds for mental health as well as FTE’s for the Certified Community Behavioral Health Clinic (CCBHC) funding. Funding for the 988 Suicide Prevention Hotline was also approved. These funds will expand call centers in Kansas, which will connect callers to local services.

In addition, $9.6 million were allocated to update the unemployment insurance benefit system as well as $250,000 to conduct an outside audit in compliance with Senate Sub. for Sub. for HB 2196, the newly passed unemployment insurance reform and modernization bill.

Budget vetoes were also addressed during the Veto Session. Three budget line-item vetoes by the Governor were overturned;

• Kansas Board of Regents capital renewal provision for $10 million;
• DCF Hope Ranch provision; and,
• KDADS provision for PACE, RFP for all-inclusive care provision.

Conference Committee Report on Senate Bill 47 – Tax Bill Bundle

This CCR includes several bills considered by the Legislature this year and does the following:

• Enacts the Taxpayer Protection Act, requiring that paid tax return preparers sign any income tax return and include the preparer’s federal preparer tax identification number on the form. Any failure to do so would subject the preparer to a civil penalty of $50 per return with a maximum of $25,000 in civil penalties per preparer per year.
• Extends the sunset by three years on an income tax credit for the Pittsburg Port Authority and makes the credit available to all income taxpayers. Current law limits the credit to only corporate income taxpayers. This proposal was supported by Watco Railroad for investments made in short line rail maintenance.
• Extends the filing deadline for corporate income tax returns to one month after the federal due date and removes the tax liability for victims of identity theft on any income fraudulently obtained.
• Increases the number of days a nonresident employee can work in Kansas before being subject to state withholding requirements to 30 days.
• Extends the sunset of the Rural Opportunity Zone program for two years.

Conference Committee Report on SB 78 – Insurance Bundle

The CCR for SB 78 updates the national insurance commissioners (NAIC) credit for insurance reinsurance model law, codifying the NAIC credit for reinsurance model regulation and updating certain terms and definitions relating to the insurance holding company act, service contracts and surplus lines insurance. The report also eliminates certain requirements relating to the annual submittal of certain documents by out-of-state risk retention groups, extending the time frame to submit certain documents by professional employer organizations, abolishing the utilization review advisory committee and replacing it with URAC.

HB 2187 – First-time Home Buyers Savings Account

The Legislature passed a bill providing a tax deduction for first-time home buyers. It allows Kansans to set up savings accounts at financial institutions starting July 1, 2022, to save for the purchase of a new home. Contributions would be limited in each tax year to $3,000 for individuals and $6,000 for a married couple filing a joint return. The deposits would be capped for all tax years at $24,000 for individuals and $48,000 for a married couple filing a joint return. The bill passed 119-3 in the House and 35-1 in the Senate. The bill awaits the governor’s signature.

Sine Die

The 2021 Legislature will have its official last day of session on May 26^th.  Sine Die is usually a formality, but Senate Leadership announced that Senate members should plan on attending to attempt any overrides of anticipated vetoes by the Governor.  The Senate is also expected to elect a new Majority Leader, to replace Senator Gene Sullentrop R-Wichita, who was voted out of his leadership position due to legal issues before regular session adjourned. Contenders for the leadership position include Asst. Majority Leader Larry Alley, R-Winfield, Majority Whip Richard Hilderbrand, R-Galena and former Senate Vice-President Jeff Longbine, R-Emporia.

2022 Legislative Session Issues

In addition, several bills were discussed during veto session but failed to pass.  They will be held over for debate during the 2022 Legislative Session:

House Substitute for Senate Bill 158 – Medical Marijuana

After hours of debate and more than a dozen of amendments, the House passed a proposal that allows for the manufacturing and sale of medical marijuana in Kansas. The bill is restricted to patients that have been prescribed the treatment by a licensed and trained physician. It also allows counties to prohibit the sale of medical marijuana in that individual county. The Kansas Department of Health and Environment will have strict regulations on harvesting, processing, and dispensing to ensure that marijuana is not smoked – even for medical purposes – and not used recreationally. SB 158 will be considered by the Senate Federal and State Affairs Committee next year.

HB 2119 – Education savings accounts

A bill that would have allowed students to take their base state aid with them to private schools under several circumstances passed the House but died in the Senate. It was part of a broad bill that included school funding and a proposal to expand taxpayer-subsidized scholarships to attend private school. The education savings accounts were ultimately removed from the legislation. They are expected to return next year.

SB 287 – Medicaid Expansion

Efforts to expand Medicaid this session again fell short in the House and the Senate. Senate Minority Leader Dinah Sykes tried to amend a bill to expand Medicaid, but it was defeated 23-12. Democratic Rep. Brett Parker tried a similar approach in the House, but his proposed amendment to the state budget was voted down 78-46. The Governor even introduced SB 287 which proposes to pay for Medicaid expansion through the authorization of medical marijuana. As one of the Governor’s top priority the issue will be in 2022.

SB 84 – Sports Betting

The Senate voted 26-12 to pass a bill authorizing the state’s four casinos to contract with the Kansas Lottery to manage and operate a sports book on behalf of the state. The House took a very different approach that would have allowed betting at the state’s four casinos and 1,200 lottery retailers statewide as well as authorized a revote to allow slot machines at the dog track in Sedgwick County. However, the House failed to forward a bill and we expect the issue to return next session.

Tax Credits and Exemptions

Several tax proposals have been held over for the 2022 legislative session.  Some of the top issues include:

• HB 2445, a property tax exemption of for-profit health clubs who argue they unfairly compete with nonprofit or local units of government health clubs Its provisions were added to a bill during the final hours of the veto session and became very controversial. The Senate ultimately rejected the provisions and instead lawmakers settled on a post audit study to look at the impact of nonprofits and local government competing with for-profit companies.
• HB 2219-TARGET Tax Credit bill-tax credit for hiring intellectually disabled individuals passed the House 123-1 but the Senate Commerce Committee failed to take it up. This bill will be pursued during the 2022 Session.
• HB 2315-Provides a tax credit for contributions to tech colleges. The bill passed the House and was heard in the Senate Assessment and Tax Committee but stalled in committee.  Expect this bill to be pursued during the 2022 Session.
• HB 2328 and SB 282-Aviation Tax Credit. Both bills were heard by both the House and Senate Commerce Committees.  HB 2328 has passed out of the House Commerce Committee and SB 282 was passed out by the Senate Tax Committee. Efforts were made to these to a tax conference committee failed. These credits will most likely be pursued in 2022.

House Sub for SB 91 – Student Liability for Work Based Learning

A conference committee was formed on SB 91 but was never called to meet.  The bill proposes liability protection for businesses that participate in high school work-based learning programs and clarifies USDs are responsible for carrying coverage for the students by treating high school work-based learning programs like other school sponsored events and authorizes schools to purchase insurance coverage for students participating in the activity. Seen as critical component to career exploration this issue remains a top business priority and will be back next session.

HB 2264 – Profiting from Likeness: Student-athlete endorsements

A bill allowing college athletes to profit from their names, likenesses and images died in the Senate this session. The legislation is seen as vital for keeping Kansas college athletics competitive. Fourteen states have already passed similar legislation, including two signed into law last week. It is rumored this bill is tied to the legislation banning transgender girl and women athletes from participating in interscholastic sports for females, which became a roadblock for this bill passing this session.

Discrimination

Bills deemed discriminatory in nature continue to pop up every year and have concerned issues such as sports, tourism, voting and even adoption bills.  We expect the same for 2022 with additional discussion on gender sports and election laws pending.

Covid Relief/Vaccine

In 2022 we are assured to see lingering Covid issues being addressed such as who may require vaccinations and whether proof of vaccination will be required for work and to attend school.  We also know there will be additional discussion on how to best utilize and spend the federal recovery dollars coming into the state. And we cannot forget about all the issue still plaguing the KS Unemployment Trust Fund.  The 2022 Legislative Session may have as many Covid issues to consider as the 2021 session.

For a comprehensive analysis of all legislation passed during the 2021session click here.