Summer 2019 Legislative Update

When the Legislative Session ends, the KCC government affairs team continues to monitor activity during the summer and fall months. The Legislature and regulatory agencies use the interim to gear up for next year’s initiatives. Here’s a brief update on some of the issues on the horizon:

Property Taxes

The KCC, along with the Kansas Grain and Feed Association (KGFA), has been in talks with the Kansas Department of Revenue’s Property Valuation Division (PVD) for several years in regard to recent spikes in grain elevator valuations. While the PVD has been responsive to some of the industry’s concerns as seen in changes made to their 2018 Grain Elevator Appraisal Guide, there is still more work to be done.

 The KCC and KGFA will continue to engage the PVD in productive dialogue about further changes to future editions of their guide. In the meantime, a number of business organizations and interested parties are working together on introducing a comprehensive property tax reform bill next legislative session. The specifics and language are expected to be finalized late this year, but here are some of the components being discussed:

  • Prohibiting counties from including in their budget any property taxes under appeal above a certain threshold.
  • Moving county appraisers under the jurisdiction of the PVD.
  • Extending the valuation cycle from one year to two.
  • Prohibiting property value increases during informal meetings or in response to an appeal.
  • Nullify the argument during a Board of Tax Appeals (BOTA) hearing that a property value could or should have been higher.
  • Prohibiting BOTA from increasing a valuation above the county’s appraisal.

 The KCC will engage in stakeholder meetings throughout the fall and winter as a proponent of a mega property tax reform bill next year.

Underground Storage Tanks 

The Kansas Department of Health and Environment (KDHE) is proposing a number of issues dealing with underground storage tanks that may be part of a comprehensive bill or several smaller bills next session.

One of several redevelopment funds is set to expire in July 2020. This fund provides incentives to underground storage tank owners for upgrading to double wall systems, as required by the 2005 Federal Energy Act. The bill would extend the sunset of the fund to 2030 as well as increase the amount reimbursed to offset the costs of the federal mandate and increase compliance.

The KCC is expecting KDHE to schedule a stakeholder meeting in the coming weeks and will continue to monitor this and other storage tank legislative initiatives.

Air Quality Fund

The KDHE is proposing an increase on fees for their Air Quality Fee Fund, which is expected to deplete by the end of next year due to the reduction in air emissions and corresponding revenue. A similar effort was tried and failed several years ago. The agency intends to raise $4.5 million annually and pursue these changes this year, for an effective date of January or February of 2020: 

  • Assess a new emissions fee on emitters of hazardous air pollutants (HAP - oil, certain manufacturers) at $150/ton.
  • Increase emissions fees on Class 1 permittees from $48/ton to $53/ton.
  • Require Class 2 emitters to begin paying emissions fees at $53/ton.
  • Assess a “complexity-base fee” on Class 1 and Class 2 emitters based on their NAICS code (from $500 up to $7,000).
  • Increase the complexity-based fee 1.2% annually.

T-Works

The deputy secretary of the Kansas Department of Transportation (KDOT) presented to the Legislative Budget Committee on August 13 the progress made toward completing the T-Works transportation program. This year, the Legislature approved roughly $200 million in additional state general funds to be used in fiscal years 2019 and 2020. KDOT’s allocation plans include the following: 

  • $50 million increase in preservation from $350 million to $400 million.
  • $86.4 million toward five projects this fiscal year: US 54 in Seward County, US 169 in Anderson County, US 281 in Russell County, US 50 in Lyon County, and US 75 in Montgomery County.
  • $5 million allocation for the local bridge program – 10% local funding match.
  • $11 million allocation for the cost-share program with state and local partnerships – 25% local funding match.
  • $10 million toward an enhanced safety program at targeted areas with high incident rates.
  • $2 million to increase payments to cities from $3,000 to $5,000 per lane mile. This payment hasn’t been increased since 1999.
  • $2 million for bike and pedestrian improvements.
  • $7 million – $27 million for federal grant projects.
  • $5 million for the city connecting link improvement program. Leveraging $6.5 million of local investment.
  • $3 million – $38 million, or whatever is left from federal funds, toward the cost-share program.

Supreme Court Rulings

Noneconomic Damages: The Kansas Supreme Court ruled on June 14 that the state’s cap on noneconomic damages in personal injury cases is unconstitutional. The Court’s opinion found that limiting damages paid for pain and suffering removes the rights of the plaintiff of having a jury determine compensation owed based on their injuries rather than state law.

The Hilburn v. Enerpipe Ltd. case was filed in 2010 and, and at that time, the state’s cap was $250,000. Since then, the Legislature has raised it to $325,000 and was scheduled to increase to $350,000 in 2022. This ruling will essentially remove the cap entirely and allow for higher personal injury awards that will likely be seen in higher auto liability insurance premiums on all Kansans.

As the dust settles and the full impact of the ruling is being interpreted, some are anticipating that the Legislature will challenge the Court’s ruling during the 2020 legislative session. The KCC is part of a business coalition that will be meeting on August 26 to discuss lobbying strategies.

Utility Study

It took three separate meetings for the Legislative Coordinating Council (LCC) to consider and approve a consultant to study Kansas’ high utility rates, which the Legislature approved this year. The interesting caveat is that the statute requires at least one minority party vote in selecting the contracts. During the first two meetings, the LCC voted on several different combinations of vendors for different phases of the project but all failed on party lines.

The three bidders considered were London Economics International at $309,000; Energy and Environmental Economics at $260,000; and Energy Ventures Analysis at $1.55 million. On July 29, the panel chose London Economics for phase one of the study and will rebid phase two, delaying the execution date to July 1, 2020.

School Finance: Rather early in the session, the Legislature approved an education finance bill that appropriates roughly $90 million per year in additional state funding toward K-12 schools. The measure is in response to the Kansas Supreme Court’s last opinion in Gannon v. Kansas, which ordered the Legislature to account for inflationary increases in the Base State Aid Per Pupil. The bill also includes student outcome accountability measures for schools and targeted programs for at-risk students.

The plan was backed by the Governor and largely supported in the Senate. It was a tougher sell in the House, however, who wanted to see a less expensive K-12 proposal move forward.

The Kansas Supreme Court ruled on June 14 that the Legislature did indeed meet its constitutional requirement to adequately fund schools with this bill. The Court will retain jurisdiction over the lawsuit, however, to ensure that the state follows through. It seems that for now at least, this ends a decade-long legal battle over school finance in Kansas.

Interim Committees

The Legislative Coordinating Council (LCC) – a seven-person, joint House and Senate leadership panel – met on July 1 to review and approve interim committees and topics to be studied prior to the 2020 legislative session.

One subject in particular will receive heightened attention this fall: Medicaid expansion. A Senate-only Health interim committee will meet to establish a Senate position on Medicaid expansion. As previously reported, the House passed their expansion bill earlier this year, which will be a starting point for consideration. Following the Senate committee meetings, a joint House and Senate interim panel will meet in an effort to find some common ground before January.

The KCC will also be monitoring and testifying during a Special Committee on Financial Institutions and Insurance, as they consider privilege fees imposed on credit unions.

The following are some of the other special joint interim committees and topics approved: 

  • Special Committee on Health: anesthesiologist licensing.
  • Special Committee on Judiciary: judicial selection process, Supreme Court decisions.
  • Special Committee on Medicaid Expansion: expanding KanCare.
  • Special Committee on Natural Resources: flood damage and control.
  • Special Committee on Federal and State Affairs: medical marijuana.