The Statehouse Report

Topeka Capitol

The Statehouse Report is published each week that the Kansas State Legislature is in session and provides high-level overviews of the status of current legislation that affect the business community.

June 9, 2017

The 2017 Legislative Session is within one day of concluding. It is expected that the budget will be ready for vote on Saturday. After working twelve straight days through a weekend, the House and Senate were able to craft proposals to gain consensus to finish the session. The 2017 session yielded significant heavy lifting over the five months and is going to be just short of the longest in state history.

Last week, the Senate’s passage of a new school finance formula sent the bill to conference committee. Leaders of the House and Senate School Finance Committee met to negotiate differences between their positions and ultimately agreed to the House’s version with a slightly larger funding level. The final version of the bill looks very similar to the old funding formulas and increases school finance funding by $460M over the next two school years. The bill was approved by the House, 67-55, and the Senate, 23-17. The Governor received the bill today and has 10 days in which to take action on the bill. At this point, it is pure speculation whether the new plan will pass constitutional muster with the Kansas Supreme Court. News from the Chief Justice, either way, is expected in the coming weeks.

The major obstacle of the final week was tax policy. The House attempted several different variations of income tax brackets with no success, while the Senate made an early statement when they passed a three-bracket income tax plan by 26-14 on the day after Memorial Day. The House even tried combining a tax plan with an education-funding plan, which did not work. Eventually, the House mustered the votes to pass a three-bracket income tax plan. As expected, Governor Brownback vetoed the tax plan but the House and Senate voted to override the veto several hours later.

The tax plan includes repeal of the exemption for non-wage income but the claiming of certain non-wage business income losses is restored. There is also the restoration of itemized deductions for property tax, medical expenses and mortgage interest on a graduated basis of 50% in 2018, 75% in 2019 and 100% in 2020. The child and dependent care tax credit would be also restored in stages 12.5% in 2018, 18.75% in 2019, and 25% in 2020 and beyond. The income tax rates will go from a two-tier bracket system to a three-tier bracket system with the rates as follows:

 

The bill is expected to raise $591 million in FY2018; $633 million in FY2019; and $617.4 million in FY2020, which will cover the passed school finance plan and any revenue deficit for 2018 and 2019.

Also included in the tax bill was an extension of the STAR Bonds incentive program. It would extend the program to 2020. There is a one-year moratorium on the approval of new STAR Bond Districts, but existing districts could continue to develop projects.

As reported last week the Senate and House passed a bill to exempt the following from allowing concealed carry in State- or municipal-owned medical care facilities and adult care homes; community mental health centers; indigent health care clinics; and any buildings located in the health care district associated with the University of Kansas Medical Center (KUMC). The bill was presented to the Governor on Monday, June 5, and has 10 days to act on the bill.

The last three days have spent finalizing the biennial budget for the next two fiscal years. Issues to be resolved include pay raises for employees, bonding authority for KDOT and financing state contributions to KPERS in the past two years. Legislators will return for a final ceremonial day later this month, known as Sine Die.

Information provided by Gaches, Braden & Associates.

 

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