• From the Statehouse: Week 6
• Appropriations update
• Rescission bill sent to Governor
• Legislative post audit reveals problems with Kansas tax policy
• Students and regents lobby for higher education funding
• Supreme Court denies motion to reopen school finance case
• Kansans with disabilities plead with legislators
• Bill protects insurance consumers
• Federal stimulus money to help with health records
• Jana Mackey bill passes House

All bills Turnaround in Week 6

We spent most of the week on the House floor in an effort to push through bills before the halfway point of the session, referred to as the Turnaround Deadline.  At this point, House bills adopted by the chamber will go to the Senate and Senate bills will come to the House.  These bills will now go through the committee process with hearings, possible amendments, and debate.  With the exception of a few exempt committees, neither chamber will introduce new legislation.

This last week we worked 62 bills on General Orders and 32 bills were voted on in Final Action.  The vast majority of the bills worked were noncontroversial, such as naming highways and authorizing new specialty license plates. 

However, two school finance bills were passed, reducing state aid to public education before we even know how our budget process will turn out.  The most controversial would reduce state aid to districts for capital outlay from the present 25% to 15% and would severely restrict small districts in upgrading and building new classrooms.  The second set limits on how much a district could be reimbursed for students who live more than 10 miles from an attendance center.

Turnaround week is spent mostly working on the House floor debating and amending bills.  A bill is first debated on the floor under the calendar item General Orders.  Amendments may be offered at this time, but they must be in writing and be germane to the bill.

The issue of germaneness is a point of considerable debate on occasion.  Typically a bill is germane if it touches the same chapter of law being amended.  In addition, if there is a common nexus to the subject matter of the bill an amendment can be germane.  When a challenge to the germaneness of a bill is brought forward, the rules chairperson will make a determination.  That ruling can be challenged and a vote is taken to determine if the rules chair's decision will stand.  Therefore, it is always said that anything that gets 63 votes is germane.

Those who have bills that did not make it through the first half of the session are looking for legislation that is germane to theirs and attempting to offer their measures as amendments.

Appropriations update

Committee work was abbreviated this week as we only meet Monday through Wednesday in the full Appropriations Committee and Monday and Tuesday in the General Government Budget Committee.  The following is the schedule of topics discussed on those days:

Full Committee:

Monday, February 16

• Budget Committee Reports On:
• Adjutant General
• Highway Patrol
• Kansas Bureau of Investigation
• Court of Tax Appeals
• Department of Labor
• Veterans Affairs

Possible action on:

• SCR 1614 - Constitutional amendments; creating a budget stabilization fund in the state treasury; annual .25% transfer of general state revenues; transfers only under certain circumstances.

Tuesday, February 16

Introduction of proposed legislation

Presentation by:

Joe Lawhon, Legislative Post Audit - Judicial District Boundary Redrawing Audit

Budget Committee Report On:

• Kansas Department of Health and Environment - Environment
• Kansas Department of Health and Environment - Health

Continued action on:

SCR 1614 - Constitutional amendments; creating a budget stabilization fund in the state treasury; annual .25% transfer of general state revenues; transfers only under certain circumstances.

Wednesday, Feburary 17

Continued action on:

SCR 1614 - Constitutional amendments; creating a budget stabilization fund in the state treasury; annual .25% transfer of general state revenues; transfers only under certain circumstances.

General Government Budget Committee:

Monday, February 15

Hearings on:

• Optometry Board Budget
• Insurance Department Budget
• Lieutenant Governor's Budget
• Judicial Council Budget

Action on:

• Real Estate Appraisal Board
• Real Estate Commission
• Kansas Racing and Gaming Commission

Tuesday, February 16

Hearings on:

• Attorney Generals' Budget
• Office of the Governor Budget
• Secretary of State Budget

Action on:

• Optometry Board Budget
• Judicial Branch Budget
• Judicial Council Budget
• Board of Pharmacy Budget

Rescission bill sent to Governor

The rescission bill passed the House last week and was reconciled with the Senate version this week.  The final product cuts $92 million from the current budget.  The House voted to concur with the conference committee report on Thursday and it will now head to the Governor for his signature or veto. It is feared that the FY 2010 budget will still be approximately $40 million short by July.  If revenues continue to come in lower than expected, we will need to revisit the FY 2010 budget for a sixth time.  If that becomes necessary, we will probably wait until the most updated revenue estimates become available in April to take any further action. 

Legislative post audit reveals problems with Kansas tax policy

On Wednesday, the Legislative Post Audit Committee heard two reports from the nonpartisan Post Audit division about the impact and effectiveness of tax credits and exemptions in Kansas.  Their findings reinforce the concerns many in the legislature have about the state's tax policy.

The Legislature has arbitrarily granted or denied tax exemptions and credits with no set criteria on which to base its decision.  As the number of tax exemptions and credits has expanded, the need for clearly defined and consistent guidelines has become more pressing. 

Over the years, the percent of State revenues provided by sales taxes has declined from 51% in fiscal year 1980 to 49% in fiscal year 2009.  Most sales tax exemptions don't have a measurable purpose. In essence, they subsidize the operations of all entities granted the exemption by lowering their costs of doing business, or by making it "easier" for people to buy their products.

Thirteen of the State's 99 sales tax exemptions account for $4.1 billion or 96% of the forgone sales tax revenue.  In all, six of those 13 exemptions ensure that goods are taxed only at the final point of sale, or avoid taxation of governmental entities.  Those six exemptions cost about $3.4 billion.

The two audits confirmed that the number of credits and exemptions cost the state a significant amount of revenue but have little measureable benefit to the state as a whole. 

The following is the summary of findings and recommendations from the audit:

AUDIT QUESTION 1: Does Kansas have tax credits that aren't accomplishing their intended purpose or have outlived their usefulness?

AUDIT ANSWER and KEY FINDINGS:

• Tax credit and refund programs cost the State $669 million in forgone revenues for tax year 2007.
• Eight credits and one refund program (costing $446.3 million in 2007) clearly appeared to be accomplishing the Legislature's policy goals.
• Eight credits (costing less than $100,000 in 2007) appeared to be likely candidates for repeal, primarily because of minimal or declining use. These include tax credits for agricultural-tourism liability insurance, a single city port authority, abandoned well plugging, swine facility improvement, child day care assistance, and three tax credits designed to encourage contributions to low-income Kansans.
• Six credits and one refund program (costing about $100 million) appeared to be accomplishing their purposes but were more generous than some other states or credits. For example, Kansas' tax credit for angel investors is 50%, while many states' tax credit rates are 25% or less. Others we identified: the homestead property tax refund and tax credits for earned income, research and development, child dependent care, and community service contributions. These credits could be modified to bring them more in-line with others.
• The Legislature may want to re-evaluate the remaining 12 credits (costing about $122.5 million). Among the reasons why: some have fairly minimal use, likely don't cause the actions being taken, are significantly more expensive than expected, may cause competitive inequities, or provide a 100% credit. For all these credits, we identified considerations that could support keeping, modifying, or repealing them, depending on the Legislature's policy goals.
• Kansas lacks a strong system for reviewing and evaluating tax credits, and the Department of Revenue's tax database system has a number of data reliability issues. Those issues included duplicate tax credits being reported, changes needed because of amended returns, taxpayer errors, and data entry errors.

Recommendations:

• We recommended that future tax credits include a measurable public purpose, a mechanism for collecting information for assessing whether the purpose has been met, and a sunset provision that would allow a periodic review. We also recommended that the Legislature consider any changes it may want to make to the credits we identified as potential candidates for being repealed, modified, or re-evaluated, and consider removing confidentiality provisions about who benefits from tax credits and by how much, as some other states have done.
• We recommended that the Department of Revenue make the changes needed to improve the accuracy of tax credit information it provides to the Legislature, and that it incorporate tax return and credit information processed by the Insurance Department.

AUDIT QUESTION: Does Kansas Have Sales Tax Exemptions that potentially should be considered for elimination?

AUDIT ANSWER and KEY FINDINGS:

• Kansas currently has 99 sales tax exemptions costing the State an estimated $4.2 billion in fiscal year 2009.
• Sales tax exemptions in several areas aren't in line with good tax policy because they provide unequal treatment for similar types of taxpayers. For example,
• o exemptions for 44 specifically named non-profit organizations or associations, costing about $2.2 million annually,
• o exemptions for non-profits such as hospitals and nursing homes,
• but not their for-profit counterparts
• o an exemption for coin-operated laundries, but not other laundry or coin-operated businesses,
• Some of the costliest sales tax exemptions enacted as a matter of public policy relate to machinery and equipment ($231 million), educational/youth activities ($58.5 million), labor services ($182 million), utilities ($136 million), and health care ($70 million). Although there may be good public policy reasons for having such exemptions, they significantly erode the State's tax base.
• Recently, many sales tax exemptions have been expanded to exempt "sales by" or "purchases made on behalf of" certain organizations. Such provisions broaden those entities' exemptions, are looser and more at risk of abuse, and don't distinguish between isolated/occasional sales
• and ongoing sales.
• The Legislature hasn't adopted broad policy goals regarding the types of organizations, services, or activities it wants to exempt from sales taxes, making it difficult to have a consistent basis for deciding which exemptions have merit and should be continued.

Recommendation

We recommended that the Legislature review the sales tax exemptions noted above to determine what changes if any should be made. We also recommended that the Legislature consider establishing a broad sales tax policy outlining the types of sales it wants to exempt and developing criteria regarding what fits within that broad policy.

To view the complete audit go to:

http://www.kslegislature.org/postaudit/audits_perform/10pa03.1a.pdf

http://www.kslegislature.org/postaudit/audits_perform/10pa03.2a.pdf

Students and regents lobby for higher education funding

This week, student leaders from KU, KSU, Washburn, Hays, Emporia and Pittsburg met with legislators to lobby for higher education funding as part of Higher Education Day.  University presidents/chancellors also appeared before the House Education Committee on Monday to discuss the impact of recent cuts.  After cutting more than $100 million from higher education last year, tuition is rising, classes are larger, there are fewer courses to choose from, and the availability of campus jobs has decreased.

I am in full agreement with the Board of Regents statement regarding the Governor's budget proposal:

"The Governor made it crystal clear that he values higher education and believes that a healthy higher education system contributes to a healthy economy. The Kansas economy won't grow without successful businesses, and businesses won't reach their full potential without the highly skilled workers that are produced by the state's public higher education system."

"After absorbing $106 million in cuts over the past year, the state's higher education system now sits at Fiscal Year 2006 funding levels, which is why I'm thankful the Governor didn't propose additional allotments for Fiscal Year 2010. We're now at the bare minimum in terms of the funding levels required to retain eligibility for the receipt of federal stimulus dollars. Any additional cuts whatsoever will jeopardize the millions of dollars in vitally important federal funding that have served as a life-preserver for our higher education system."

"The Board applauds the Governor's politically difficult but fiscally responsible decision to propose a revenue enhancement package for Fiscal Year 2011. While it's never easy to propose a tax increase, the proposal does serve two important purposes. First, it spares the higher education system from additional reductions, which, at this point, would devastate a system already crippled by budget cuts. Second, the $10 million budget enhancement represents an important and positive step in reversing what has become an extremely damaging higher education funding trend. If we do ultimately receive this enhancement, the Board will commit it to strategically targeted investments aimed at boosting the Kansas economy."

"Our higher education system has certainly shouldered its fair share of the state's budget burden.  At a time when enrollments continue to increase statewide, over 750 employees and positions have been laid off, held vacant, or eliminated, and over 450 academic programs and classes have been eliminated, producing increased class sizes and making it less likely students will be able to graduate on time. Tuition has increased, institutions are now turning away qualified Kansans from high demand programs, and some institutions are even considering enrollment caps. It will take the next decade for the state's higher education system to fully recover from the recent budget cuts. The trend of state disinvestment in higher education must be reversed if the Kansas economy is to ultimately thrive, which is why the Governor's proposal is so important."

"The Board strongly urges the Legislature to approve the Governor's revenue enhancement package. Because higher education is an engine for economic growth, the state should invest in its higher education system in order to lay the foundation for its future economic recovery. Now is the time to invest in the future of Kansas."

Budget Details:

Higher Education System Support (State Funding):

FY 2006:                                  $747 million

FY 2007:                                  $785 million

FY 2008:                                  $829 million

FY 2009:                                  $853 million

FY 2009 Rescission:                $817 million

FY 2010:                                  $790 million

FY 2010 Omnibus:                  $768 million

FY 2010 1st Allotment:          $753 million

FY 2010 2nd Allotment:         $747 million

Total cuts over the past year: $106 million ($853M - $747M), a 13% funding reduction.

Impact of Budget Cuts to Date (system wide):

• Employee layoffs, positions held vacant, and positions eliminated: Over 780
• Programs and classes eliminated: Over 450

Supreme Court denies motion to reopen school finance case

The Kansas Supreme Court has denied a petition by the school districts to reopen the 2006 Montoy school finance case.  Friday's ruling from the court means that any new challenge to the state's school finance system must start over at the district court level.  Attorneys for a coalition of 74 districts argued that the state is failing to comply with the court's earlier ruling that state aid to schools was unconstitutionally low.  The Court opinion says that the July 28, 2006, decision found the Legislature to be in "substantial compliance" with the remedial orders made by the court in that case by passing bills in the 2005 special session and the 2006 session.  The Court also says that the 2006 decision and closing the case was "limited to determining compliance" with the Court's orders in the specific case before the Court.

The Court says that it "refused to address the question whether the new legislation provided constitutionally suitable provision for finance of the public schools as required by Article 6, section 6 of the Kansas Constitution."  The Court went on to say that, after reviewing the legislation, they determined that it had materially and fundamentally altered the Kansas school funding formula as to essentially replace the funding scheme at issue in the Montoy case.  The record before the Court from the eight-day district court trial concerned the prior funding formula.  Although the 2005 and 2006 legislation responded to the constitutional faults found in the old formula and conformed somewhat with the Court's requirements, the issue now is whether the Legislature has changed the formula recently in such ways as to render it unconstitutional at present. 

The Court could have remanded the case to district court for findings of fact about the constitutionality of the present funding scheme, but the Court pointed out several problems with continuing the case which was originally filed in 1996.  Ryan Montoy probably is no longer in public school and, therefore, does not have standing to sue under the new formula.  The situation of the original school districts has changed over time.  And, the opinion pointed out, the case on remand would have to go through essentially the same process as a new case and "there is nothing the plaintiffs are seeking that they cannot accomplish by filing a new lawsuit."

The Court said that the decision to dismiss the case "was not unanimous."  It was a decision by a majority of the Court.  Attorney General Steve Six fought the districts' request to reopen the case. He says a 2005 Kansas law requires that any challenge to school finance be filed first in district court.

Kansans with disabilities plead with legislators

Gov. Mark Parkinson cut Medicaid by 10% or $77 million when it became clear that the state was facing revenue shortfalls during the time the Legislature was not in session. The cut has been especially harmful because it means the loss of an additional $140 million in federal matching funds.  Our neighbors are feeling the pain of lost services as a result.  This morning, people with developmental disabilities begged lawmakers to restore cuts in Medicaid funding made since last year. 

"Any more cuts, and I may have to go into a nursing home," testified Terry Walter of Topeka. Walter has diabetes, congestive heart disease and uses a wheelchair.  "It's just mind-boggling that we would cut those services only to force people into institutions which are going to cost taxpayers more dollars," said the executive director of the Disability Rights Center of Kansas.  He said policymakers don't understand that the cuts "are real and are devastating people's lives, and without restoring those cuts, it's only going to get worse."   The cuts also resulted in an even bigger loss in matching federal funds.

At a news conference, several people caring for those with disabilities spoke about the need to restore funding.  For example, a caregiver from Lawrence said that because of the cuts, the 3-year-old boy she takes care of, Max, will be unable to get a new wheelchair when he grows out of the one he is in now.  Daniel Perez of Wichita said the cuts have forced him to lose respite and dental care for his autistic son, Daniel, 18.  Kathy Payne of Berryton said the cuts have reduced the wages for the caregiver of her 36-year-old daughter, Robin, who is severely disabled. Without Robin's caregiver, Payne said she would not be able to hold down a job and keep her daughter at home.

Bill protects insurance consumers

On Tuesday February 16, I presented testimony to the Committee on Insurance at a hearing on the bill I introduced (HB 2563), which would help protect consumers' credit scores during difficult times.  I have been given assurensess that this bill will be worked into a Senate bill and passed out of committee next week.

The bill provides that if a consumer undergoes extraordinary life circumstances, it will enable them to freeze the credit score on file with his/her insurance company.  Extraordinary life circumstances include: 1) a declared state or federal catastrophic event; (2) a serious illness or injury to the consumer or the consumer's immediate family; (3) the death of a spouse, child or parent of the insured; (4) divorce or involuntary interruption of alimony or support payments; (5) identity theft; (6) military deployment; (7) involuntary loss of employment for more than three months; and (8) any other events as determined by the insurer.  The bill would also eliminate the mandated updates of scores every 36 months.

At a time when thousands of Kansans are being laid off at no fault of their own, we must lessen the long-term impact of temporary circumstances.  With no regular source of income, it is easy for even the most financially responsible families to fall behind.  Missed bills and late payments lower credit scores almost immediately.  In turn, consumers are faced with increased interest rates, decreased opportunities for employment or housing, and higher insurance premiums.  It only takes one missed payment to lower a credit score, but it takes years to improve a score that contains negative marks. 

Federal stimulus money to help with health records

The state of Kansas will receive $9 million from the federal government in grants to hel doctors and hospitals move from paper to computerized record keeping.  Friday the Obama administration announced more than $975 million in stimulus funds for this purpose.  Gov. Parkinson says, "This announcement is great news for Kansas as it will bring countless opportunities in terms of creating jobs, advancing technology and reducing our overall health care costs," 

Studies show electronic medical records help reduce medical errors and improve the quality of patient care. The grant money comes from the economic stimulus passed by Congress last year and is part of a push to get health care providers to adopt electronic record keeping. The goal is to help make electronic record-keeping technologies available to Kansas hospitals and primary care physicians by the year 2014 while helping train people for careers in health care and information technology.

The grants come from two federal agencies.  Health and Human Services announced $386 million in grants to advance electronic health records at the state level, also granting $375 million to 32 nonprofits for regional training of health care workers on these technologies. 

Labor Secretary Hilda Solis announced around $225 million to support 55 job-training programs in 30 states. The administration says around 15,000 people should get training in the health records technology field.  Solis said the training will lead those people to jobs offering career-track employment and good pay and benefits.  In addition to the grant to the state, the Kansas Foundation for Medical Care received a $7 million grant. The Topeka-based organization is a nonprofit that focuses on Medicare and Medicaid patients, according to its Web site.

Jana Mackey bill passes House

On Thursday, House Bill 2517 passed the House, which will help the justice system better track domestic violence cases.  The bill was introduced in response to the 2008 murder of Lawrence resident Jana Mackey.

Currently, many crimes related to an abusive relationship (such as harassment, damage to property or disorderly conduct) aren't classified as domestic violence.  House Bill 2517 would allow judges to determine whether crimes are linked to domestic violence and then tag them accordingly onto legal documents connected to any criminal act involving an intimate or domestic relationship.  A tag will allow for better tracking of repeat offenders. This is especially important with domestic violence cases, as most offenders repeat their crimes (including Jana's murderer).  Additionally, the bill allows judges to require treatment for the offender. Ultimately, this legislation will help sanction domestic violence before it escalates.

Mackey, originally from Hays, was a 25-year-old KU law student when she was murdered by her ex-boyfriend in 2008.  Tragically, she had previously worked as a lobbyist in the State Capitol on behalf of women who were victims of domestic violence.  In her wake, Jana's parents have carried on her passion for fighting domestic violence through the creation of "Jana's Campaign to Stop Domestic Violence."  The campaign's goal is to promote new and effective legislation to protect victims of domestic violence.  Her mother, Christie, was in the House gallery when the bill came to the floor.

House Bill 2517 now heads to the Senate for its consideration.