2021 Kansas midway point legislative review
The Kansas Legislature returned to work on March 10 after a brief break following “turnaround” day, which occurred on March 5 this year. Turnaround day is considered the halfway point of the session and marks the final day for consideration of “nonexempt” bills in their “house of origin.” Nonexempt bills that have not been passed in their house of origin are now considered “dead” for this session, but those that have passed remain alive, as do bills that have been introduced by or referred to deadline-exempt committees. Most bills now considered dead in this session will see new life next session; however, as Kansas law provides that bills not acted upon in odd-numbered years, and which are not adversely reported, automatically carry over to the following even-numbered year session and remain at the point in the process where they were when the first session ended.
The following are brief summaries of bills of interest to the commercial and industrial building construction industry. Bills already passed by the legislature and signed into law by the governor take effect on July 1, 2021, unless otherwise noted.
Extension of the COVID-19-related state of disaster emergency is quickly approved
The Kansas Legislature wasted no time passing Senate Bill 14 and extending the COVID-19 state of emergency declared by Governor Laura Kelly on March 12, 2020. SB 14 ratifies and continues compromise emergency legislation (House Bill 2016) approved during the 2020 special session and subsequent extensions approved by the State Finance Council, and it extends the state of disaster emergency until March 31, 2021. The governor is prohibited from proclaiming a new COVID-19 state of emergency without approval by at least six legislative members of the State Finance Council and is prohibited from issuing an order that substantially burdens or inhibits the gathering or movement of individuals or operation of any religious, civic, business or commercial activity, whether for-profit or nonprofit.
Importantly, the bill extends business immunity from liability for COVID-related claims by providing that, notwithstanding any other provision of law, a person, or an agent of such person, conducting business in the state shall be immune from liability in a civil action for a COVID-19 claim if such person was acting pursuant to and in substantial compliance with public health directives applicable to the activity giving rise to the cause of action when the cause of action accrued. The bill was introduced on Jan. 11, signed into law on Jan. 25, and took effect that same day upon publication in the Kansas Register.
Other legislation involving modifications to the Kansas Emergency Management Act and providing restraints on executive action by the legislature include Substitute for Senate Bill 273, which was passed (27-12) by the Senate on March 1, and House Bill 2416, which was passed (81-40) by the House on March 4. Another bill, Senate Bill 283, was approved (31-8) by the Senate on March 3. The bill would amend the COVID-19 Response and Reopening for Business Liability Protection Act to extend the expiration date of the statute governing COVID-19 claim immunity for persons or agents of persons conducting business in the state by one year, until March 31, 2022. All three bills would become effective upon publication in the Kansas Register.
Unemployment compensation mismanagement and fraud problems in Kansas
The Kansas Department of Labor (KDOL) has been overwhelmed by a historic number of unemployment compensation claims since the COVID-19 pandemic began a year ago. Complaints from frustrated claimants unable to access their benefits or even contact agency personnel have plagued the agency, which has been led by four different directors in the past year. All this has been compounded by a huge rash of fraudulent claims, which began last year and only escalated in the early weeks of 2021. Kansas saw as many as 70,000 initial claims in one week in early January, which was more than almost every other state in the country. Frustration with the KDOL has reached a boiling point for out-of-work Kansans and legislators alike. Kansas legislative auditors estimate that fraudulent claims accounted for at least $600 million worth of unemployment payments since the COVID-19 pandemic started last year, which is twice the rate KDOL is acknowledging. Auditors counter that the $600 million figure might be low. Whether the funds needed to solve these very serious problems in the department come from the state or federal government, the costs will eventually find their way back to taxpayers.
Addressing unemployment insurance problems and preventing future fraud
On March 4, the Kansas House amended and passed (87-36) Substitute for House Bill 2196, which would, among many other things, hold Kansas businesses harmless from unemployment fraud and modernize the KDOL information technology system so future fraud can be identified and avoided. The bill would create the Unemployment Compensation Modernization and Improvement Council, which would be tasked with determining overall costs and changes needed to provide a safe and timely response to unemployment issues. It would require KDOL to modernize its IT infrastructure and maintain a modern infrastructure over time. In addition, the bill would make temporary changes to the membership of the Employment Security Review Board; make changes to Employment Security Rates tables; require the Secretary of Labor to provide tax notifications and certain Employment Security Fund Data Reporting; provide for certain employer account protections; provide for transfers of federal coronavirus relief aid or State General Fund money to the Employment Security Fund; prohibit the continuation of federal unemployment compensation programs using state funds; adjust thresholds for maximum benefits; modify the shared work program; and make other employment
security compensation changes. Sub for HB 2196 was referred to Senate Commerce for hearings March 16-17. If adopted, the bill would become effective upon publication in the Kansas Register. The companion bill in the Senate, Senate Bill 177, was “blessed” and kept alive by referral to the deadline-exempt Senate Federal and State Affairs Committee on March 4 and returned to the Commerce Committee the following day.
Local control over wage and fringe requirements on construction projects
House Bill 2306 died in the House Commerce, Labor and Economic Development Committee after failing to meet the March 5 deadline for consideration of nonexempt bills in their house of origin. Current Kansas law provides that, unless otherwise required by state or federal law, no city, county or local government unit shall enact or administer any ordinance, resolution or law that requires an employer to: (1) provide employees any leave from work; (2) pay compensation for any leave from work; (3) pay compensation or wages at any rate higher than the minimum wage; (4) offer an employee benefits; or (5) alter or adjust any employee scheduling. HB 2584 would have stricken the prohibition against the adoption of ordinances, resolutions or laws requiring payment of compensation or wages at a rate higher than the minimum wage. Current law does not apply to state economic development incentive programs or to city, county, local government or local economic development agency business attraction, retention or recruitment programs.
Criminal penalties proposed for filing a lien with bad intent
Senate Bill 58 passed the Senate (39-0) on Feb. 9 and has been referred to the House Judiciary Committee for hearing on March 15. This bill would provide for a severity level eight, nonperson felony for presenting unlawful liens or claims against personal or real property. The bill would also amend current law by requiring a court to enter an order prohibiting an individual from filing subsequent duplicate liens or other claims if the court sets aside a lien or other claim. The order must include an instruction that the filer seek approval from the court before filing subsequent liens or other claims and a warning that violation of the order could lead to civil and criminal penalties.
University Engineering Initiative Act
House Bill 2101 was approved by the House (112-12) on Feb. 25 and has been referred to the Senate Ways and Means Committee. As amended, HB 2101 would extend the current transfer of the first $10.5 million credited to the Expanded Lottery Act Revenues Fund (ELARF) to the Kan-grow engineering funds at KU, KSU and WSU, with each engineering fund receiving $3.5 million in each fiscal year through 2032. The bill would amend the goal of the University Engineering Initiative Act to continue to generate the same number of engineering graduates (1,365) per year as is currently set for 2021. The bill would add reporting requirements from the educational institutions, the Kansas Board of Regents, and the Secretary of Commerce to the House Committee on Appropriations and the Senate Committee on Ways and Means. The reports would include how many engineering graduates remain in the state over the previous three years; what efforts are
taken to increase retention of graduates and opportunities for graduates in the state; and information regarding the number of engineering graduates from each state educational institution who were initially enrolled as in-state or out-of-state students.
“Revenue neutral” property tax lid bill on its way to the governor
The Kansas Senate concurred (30-5) with House amendments to Senate Bill 13 on March 11, and the bill is now on its way to the governor. The bill was previously approved as amended (34-1) by the Senate on Jan. 14 and was further amended by the House and approved (120-3) on March 4. As amended, SB 13 would repeal the property tax lid law applicable to cities and counties and certain budget requirements applicable to other municipalities on Jan. 1, 2021; establish notice and public hearing requirements for certain taxing subdivisions seeking to collect property taxes in excess of the subdivision’s “revenue-neutral” rate; prohibit valuation increases resulting solely from normal maintenance of existing structures; and expand the allowed acceptance of partial payments or payment plans for property taxes. If signed into law as expected, the bill will take effect upon publication in the Kansas Register.
Putting licensing on a fast track for new Kansas residents
Substitute for House Bill 2066 was passed by the House (103-21) on March 4 and referred to the Senate Federal and State Affairs Committee for hearing on March 11. In short, the bill provides that people licensed out of state and/or military spouses who move to Kansas are put on a fast track to obtain a Kansas license unless the requirements are substantially different. The bill would apply to any individual applicant for licensure, reciprocity or reinstatement who has provided proof that the applicant has established or intends to establish residency. The application would be considered complete if the licensing body has received all information and fees even if the body has not received the criminal background report from the Kansas Bureau of Investigation. The bill would allow agencies to maintain their current processes if reciprocity standards contained within existing law are more favorable. However, if current processes are less favorable to an applicant or there are no current processes, the agency would be required to issue a license if the applicant has a valid license in another state with substantially similar licensing requirements or if the applicant has met work or experience requirements if no similar license is issued by the other state, if doing so would not jeopardize the safety of the public.
Economic development measures
Senate Bill 124 was passed (24-11) by the Senate on March 3 and referred to the House Commerce, Labor and Economic Development Committee for hearing on March 16. This bill would supplement, amend and reauthorize the Sales Tax and Revenue (STAR) Bonds program and extend its sunset date to July 1, 2026. Among other things, the bill provides that no state or local government official shall benefit financially, either directly or indirectly, from any STAR Bond project. It would add “major business facility” to the list of terms defined as “eligible areas” for the program and add the term “rural redevelopment project” to the list of eligible costs for which a STAR Bond project could expend funds. It also modifies current law by changing certain project financing, investment and sales provisions, adding a visitor tracking plan requirement and additional feasibility study requirements with oversight.
HPIP, KIT and KIR decoupling
Under current law, taxpayers who claim the High-Performance Incentive Program (HPIP) tax credit are required to participate in either the Kansas Industrial Training (KIT) or Kansas Industrial Retraining (KIR) programs. House Bill 2097, which was passed (124-0) in the House on March 3, would decouple the tax credit from participating in KIT and KIR and provide flexibility in using dollars from both the KIT and KIR programs. The companion Senate bill, Senate Bill 65, was approved (38-0) by the Senate on Feb. 18 and referred to the House Commerce, Labor and Economic Development Committee for hearing on March 17.
Transfer of HPIP credits
The Kansas Department of Commerce introduced House and Senate bills, House Bill 2171 and Senate Bill 91, which would allow for transferability of unused HPIP credits. Although the House bill stalled out and died in committee, SB 91 was passed by the Senate (34-5) on March 3 and has been referred to the House Commerce, Labor and Economic Development Committee for a hearing on March 17. This bill would allow taxpayers to transfer up to 50% of eligible HPIP tax credits for projects placed into service on and after Jan. 1, 2021, to one or more individuals or entities. The transferred tax credits would be required to be claimed in the same year as the transfer and the remaining tax credits for the original taxpayer would be allowed to be carried forward for up to 16 tax years.
Angel Investor Tax Credits
The House passed (112-11) House Bill 2045 on March 3, and the bill has been referred to the Senate Commerce Committee. Among other things, this measure would extend the sunset for the Angel Investor Tax Credit from tax year 2021 to tax year 2026, increase the amounts of tax credits allowed, remove certain program restrictions, remove or modify certain restrictions on investments and investors, and modify the clawback provision in the act. The Senate version, Senate Bill 66, was approved by the Senate (26-12) on Feb. 18 and has been referred to the House Commerce, Labor and Economic Development Committee for a hearing on March 17.
Income tax credits in rural opportunity zones
House Bill 2237 was approved (107-16) by the House on Feb. 24 and was referred to the Senate Assessment and Taxation Committee for hearing on March 16. Under current law, the Rural Opportunity Zones Program offers individuals who relocate to a county that has been designated as a Rural Opportunity Zone the chance to participate in a Student Loan Forgiveness Program through FY 2021 and receive a 100% state income tax credit through tax year 2021. HB 2237 would extend the sunset for the student loan forgiveness
program to fiscal year 2023 and extend the sunset on the income tax credit to tax year 2023.
Tax abatement for destroyed or substantially destroyed buildings
Senate Bill 23 was passed (38-1) on March 3 and has been referred to the House Taxation Committee. SB 23 would allow a property owner to apply to the county commission for an abatement or credit of property taxes that are levied against a building or improvement that is destroyed or substantially destroyed by earthquake, flood, tornado, fire or storm. The abatement would be available for up to three years beginning retroactively to tax year 2016 through tax year 2019. The bill would take effect upon its publication in the Kansas Register.
Workforce training related bills
Several workforce training bills remain alive in the Kansas legislature, while several others have died for this session. House Bill 2287 has been kept alive by being withdrawn from Commerce and referred to the deadline-exempt House Appropriations Committee. This bill would create the Kansas Promise Scholarship Act to be administered by the Kansas Board of Regents. An eligible student would have to meet several criteria set out in the bill, maintain a 2.0 cumulative GPA, and fulfill the terms of the agreement. The agreement requires scholarship recipients to be full-time students, complete the scholarship-eligible program, and within six months after graduation, commence work in the state for at least two years or enroll full-time in a Kansas postsecondary educational institution. House Bill 2175, passed (122-2) by the House and heard by the Senate Local Government Committee on March 11, would create the Dwayne Peaslee Technical Training Center (DPTTC) District Act. The bill would require the Douglas County Board of County Commissioners to submit the question of creation of this district to the county’s voters at the next primary or general election or at a special election. House Bill 2351 failed to meet the turnaround deadline and has died. HB 2351 would have exempted any business that accepted a secondary student in a work-based learning program from certain claims arising from a student’s negligent act as a result of participating in the program at the business or work site. A student’s school district would be solely responsible for civil liability, absent gross negligence or willful misconduct. The bill would have allowed school districts to purchase insurance contracts to insure against liability claims.
New sales tax exemption for certain projects at educational institutions
House Bill 2104 was approved (114-8) by the House on Feb. 18 and was heard in the Senate Assessment and Taxation Committee on March 10. As amended, this bill would exempt nonprofit educational institutions from paying sales tax on purchases related to the building, maintenance and enlargement of facilities used to house nonstudents of the institution. Under current law, the sales tax exemption for construction materials or services at educational institutions does not apply to the erection, construction, repair, enlargement or equipment of buildings used primarily for human habitation. HB 2104 would allow this sales tax exemption to apply to buildings used primarily for human
habitation as long as the building is not used for student housing. The bill would take effect upon publication in the Kansas Register.
Right to resign from certain labor unions and end dues obligations
House Bill 2354 has failed to meet the March 5 turnaround deadline and is dead for the session. Although a hearing was scheduled for Feb. 24 in the House Commerce, Labor and Economic Development Committee, that hearing was subsequently cancelled. As drafted, the bill related only to certain public employees and professional employees and their corresponding labor unions. The bill was intended to align Kansas law with U.S. Supreme Court rulings that public employers must receive clear and compelling evidence of affirmative consent from an employee who wants union membership dues to be deducted from his or her paycheck. The bill would have codified public employees’ and professional employees’ right to join or refrain from joining their respective unions as well as the right to immediately resign from and end any financial obligation to such unions. While the bill will be back in the 2022 legislative session, any movement on the measure is doubtful.
P3 construction for certain department of corrections projects
Although it is still in its house of origin following the turnaround deadline, House Bill 2401 remains a live bill by virtue of the fact that it was introduced by the deadline-exempt House Appropriations Committee. A hearing was held on the bill on March 10 in the House Corrections and Juvenile Justice Committee. HB 2401 would allow the Department of Corrections to enter into agreements with private entities for public-private projects to construct or renovate buildings at correctional institutions for education programs or spiritual services. The bill would allow the agency to request approval for the issuance of bonds for a public-private project from the Department of Administration and the Kansas Development Finance Authority. Prior to commencing any public-private project, the agency would be required to advise and consult with the Joint Committee on State Building Construction. The bill would allow the Department to establish a nonprofit corporation for fundraising and to use such funds for public-private projects without bidding, provided state funds are no more than 25% of the cost of the projects. The agency notes enactment of the bill would allow it to facilitate donations of philanthropic private funds to support certain buildings at correctional institutions.
Senate Bill 181 remains a live bill in the deadline-exempt Senate Federal and State Affairs Committee where it received a hearing on Feb. 18. This bill would create the Elevator Safety Act, which would regulate the design, construction, installation, operation, inspection, testing, maintenance, alteration and repair of elevators. The bill would create the Elevator Safety Advisory Board, which would be required to meet at least once a year, and members would serve terms of three years. The board would advise the state fire marshal and make recommendations regarding rules and regulations to enforce the provisions of the bill. The bill would require any entity wishing to engage in the business of installing, altering, servicing, replacing or maintaining elevators to apply for a
contractor, inspector or mechanic license from the state fire marshal to perform work. The bill would require applicants to submit certain information to the state fire marshal and would create a process by which the state fire marshal would issue and revoke licenses and collect application fees. The bill would also require a permit to be issued by the state fire marshal prior to the construction of an elevator and would require the owner of an elevator to have it inspected annually by a licensed inspector.
Asbestos remediation fund
House Bill 2203 was approved (122-2) by the House on March 2 and referred to the Senate Committee on Agriculture and Natural Resources the following day. This bill would allow penalties and fees collected for the Asbestos Program to continue to be remitted to the Asbestos Remediation Fund rather than the State General Fund. Last year’s appropriation bill, 2020 Senate Bill 66, established the Asbestos Remediation Fund and authorized all fees related to asbestos remediation to be credited to the Fund for fiscal year 2021 only. If enacted, HB 2203 would allow the Asbestos Remediation Fund to receive the money annually beginning in fiscal year 2022. The provisions of HB 2203 are similar to those in Senate Bill 261, which was approved (38-1) by the Senate on March 2 and referred to the House Committee on Agriculture the following day.
Storage Tank Act
House Bill 27 was approved (39-0) by the Senate on Feb. 1, approved (123-0) by the House on Feb. 24, and signed into law by the governor on March 3. SB 27 makes several amendments to provisions of the Kansas Storage Tank Act, which is administered by the Kansas Department of Health and Environment (KDHE). The bill increases the maximum per-facility liability of the Underground Petroleum Storage Tank Release Trust Fund (Underground Fund) and the Aboveground Petroleum Storage Tank Release Trust Fund (Aboveground Fund) from $1.0 million to $2.0 million and extends the sunset dates of both funds from July 1, 2024, to July 1, 2034. It increases the maximum amount KDHE may reimburse facilities for approved underground storage tank replacement costs from $50,000 to $100,000 per facility. Reimbursements will be for the costs of secondary containment systems. The provisions regarding reimbursements for underground storage tank replacements are extended from June 30, 2020, to June 30, 2030. Under current law, underground storage tank fees are deposited into the State General Fund. SB 27 directs underground storage tank fees to the Storage Tank Fee Fund. The bill also extends the UST Redevelopment Fund and the UST Redevelopment Fund Compensation Advisory Board from July 1, 2024, to July 1, 2032.
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