Turnaround point reached in Kansas legislative session
The Kansas Legislature returned to work on March 4 after its traditional short break following “turnaround” day which fell on February 27 this year. Turnaround day is the final day for consideration of “nonexempt” bills in their house of origin. Bills that have not been approved by their house of origin or have not been “blessed” by association with deadline-exempt committees are now dead. Many bills that would have otherwise died for lack of movement, however, were kept alive by referral to deadline-exempt committees just prior to the turnaround deadline. You may be aware that several moderate Republicans joined House Democrats to block a proposed anti-abortion amendment to the state constitution earlier this session and abortion opponents responded by moving aggressively to block a Medicaid expansion plan backed by Democrats and GOP moderates. That impasse continues to this day affecting progress on other bills as well and has resulted in a sluggish legislative session so far. That said, there have been developments on a number of bills of interest to the commercial and industrial building construction industry and brief summaries of them follow.
LOCAL CONTROL OVER WAGES AND BENEFITS
House Bill 2584 has died in the House Commerce, Labor and Economic Development Committee having failed to meet the February 27 deadline for consideration of non-exempt 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 benefit; 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.
PROPOSAL TO PREEMPT LOCAL BUILDING CODES FAILS
Significant opposition to House Bill 2703 was raised at a February 19 hearing before the House Committee on Commerce, Labor and Economic Development and the bill died in committee as the turnaround deadline passed. Drafted much more broadly than proponents intended, the bill essentially prohibited political subdivisions from adopting building codes that are either more or less stringent than “national model codes” as defined in the bill. That essentially means that all political subdivisions would have to adopt such codes and not deviate. In noting our opposition to the measure, we advised that contractors and codes officials work closely together in communities all across the state to locally adopt the building codes that best meet the particular needs of each community. Kansas political subdivisions should retain the ability to do that and we support their home rule authority to do so. This legislation was actually intended to prohibit political subdivisions from adopting codes that would prohibit the use or connection of existing energy sources such as natural gas (which the City of Lawrence is attempting to do over a period of years). Proponents will likely pursue legislation next session that is more narrowly drafted and limited to the intended purpose.
SALES TAX EXEMPTIONS
House Bill 2727 remains alive in the deadline-exempt House Taxation Committee. This bill would require that an existing sales tax exemption of equal or greater value be repealed or suspended for each new sales tax exemption adopted on and after January 1, 2021. The Builders’ and Kansas City Chapter, AGC monitors this and other sales tax exemption related bills that are introduced each legislative session so as to preserve the existing important sales tax exemption for labor services (labor, profit and overhead) involved in new construction in Kansas. Legislation imposing a 2.5% sales tax on such labor services to help fund school finance was adopted in 1992 with disastrous results, especially in the economically important Kansas City metropolitan area. The Builders’ Association, the Kansas City Chapter, AGC and a coalition of other organizations joined together to get legislation approved that would repeal the sales tax on new construction labor services in each of the subsequent two years only to have the legislation vetoed by then Governor Joan Finney. Finally, newly elected Governor Bill Graves signed repeal legislation in 1995. We have closely watched all sales tax exemption related legislation since.
RIGHT TO RESIGN FROM CERTAIN LABOR UNIONS AND END DUES OBLIGATIONS
Having been approved by the House Commerce, Labor and Economic Development Committee and placed on the House Calendar, House Bill 2586 was “blessed” and kept alive by referral to the deadline-exempt Appropriations Committee prior to the turnaround deadline. The bill was then re-referred to House Commerce. As drafted, the bill relates only to certain public employees and professional employees and their corresponding labor unions and is intended by proponents 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 wishes union membership dues be deducted from a paycheck. The bill would codify 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. A companion bill, Senate Bill 361, was stricken from the Senate Calendar on March 4.
The Substitute for HB 2506, which is intended to remove barriers to employment in Kansas for those professionals who are new to the state and who work in occupations which require occupational licenses, was passed (123-2) on February 26 and has been referred to the Senate Commerce Committee. A companion bill, Senate Bill 366, failed to meet the turnaround deadline and has died. HB 2506 provides reciprocity for applicants who have been licensed and practicing in other states if such other states’ requirements are substantially equivalent to those in Kansas. In instances where Kansas licensing requirements exceed those of other states, applicants will be granted temporary permits while completing the necessary educational requirements for a Kansas license. Special provisions are included in the law which address this issue for members of the military and their spouses.
WORK-BASED LEARNING PROGRAMS AND LIABILITY FOR NEGLIGENT ACTS
House Bill 2507 was passed as amended by the House Commerce, Labor and Economic Development Committee on February 12, approved by the full House (97-27) on February 26 and has been referred to the Senate Commerce Committee. The amended bill would exempt businesses from certain liability claims arising from a secondary student engaged in a secondary curriculum including work study, on-the-job training, job shadowing, internships, clinicals, practicums, apprenticeships, co-ops, and industry-led service-learning projects. A business would not be subject to a claim arising from the student’s negligent act or omission or to a claim for bodily injury to the student or sickness or death by accident of the student provide the student’s school district has purchased applicable insurance coverage. The school district would be solely responsible for a student’s loss due to bodily injury, sickness, or death caused by accident due to a negligent act or omission caused by the student or business. The bill would not provide immunity for the student or business for gross negligence or willful misconduct. The bill would also broaden the concept of school-sponsored activity to include transportation to and from a work-based learning program.
JOB CORP WORK-BASED LEARNING PROGRAM PREFERENCE BILL FAILS
House Bill 2455 would have specified that, except when a contract is awarded to a certified business or disabled veteran business under current law, a contract would be awarded to a Job Corps-aligned business that is also a responsible bidder whose total bid cost is not more than ten percent higher than the lowest competitive bid. The contract would include a promise by the Job Corps-aligned business or a memorandum of understanding with the Job Corp that at least five percent of its employees are Job Corps Work-based Learning Program graduates and that the percentage would not decrease throughout the contract term as well as a condition that the Job Corps-aligned business would not subcontract for goods or services in an aggregate amount of more than twenty-five percent of the total bid cost. A hearing before the House Commerce, Labor and Economic Development Committee scheduled for January 23 was postponed and the bill subsequently died for failure to meet the February 27 deadline for consideration of bills in their house of origin.
PENALTIES FOR MISCLASSIFYING EMPLOYEES
Senate Bill 419 has died in the Senate Commerce Committee having failed to meet the February 27 turnaround deadline. This bill would have increased civil penalties for anyone who knowingly and intentionally misclassifies one or more employees as independent contractors for the purpose of avoiding either state income tax withholding and reporting requirements or state unemployment insurance contributions reporting requirements. It also would have provided for an order to be issued to any person who has not complied with the civil penalties rendered for making such misclassifications to cease doing business as an employer in the state of Kansas. Enforcement provisions through the district court are set out for an employer who fails to comply with such order.
FILING DUPICATE LIENS OR PRESENTING FALSE LIENS TO RECORDERS OF RECORD
Senate Bill 372 has died in the Senate Judiciary Committee having failed to meet the turnaround deadline. This bill would have required a court that sets aside a lien or other claim to enter an order prohibiting an individual from filing subsequent duplicate liens or other claims. Such order would have been required to include an instruction that the filer must 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. The bill would have created a new prohibition against presenting a lien or financing statement that the presenter knows or should know is false to the recorder of record. It would also have prohibited the presentation of any document to the recorder of record that is intended to be filed publicly and that the presenter knows or should know is false and is presented to harass an entity, individual, or public official, or obstruct governmental operations or judicial procedures. The penalty for violation would be a severity level 8, nonperson felony.
ECONOMIC DEVELOPMENT BILLS LIVE ON
House Bill 2529 was blessed by referral from the House Commerce to the Appropriations Committee on February 26 and the bill has now been re-referred to Commerce. Among other things, this bill would add “major business facility” and “major medical facility” to the list of definitions associated with the STAR Bond Financing Act. “Rural redevelopment project" is defined to mean a project that is in an area outside of a metropolitan statistical area that is of regional importance, with capital investment not to exceed $4,000,000, and that will enhance the quality of life in the community and region. The bill would increase the minimum capital investment required from $50 million to $75 million and projected gross annual sales from $50 million to $75 million. It would alter the procedure for a city or county proposing to undertake a STAR bond project by requiring that a feasibility study be conducted by one or more economic consultants selected and approved by the Secretary of Commerce and the costs would be paid by the developer or the city or county. The bill would also extend the expiration date for provisions regarding STAR bonds from July 1, 2020 to July 1, 2025. Senate Commerce Chairwoman Julia Lynn (R-Olathe) has also introduced a STAR Bond bill through a deadline-exempt committee on the Senate side but the bill has yet to be numbered and printed at the time of this writing. She and House Commerce Chairman Sean Tarwater (R-Stilwell) have agreed to address this topic in the near future.
House Bill 2689, as amended and passed by the House Commerce, Labor and Economic Development Committee, was withdrawn from the House Calendar on February 26 and referred to Appropriations to keep it alive, then re-referred to Commerce. Among other things, this bill would extend the sunset on the Angel Investor tax credit from tax year 2021 to tax year 2026. The annual cap on tax credits would increase in one-half million dollar increments annually, from $6 million in tax year 2021 to $8 million in tax year 2025 and thereafter. The bill would increase the amount of tax credits claimed on a qualified business investment from $50,000 to $100,000. The total amount of tax credits an investor could claim in any one tax year would increase from $250,000 to $350,000. The bill would allow bioscience businesses in Kansas to qualify for the tax credit. Entrepreneurs and representatives of the Department of Commerce, the Enterprise Center in Johnson County, and various technology and bioscience trade associations spoke in favor of the bill at its February 20 committee hearing and generally stated that the Angel Investor Tax Credit is a means to mitigate investment risk, encourage new capital to flow into the state, and grow the Kansas economy.
Another economic development bill is House Bill 2702 which relates to the High Performance Incentive Program (HPIP), workforce training participation requirements and workforce training tax credits. Under current law, taxpayers that claim the High Performance Incentive Program tax credit are required to participate in either the Kansas Industrial Training (KIT) or Kansas Industrial Retraining (KIR) Programs. HB 2702 would decouple the tax credit from participating in KIT and KIR. HB 2702 was approved by the House (125-0) on February 26 and has been referred to the Senate Commerce Committee.
EMPLOYMENT SECURITY BILLS
House Bill 2642 remains alive having been blessed by referral to the deadline-exempt Appropriations Committee on February 26 and subsequently re-referred to House Commerce on March 4. This bill would amend the Workforce Protection Act by changing the maximum number of weeks allowed to be claimed for unemployment insurance benefits to 26 weeks, regardless of the unemployment rate. The change would sunset for initial claims on and after April 1, 2021. Under current law, the maximum number of weeks is based on the Kansas unemployment rate and ranges from 16 weeks to 26 weeks. A similar bill without the sunset for initial claims, Senate Bill 394, remains alive on the Senate side in the deadline-exempt Ways and Means Committee. Yet another similar bill, Senate Bill 378 died when the turnaround deadline passed. That bill would have extended the period for unemployment insurance benefit eligibility to 26 weeks for the next two years.
Other employment security related bills that have died for failure to meet the turnaround deadline include House Bill 2704 which, among other things, would have prohibited any individual who knowingly makes false statements to obtain or increase unemployment benefits from receiving unemployment benefits for five years or until the individual repays the resulting overpayment, penalty and interest. The bill would have removed a provision under which an individual who is recovering from illness or injury would not be disqualified from receiving unemployment benefits and removed certain restrictions on receiving unemployment benefits for individuals who are receiving pension income. House Bill 2566 would have allowed a claimant to receive compensation for the waiting week upon completion of three weeks of unemployment consecutive to the waiting week. Under current law, a claimant for unemployment insurance benefits is eligible to receive benefits after the claimant has been unemployed for a waiting period of one week.
BILLS WOULD ESTABLISH THE FORWARD TRANSPORTATION PROGRAM IN KANSAS
House Bill 2588 and Senate Bill 375 are companion bills and both remain alive having been introduced by deadline-exempt committees in their respective houses of the legislature. Each would establish the FORWARD Transportation Program in Kansas which would provide for assistance including credit and credit enhancements, to cities and counties in meeting their responsibilities for the construction, improvement, reconstruction, and maintenance of transportation improvements. The assistance would include, but not be limited to the following: Special City and County Highway Fund apportionment; sharing federal aid; city connecting link maintenance assistance; programs for local bridge improvement; programs for railroad crossings; federal aid for state funds exchange; program for rail service improvements; program for aviation assistance; program for transit assistance; transportation technology; multimedia program for bicycle and pedestrian facilities; and allowing the Secretary of Transportation to award certain state highway system projects using alternative delivery procurement methods on up to five percent of dollars spent. Among many other things, the bills would establish the Transportation Technology Development Fund. All monies credited to the fund would be used to provide assistance with the planning, assessment, and fielding of new capabilities for all modes of transportation, including, but not limited to aviation and highway transportation. Each bill would also establish the Broadband Infrastructure Construction Grant Fund. All monies credited to the fund would be used to provide grants for the expansion of broadband service in Kansas. Grants by the Secretary of Transportation would reimburse grant recipients for up to fifty percent of actual construction costs in expanding and improving broadband service in Kansas. The bills provide that on and after July 1, 2021, 16.154 percent of the 6.5 percent state sales tax and state compensating use tax imposed would be levied for the State Highway Fund. KDOT estimates the total cost of the FORWARD program over its ten-year lifetime, FY 2021 through FY 2030, to be $9.9 billion. KDOT’s estimates assumes that the transfers to the State General Fund are phased out by FY 2023 and the issuance of approximately $1.2 billion in bonds from the State Highway Fund.
OTHER BILLS OF INTEREST
County Sales Tax Authority – Senate Bill 400 remains alive in the Senate Assessment and Taxation Committee but has yet to receive a hearing. This bill would allow a county commission the authority to submit to voters the question of imposing an earnings tax of up to one percent on individuals living or working within their county. The revenue would be used for general county purposes. The county commission or a petition signed by at least ten percent of the voters in the county would be allowed to ask for an election to repeal the earning tax, or increase or decrease the earning tax rate. Voters would be required to vote on extending the earnings tax every five years. The county may require employers to collect and remit the earnings tax to the county and would be allowed to request that employers submit a list of all employees residing within the county on a yearly basis. The employer would be allowed to deduct and retain 1.5 percent of the total amount of earnings tax collected as a fee to compensate the employer for collecting this tax; however, the county would be allowed to reduce, eliminate, or reimpose this fee by resolution.
Calculating State Aid for Capital Improvement Bonds – Senate Bill 382 was passed as amended (40-0) in the Senate on February 26 and has now been referred to the House Committee on K-12 Education Budget. This bill would change the state aid calculation for capital improvement bonds approved by voters on or after July 1, 2020, by removing USD 207-Fort Leavenworth from the assessed valuation per pupil (AVPP) schedule for computing Capital Improvement State Aid from the last bond state aid calculation. Since much of the real property located in the boundaries of USD 207-Fort Leavenworth is owned by the federal government and is exempt from property taxes, this school district is always the lowest ranked district based on AVPP for Capital Improvement State Aid. Because of this ranking, the district would theoretically be entitled to 75 percent state aid. However, state law prohibits USD 207-Fort Leavenworth from the ability to issue bonds for capital improvements. By removing USD 207-Fort Leavenworth in the state aid calculation, the state aid for all other districts would increase.
Assuming the Powers, Responsibilities and Duties of Special Districts – House Bill 2510 was approved (122-3) by the House on February 26 and has been referred to the Senate Committee on Ethics, Elections and Local Government. This bill would establish a procedure for any city to assume the powers, responsibilities and duties of any special district including airport authorities, cemetery districts, drainage districts, fire districts, industrial districts, library districts, port authorities, rural water districts, sewer districts and rural watershed districts located within the city’s corporate limits and to provide for the dissolution of the special district through a joint resolution. Following a public hearing, the governing bodies of the special district and the city would determine if they want to proceed or abandon the proposed dissolution. Upon dissolution, the city would assume all debts, powers, duties and functions of the special district. The court could allow any legal suit, action or other proceeding to be maintained by or against the successor of the district or of any officer.
As always, if you have questions about any of the pieces of legislation above, or would like us to look into a bill or issue not listed, please contact Allen Dillingham, Government Relations Director for The Builders’ Association, at 816-595-4121 or [email protected]. We also encourage you to contact your elected representatives on these pieces of legislation and other issues important to you and your business.