17 Jan 2025 Kansas Statehouse Insider – Week 01
As your eyes and ears at the capitol, we were in attendance to welcome legislators into the new biennium on your behalf on Monday, Jan. 13, 2025. Following the election in November, where all 125 House of Representatives seats and 40 Senate seats were open, more than 30 new lawmakers were sworn in to represent their districts’ interests.
Governor Laura Kelly delivered the annual State of the State address on Wednesday where she focused on economic development initiatives, a new strategic plan to conserve water and her disagreement toward republican leadership’s plans to cut corporate income and property taxes.
Quickly following the speech, Speaker of the House Dan Hawkins (R-Wichita) and Senate President Ty Masterson (R-Andover) quickly went to work with their party’s supermajority (88-37 in the House, 31-9 in the Senate) advantage to begin advancing their plans to reduce the tax burden on Kansans.
With this in mind, the first week strayed from the typically relatively light ‘welcome back,’ week of work for legislators who are overwhelmed learning the rules, their colleagues’ names and where their own offices are, republican leadership in both chambers instead has opted to speed up the pace in order to meet their goal of a March 28 adjournment.
Property Tax Relief
Property tax relief is a top priority this year of Republican legislators in the House and Senate. Here are a few proposals being discussed:
- House Bill 2011 would decrease the rate of ad valorem tax imposed by school districts from 20 (currently) to 18.5 in school years 2025 and 2026. The bill is scheduled for hearing in the House Tax Committee on Wednesday, Jan. 22.
- Senate Bill 35 would discontinue state property tax levies for the Kansas educational building fund and the state institutions building fund. This measure would remove 1.5 mills from the state portion of the property tax mill levy for all taxpayers. The lost revenue from the measure would need to be backfilled from the state general fund. The bill is scheduled for hearing in the Senate Tax Committee on Tuesday, Jan. 21.
- SCR 1603 would amend the Kansas Constitution to limit annual increases in real property valuations to 3 percent. A similar bill was passed by the Senate last year but did not advance in the House. As a constitutional question, the bill requires passage of a 2/3 supermajority of the legislature but does not require the Governor’s signature. If passed by the legislature, the measure would be included as a ballot question on a special state-wide election in November of 2025 and, if passed, would become effective in 2026. The Senate Tax Committee held a hearing on the measure on Jan. 16 and plans to take final committee action on Jan. 21.
Personal Property Tax Exemptions
House Bill 2014 was introduced to exempt certain personal property, such as ATVs, watercraft, and certain trailers from personal property tax. A hearing is scheduled for the Senate companion bill, Senate Bill 10, on Tuesday, January 21.
Prohibiting Foreign Ownership of Real Property
Last session, the House passed House Sub for SB 172 to prohibit principals from federally designated countries of concern from holding or acquiring interest in real property in the state within 100 miles of a military installation. The bill exempted individuals and properties previously verified by the federal interagency Committee on Foreign Investment in the United States. After passing the House and Senate, Governor Laura Kelly vetoed the bill, and the legislature did not attempt to override the veto. House and Senate leadership have indicated the bill will be reintroduced again this year. Similar legislation has been passed in many other states.
Gross Weight Exemption for Ag Commodities
This week, Senate Bill 17 was introduced in the Senate Committee on Agriculture and Natural Resources to exempt haulers of grain and certain other agricultural goods from gross weight limitations for vehicles.
Conservation Reserve Enhancement Program
KDA intends to seek legislation amending conservation reserve enhancement program statutes that would increase the state acreage cap from 40,000 acres to 60,000 acres. This change would increase the number of eligible acres per county from 10,000 acres (currently) to 15,000 acres. The legislation would also expand eligibility criteria and potentially allow for dryland farming practices if approved by USDA.
Corporate Income Tax Single Sales Factor Apportionment
Legislation will be introduced again this year to require corporate taxpayers to use a single factor sales method to apportion income for tax purposes, rather than the current three-factor system for apportioning incomes. The bill will allow a three-year phase-in period and will also include market-based sourcing provisions to replace the cost of performance requirements. Past similar legislation had an estimated cost to the state of approximately $20 million, but the fiscal note on the new legislation is unknown.
State Revenue Forecast
Of significant interest this session will be balancing the state budget given the anticipated reduction in state revenues following passage of tax cut legislation (Senate Bill 1) during the special session last summer. Unless the budget is trimmed considerably, the state is expected to experience annual budget deficits of more than $400 million and will nearly burn through its entire current budget surplus by the end of fiscal year 2029. In fact, in the current fiscal year ending June 30, 2025, the state is projected to spend $1.3 billion more than it receives in revenues. This situation caused House Appropriations Chairman Rep. Troy Waymaster (R-Bunker Hill) to say that the Legislature must be “very cautious” with budgets going forward, and to “get away from the last few years of basically (approving) a wish list that everybody brought forward.” One positive note is that the state’s Budget Stabilization Fund (our “rainy day fund”) is expected to grow from around $1.7 billion to $1.9 billion by the end of the fiscal year 2029.
Governor Sets Forth 2025 Priorities in State of State Address
Governor Laura Kelly’s 2025 State of the State address focused on the following key priorities for Kansas:
- Water Resources: Emphasizing the need to invest in and protect Kansas’s water supply.
- Tax Policy: Advocating for fiscal responsibility, opposing further tax cuts and the diversion of public school funds to private schools.
- Education: Providing free lunches to over 35,000 students and fully funding public schools for 7 years, with a focus on special education.
- Early Childhood Services: Simplifying regulations to increase childcare availability significantly over the next two years.
- Medicaid Expansion: Pushing to extend Medicaid to 150,000 more low-income workers, refuting past arguments against it.
Governor’s 2026 Proposed Budget
Governor Kelly has introduced her 2026 proposed budget which recommends that as state revenues begin to return to more normal growth patterns, so too must state spending. The proposed budget would increase state general fund expenditures by 0.7 percent in FY 2026. The budget seeks to fully fund K-12 education and significantly boost special education by $72.6 million as part of a long-term plan to fully fund the program. The budget also includes an investment of $13.4 million to expand childcare availability, addressing a critical need in the state. Regarding water, the budget would increase funding to the state water plan fund by an additional $30 million with a goal of an additional $90 million in coming years for water infrastructure, especially in rural areas, and promoting water conservation efforts of farmers and ranchers. The budget adds close to $50 million for postsecondary education needs, and it allocates $9 million for foster care services. The proposed budget would increase the minimum wage for state hourly employees to $15 per hour and propose a 2.5 percent pay raise for certain other state employees. It also includes a proposal to extend Medicaid to cover an additional 150,000 Kansans, utilizing federal funds.
GOP Response to State of the State
Senate President Ty Masterson highlighted the following key points in the Republican response to Governor Kelly’s State of the State address:
- Tax Relief: Supports significant property tax relief and continued push for other tax relief
- Security: reintroduction of legislation to protect land around military installations from foreign adversaries and support for President Trump’s border security measures.
- Government Efficiency: Streamlining government processes to increase efficiency and lower costs.
- Education: supported full funding of public schools but advocated for policies like school vouchers to provide more parental choice
- Banning gender-affirming care practices for Kansas minors
State Water Plan Funding
The legislature recently increased funding to the state water plan fund by $35 million each year, for five years. This year, Governor Kelly proposes to increase funding an additional $30 million to develop a “comprehensive, long-term, sustainable strategy to ensure Kansans have the water supply they need – for generations to come” by stabilizing the Ogallala Aquifer, maximizing state reservoir capacity, and ensuring all Kansans have access to clean water. She also wants to develop a better water management system by creating an Office of Natural Resources that would administer water resources that are currently managed by 14 separate agencies.
Water Structure Licensing Fees
KDA has indicated they will introduce legislation to amend the Stream Obstruction Act. The legislation would amend the water impoundment bridge structures statutes. The legislation would allow state to provide inspections on a cost for service basis and provide for the certification of non-state entities to perform inspections for the state. The legislation will base create application fees based on hazard class for new construction or modifications. It will also allow civil enforcement action to protect the public. The legislation will exempt state, county, and municipal road fill dry detention dams.
Conservation District Funding
Senate Bill 36 was introduced to make permanent a temporary increase in the current cap on moneys disbursed by the state division of conservation, to conservation districts across the state, and to provide increased matching basis for state moneys disbursed to conservation districts.
Muti-Year Flex Accounts
KDA has indicated they will introduce legislation seeking to amend the muti-year flex account (MYFA)statutes. The amendments would seek to make it easier for applicants to enroll in the program and make it easier for the agency to administer. The amendments would also streamline calculations based on net irrigation requirement (NIR) allocation, plus 10 percent, rather than on average use. As described, the bill will also eliminate the potential to double-count overlapping acreage. The bill will align MYFA to allow participation in local enhanced management areas (LEMAs), intensive groundwater use management areas (IGUCAs), and water conservation areas (WCA).
Income Tax Rate Trigger
Legislation modeled off other states will soon be introduced to add a trigger to the state tax code that automatically lowers individual and corporate income tax rates as state revenues increase.
EV Equity Road Repair Tax
House Bill 2003 was introduced to establish the EV energy equity road repair tax act (EVEERRT act) and to create a road repair tax on electricity distributed from public charging stations for electric vehicles. The bill was referred to the House Transportation Committee.
New Seward County Sales Tax
House Bill 2004 was introduced to provide a countywide retailers’ sales tax authority for Seward County, KS for the purpose of financing the costs of roadways, bridge construction,maintenance and improvement in the county. The bill has been scheduled for hearing in the House Tax Committee on Tuesday, January 21.
Three-Mile Extraterritorial Planning and Zoning Authority
Current law allows city planning commissions to apply subdivision regulations to land outside of the city but within three miles of the nearest point of the city limits provided such land does not extend more than 1/2 the distance between the city and another city. Senate Bill 37was introduced to repeal this three-mile extraterritorial planning and zoning authority. A companion bill was introduced as House Bill 2025.
Executive Regulations Constitutional Amendment
It is anticipated that a bill will soon be introduced in the House seeking an amendment to the Kansas Constitution to provide the state legislature with greater oversight of regulations proposed by executive branch administrative agencies. The language will likely be similar to a previous proposed constitutional amendment that failed to pass a popular vote in 2022.
Utilities
The Kansas Corporation Commission (KCC) is a three-member regulatory body that regulates public utilities in the state. KCC commissioners are appointed by the Governor. It is anticipated that legislation will soon be introduced to change this appointment process to a popular election process, which is utilized in many other states.
Human Resources
A coalition of stakeholders has been working on a proposal to mandate paid family leave in the state. It is anticipated that a bill will be introduced soon.
Immigration
SCR 1602 was introduced by Senator Mike Thompson to “encourage the Governor to cooperate with federal enforcement of immigration laws.” The bill was referred to the Senate Committee on Federal and State Affairs.