29 Jan 2023 Kansas Legislative Update – Week Three
2023 Legislative Session Continues
This week, the governor gave her delayed State of the State, and the legislature introduced a flurry of additional bills. A few hearings are being held, but many more are scheduled for next week. There was continued discussion around the capitol on the recent listing of the Lesser Prairie Chicken as a threatened species in Kansas, which culminated in the introduction of a Senate Resolution pushing back on the listing.
Carbon Dioxide Capture and Sequestration
This week, Renew Kansas Biofuels Association introduced a bill in the House Committee on Agriculture and Natural Resources that would allow Kansas industries to pursue carbon capture and sequestration (CCS) projects. The legislation seeks to amend the Kansas Carbon Dioxide Reduction Act to allow for the permanent underground storage of carbon dioxide (CO2) in UIC Class VI injection wells. By capturing and sequestering CO2, the biofuel industry is able to lower the carbon intensity score of their fuels, increasing its value and marketability. Most Midwest states have already adopted this type of legislation allowing long-term CO2 sequestration to be conducted more easily in their state. CO2 sequestration wells require an injection permit issued by USEPA. States can apply to EPA for “state primacy” of the permits, which means USEPA would delegate its authority to the state to regulate the storage facilities. The proposed legislation includes provisions from legislation passed in Indiana in 2022 (House Bill 1209), and Nebraska in 2021 (LB650.pdf). The bill directs the Kansas Department of Health and Environment (KDHE) to apply to USEPA for Kansas primacy. This bill also grants KHDE authority to adopt regulations to assess fees necessary to administer the injection program and for the costs of long-term monitoring of closed storage facilities. In addition, the bill allows the transfer of ownership and long-term liability of the stored CO2 to the state upon certified closure of the storage facility.
Reduced Penalties for Failing to File Personal Property Tax Renditions
The Senate Tax Committee held a hearing on Senate Bill 8, which would reduce penalties for the late filing, or failure to file, personal property renditions annually to the county appraiser. Your association testified that this bill is important for the grain elevator and biofuel industries following the 2022 Kansas Court of Appeals decision finding that grain elevator machinery and equipment should be property classified as personal property rather than as fixtures to the realty. Your association will work to amend the bill to allow county appraisers to waive late penalties, and for penalties to be set aside if the machinery and equipment was previously classified as real property. Other associations and individuals testified to support the bill, and there were no opponents.
Road Usage Charges
This week, the House Committee on Transportation received a presentation from the Kansas Dept. of Transportation (KDOT) on the results of a study is conducting on the feasibility of road usage charges to the fund the state highway plan in the future. Currently, the state highway plan for funding state infrastructure maintenance is funded by state sales tax (38 percent), motor fuel sales tax (20 percent), federal funds, and just recently, increased registration fees on electric vehicles. According to KDOT, by the year 2050, 40 percent of all road vehicles will not be powered by something other than liquid motor fuels. In addition, those that are still powered by liquid motor fuel will have much better fuel economy. As gallons of liquid mobile fuel decline, so will the funding received to pay for road and bridge infrastructure. For this reason, KDOT is studying mileage-based road usage as an alternative funding source. This policy would treat the road infrastructure as a utility – where rate payers pay for the amount of the utility (the road) they used – meaning miles driven. KDOT is implementing its study in three phases: Phase 1: outreach,
Phase 2: design pilot program, and Phase 3: demonstration – which will begin in March of 2023.
EV Energy Equity Road Repair Tax
House Bill 2004 would establish the EV Energy Equity Road Repair Tax Act, which would impose a road repair tax equal to $0.03 per kilowatt-hour of electricity provided to an electric vehicle at a public charging station. The road repair tax would be imposed regardless of whether the public charging station charges for the electricity or provides the electricity for free. The owner of the public charging station would remit the tax to the Director of Taxation to be credited to the State Highway Fund. The public charging station owner would also be entitled to charge and collect an amount equal to the road repair tax as part of the selling price. A hearing on the bill is scheduled in the House Transportation Committee on Tuesday, January 31.
Electric Utility Rates
Multiple bills were introduced this week focusing on various ways to address high electric utility rates in our state:
Senate Bill 88 in the Senate, and House Bill 2154 in the House would seek to reform the Kansas Corporation Commission by allowing for the election of KCC commissioners, and establishing a utilities regulation division in the office of the attorney general to represent and protect the collective interests of utility customers in utility rate-related proceedings.
Senate Bill 78 and House Bill 2155 would require the state corporation commission to review the regional rate competitiveness of an electric utility’s rates in electric utility rate proceedings.
Governor Kelly Gives State of the State Address
In Governor Kelly’s annual State of the State address this week, the governor vowed to “remain in the middle” to accomplish the following policy goals:
- Taxes: Kelly said she would stand against irresponsible tax proposals that drain the state’s budget. She emphasized her desire to end the state sales tax on groceries immediately, enact a sales tax holiday for school supplies and gradually cut taxes on Social Security income.
- Workforce development: Kelly acknowledged a lack of workforce was a serious shortcoming to fostering business development.
- Water: Kelly issued a call to action against the diminishing water supply in western Kansas and said it may be the most important issue facing the state. She noted that last year her administration fully funded the State Water Plan for the first time since 2009.
- Mental health: Kelly proposed expanding mental health funding for adult psychiatric services in the Wichita area and to solve the shortage of mental health workers across the state.
- Medicaid Expansion/Marijuana: Kelly called on the legislature to pass Medicaid expansion and legalize medical marijuana. For their part, Republican legislative leaders suggested they were unlikely to do either this year.
Governor’s Budget Recommendations
Governor Laura Kelly’s FY 2024 Budget Recommendations focuses on “targeted and sustainable tax relief,” and various one-time investments, including:
- $1 billion in various one-time expenses, including: $500 million to the Budget Stabilization Fund; $220 million for an “Infrastructure Hub”; and $53 million to retire state debt owed to the federal government for two state water reservoirs (saving the state $30 million in future interest payments)
- Adding $72.4 million annually for Special Education funding
- Adding $108 million in funding to the state’s post-secondary education system ($66 million in base aid, and $42 million in one-time funds), and
- Setting $20 million aside for use in a Housing Revolving Loan Program for urban housing (in addition to the $20 million set aside last year for rural housing).
Corporate Income Tax Apportionment
House Bill 2110 would allow certain taxpayers, based on NAICS codes included in the bill, to elect to use a single-factor apportionment formula based on sales in the state to determine corporate income tax liability. The bill is estimated to have a cost to the state of approximately $20 million, and it is scheduled for hearing in the House Taxation Committee on Tuesday, January 31.
Right of First Refusal for Electric Transmission Line Build Out
Kansas has the highest energy rates in our region. In recent years, legislation was introduced to reduce rates while ensuring reliable service. Senate Bill 68 has been introduced in the Senate Utilities Committee to allow energy producers a Right-of-First-Refusal to build out new electric transmission lines assets in the state. The bill is likely to be heavily opposed by commercial and residential utility rate payers.
Sustainable Agriculture Swine Facilities
Two bills have been introduced which would seek to direct the Kansas Secretary of Agriculture to “establish a division of sustainable agriculture” that would “apply for federal grant funds under the greenhouse gas reduction fund to assist farmers in converting to renewable energy and sustainable agriculture practices.” House Bill 2091 was introduced in the House by Representatives Michael Murphy (R-Sylvia), Joe Seiwert (R-Pretty Prairie), and Dennis “Boog” Highberger (D-Lawrence). In the Senate, the bill was introduced as Senate Bill 71, a bipartisan bill with the sponsors Senate Majority Leader Larry Alley (R-Winfield) and Senator Marci Francisco (D-Lawrence). We have proposed a friendly Amendment to the sponsors of the bills and asked that it be adopted. Rep. Murphy agreed to seek adoption of our amendment in the House Ag Committee. Senator Francisco is on the Senate Ag Committee.
Lesser Prairie Chicken Resolution
Both the House and the Senate are considering passage of a Concurrent Resolution disapproving the designation of the lesser prairie chicken as a threatened species in Kansas by the United States Fish and Wildlife Service. It was also announced this week that US Fish and Wildlife Service would delay the threatened species listing for 60 days, until March 27.
KDA Ag Economy Report
The Kansas Department of Agriculture has released its annual economic contribution reports to estimate the impact of agriculture on the Kansas economy. In 2022, the report indicates that 73 agriculture and agriculture-related sectors directly contribute $53.4 billion in output and 136,227 jobs to the Kansas economy. Including indirect and induced effects, agriculture and agriculture-related sectors have a total impact of $76 billion in output, 256,080 jobs and 14 percent of the total Gross Regional Product (GRP).
Prohibiting Foreign Ownership of Real Property
This week, Senate Bill 100 was introduced in the Senate Committee on Federal and State Affairs. The bill would seek to prohibit foreign ownership of real property in Kansas. The bill was referred to the Senate Judiciary Committee. The bill prohibits “foreign business entities” from purchasing or otherwise acquiring any interest in real property in the state. The bill defines the term “foreign business entity” as “[A]ny corporation, limited liability company, partnership, limited partnership, firm or other association in which the majority of the shares or ownership interest is held by one or more foreign nationals, foreign business entities or foreign governments; (2) any corporation, limited liability company, partnership, limited partnership, firm or other association in which the majority of the shares or ownership interest is held by one or more entities described in paragraph (1); and (3) any agent, trustee or fiduciary of an entity described in paragraph (1).
Plastic Container Regulation, State Level Preemption
Last year, legislation was passed and sent to the governor that would have prohibited cities and counties from regulating plastic and other containers designed for the consumption, transportation or protection of merchandise, food, or beverages. Governor Kelly vetoed the bill to the legislature. There were not enough votes to override the veto, and the bill died. A similar bill has been introduced this year as Senate Bill 47. The bill is scheduled for hearing in the Senate Commerce Committee on January 31, 2022.
This week, House Bill 2168 was introduced which would amend the definition of grain in the to include industrial hemp seed. It is uncertain at this point what other impacts this designation might have, but the Kansas Department of Agriculture is currently reviewing the bill.
Motor Carrier Independent Driver Status
This week, the House Transportation Committee held hearings on two bills concerning independent motors carriers: House Bill 2020, which would clarify that the employment status of a driver of a motor carrier does not change as a result of the inclusion of safety improvements made to the vehicle; and, House Bill 2019 which would clarify the conditions for when a motor carrier driver shall be deemed an independent contractor for a transportation network company.
Wind Energy Light Mitigation
The Senate Committee on Utilities held a hearing on Senate Bill 46 which would require wind energy conversion systems to install light-mitigating technology systems for aviation hazard warning. There were multiple proponents to the bill and no opponents.
Solar and Wind Interest Disclosure
Senate Bill 86 would require local governmental officials and candidates for local office to disclose substantial interests in a renewable energy systems and prohibit local governmental officials with a substantial interest from acting on matters relating to the renewable energy system. The bill is scheduled for a hearing in the Senate Local Government Committee on Thursday, February 2.
Third-Party Funded Litigation
Senate Bill 74 concerns litigation funding by third parties. The bill provides for joint liability of costs and also allows for sanctions in third-party funded litigation. It would also require certain discovery disclosures and payment of certain costs for nonparty subpoenas. The bill is scheduled for hearing in the Senate Judiciary Committee on Thursday, February 2.
Other Bills We Are Monitoring:
HB 2159: providing revenue for water program management fund and creating new fees for various UIC injection wells
HB 2173: ensuring federally approved refrigerants may be used in Kansas
HB 2192: creating a Kansas Secretary of State website for grants, applications, and awards