2023 Kansas Legislative Update – Week Five

Kansas Legislature Update Week Five

2023 Kansas Legislative Update – Week Five

This week was the last week for new bills to be introduced in either chamber in 2023, unless brought forward through an “exempt committee,” such as tax or appropriations. Committees will be busy holding hearings next week, as all hearings and other action on most bills must be completed by Tuesday, Feb. 21.

A water policy bill was heard in the House Water Committee this week, to be followed by a water funding bill next week. Utilities committees in both the House and Senate were very busy this week, and next, holding hearings on bills seeking to lower the rising cost of electric utilities. Final action on a Senate Resolution happened this week pushing back on the United States Fish and Wildlife’s listing of the Lesser Prairie Chicken as a threatened species in Kansas.

Renew Kansas Members Share Biofuel Benefits During Annual Advocacy Day

On Wednesday, Feb. 8, Renew Kansas hosted nearly 15 of its members in Topeka for the association’s annual Biofuels Day on the Hill. Highlighted by meetings with the majority of Kansas’s top elected officials, members in attendance were able to make personal connections with lawmakers, while sharing the positive impact the biofuels industry has on the state. Those in attendance met with Kansas Senate President Ty Masterson (R-Andover), Kansas Speaker of the House of Representatives Dan Hawkins (R-Wichita), Kansas Senate Agriculture Committee Chairman Dan Kerschen (R-Garden Plain), Kansas House Agriculture Committee Chairman Ken Rahjes (R-Agra), Kansas Secretary of Agriculture Mike Beam and senior staff members from Governor Laura Kelly’s office. In addition to conversations with statewide officials, Renew Kansas also hosted United States Environmental Protection Agency Senior Agriculture Advisor Rod Snyder for a brief conversation regarding EPA’s outlook on the renewable fuel industry.

Water Bill Placing New Conservation and Reporting Requirements on GMDs

House Bill 2279 was introduced late in the week by the Ranking Member of the House Water Committee Representative Lindsay Vaughn (D-Overland Park). The bill would amend the Groundwater Management District act to place new annual reporting and conservation action plan requirements on the groundwater management districts. The bill was heard this week in the House Water Committee, where Kansas Agribusiness Retailers Association (KARA) joined numerous other conferees in providing testimony on the bill. KARA, and others, offered ways to amend the language to make it more user-friendly and practical in its application. The bill is likely to be amended on Thursday, Feb. 16 when the committee takes it up for final action.

Water Funding Bill

Chairman Jim Minnix (R-Scott City) has introduced House Bill 2302 focusing on long-term funding of the state water plan fund and water conservation efforts. The bill would distribute a portion (approximately $52 million) of the revenue from the current state sales tax to the state water plan fund, modify the distribution of current moneys into the state water plan fund, create a water technical assistance fund and a water projects grant fund for water infrastructure projects. Dedicated revenue from the state sales tax would be added to water plan fees from the ag sector, and from municipal water fees (each approximately $6 m annually). As previously discussed, the goal of the funding would be as follows:

  • $38 million toward retirement of a portion of our state debt on two reservoirs
  • $6 million toward agricultural water conservation education and technical investments
  • $6 million to small Kansas municipalities to cost-share lead pipe replacement and to assist in submitting proposals for federal grants
  • additional funding to Kansas Dept. of Agriculture and Kansas Water Authority to hire additional water engineers

The bill would sunset in five years, at which time it could be extended. If it were not extended, then the sales tax funding piece would disappear and the previous state funding mechanisms would be re-installed. The bill is scheduled for hearing on Tuesday, Feb. 14 in the House Water Committee, and final action is scheduled for Thursday, Feb. 16. It is unclear how this dedicated funding stream from the state sales tax will be received by the House and Senate leadership.

Senate Tax Committee Advances Tax Bills

This week, the Senate Tax Committee advanced multiple tax bills out of committee with a total fiscal note of nearly $180 million, including:

  • an increase in the standard deduction for individual income taxes based on federally approved cost of living increases. Fiscal Cost: $24 million in 2024, $32 million in 2025, and $42 million in 2026
  • an exemption of all Social Security benefits from Kansas taxable income, with an initial cost of $147 million, and $120 million each year for the next two years
  • a net operating loss carry-forward, with a cost of about $8 million
  • an exclusion of the value of manufacturers’ coupons from the taxable price of goods, with a cost of $1.7 million, and
  • an elimination of the sales tax on custom butchering, with a cost of approximately $1.4 million.

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. The House Tax Committee held a hearing on the bill on Tuesday. Kansas Grain and Feed Association joined the Kansas Chamber as the only proponents on the bill. The committee may take final action on the bill next week.

Carbon Dioxide Capture and Sequestration

Renew Kansas Biofuels Association introduced a bill 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 would also grant 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. As deadlines for hearings of all bills approached, the committee chairman requested that Renew Kansas and other stakeholders table the bill over the summer interim and reintroduce it in 2024.

Lesser Prairie Chicken Resolution

Both the House and the Senate are considering passage of Concurrent Resolution 1602 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. The House Committee on Agriculture and Natural Resources held a hearing on the bill and passed it out favorably to the full House. On Thursday, the full House passed the resolution 83-35. The bill has been enrolled and presented to the Kansas Secretary of State for publication.

Reduced Penalties For Failing to File Personal Property Tax Renditions

Senate Bill 8 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 is seeking 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. The Senate Tax Committee is likely to take final action on the bill next week.

Short Line Rail Grant Program

In 2020, the legislature passed the Eisenhower Legacy Transportation Program which included a $15 million, three-year, cost-share grant program (70/30) for qualified track maintenance and improvements to short line rail and rail siding. In 2020, 2021, and 2022 KDOT set aside a percentage of the $5 million program funds specifically for rail siding projects. This funding has greatly benefited Kansas agribusiness infrastructure. Last week, in coordination with KDOT, KGFA introduced House Bill 2335 to restructure the Short Line Rail Improvement Fund program to combine it with KDOT’s Rail Service Improvement Fund Program. The bill would make it easier to administer this cost-share grant program and would dedicate $10 million annually from the state highway fund to this program. Under the bill, grain shippers and other owners of rail siding adjacent to short line rail, would be able to apply directly to KDOT. A hearing on the bill is scheduled in the House Transportation Committee on Tuesday, Feb. 14, at 1:30 p.m. in Room 582-N of the Kansas Statehouse.

Kansas Rail Safety Improvement Act

Senate Bill 215 was introduced by Senator Carolyn McGinn (R-Sedgwick) and referred to the Senate Committee on Transportation. The bill would establish the Kansas rail safety improvement act and would create safety requirements for railroad operations and crossings, including such things as: 8,500 feet max train length; 300-foot setback requirements for rolling stock stored on rail siding near crossings; and, mandatory two-man minimum train crews. We are not sure whether the bill will receive a hearing, but KGFA has reached out to members to determine what impact the bill might have on the grain, agribusiness, and biofuel industries.

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). Senate Bill 71 was introduced in the Senate as 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 bills which Rep. Murphy agreed to carry in the House Ag Committee. Both bills are scheduled to be heard next week in the House and Senate Committees on Agriculture.

Prohibiting Foreign Ownership of Real Property

Senate Bill 100 would seek to prohibit foreign ownership of real property in Kansas. The bill prohibits “foreign business entities” from purchasing or otherwise acquiring any interest in real property in the state. A “foreign business entity” would be defined 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). A House companion bill may be introduced soon. Next week, the House Committee on Agriculture will receive an overview of House Bill 2397 a different House version of the bill which would prohibit the conveyance of certain real property in Kansas to foreign adversaries.

Electric Utility Rates

Kansas has the highest energy rates in our region. In recent years, legislation was introduced to reduce rates while ensuring reliable service. This year, multiple bills have been introduced which focus on various ways to address high electric utility rates in our state:

  • House Bill 2227 would authorize solar power purchase agreements with renewable energy suppliers, exempt the sales of electricity pursuant to power purchase agreements from public utility regulation, and require electric public utilities to enter into parallel generation contracts with certain (non-industrial) customers of the utility. A hearing was held this week in the House Utilities Committee, and Kansas Grain and Feed Association and Renew Kansas Biofuels Association supported the measure while asking that the bill be expanded for industrial uses.
  • House Bill 2221 would allow for a 0 percent sales tax rate on utilities for commercial facilities. The Senate Tax Committee held a hearing on the Senate companion bill Senate Bill 54.
  • House Bill 2225 would limit cost recovery for electric public utility transmission-related costs. A hearing is scheduled for Tuesday, Feb. 14 in the House Utilities Committee.
  • House Bill 2228 would increase the capacity limitation of the total amount of net-metered generation systems that may operate within the service territory of an investor-owned electric utility and remove the load-size limitations on certain customers’ net-metered systems. A hearing is scheduled for Tuesday, Feb. 14 in the House Utilities Committee.
  • 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. A hearing is scheduled on HB 2154 on Tuesday, Feb. 14 in the House Utilities Committee. A hearing is scheduled on SB 88 on Tuesday, Feb. 14 in the Senate Utilities Committee.
  • 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.
  • Senate Bill 214 would prohibit public utilities from recovering dues or contributions to a charitable organization through rates.
  • House Bill 2310 would increase the number of commissioners on the state corporation commission.

Right of First Refusal for Electric Transmission Line Build Out

Senate Bill 68 has been introduced by state energy producers to allow those companies a Right-of-First-Refusal to build out new electric transmission line assets in the state. Renew Kansas, Kansas Grain and Feed Association, and Kansas Agribusiness Retailers Association joined other commercial and residential utility rate payers in opposing the measure during multi-day hearings this week, arguing that the bill would remove competition from the build process and result in higher electric energy rates.

Kansas Apprenticeship Tax Credit Act

HB 2292 would establish a three-year Kansas apprenticeship tax credit to encourage the development of apprenticeship programs by participating businesses. The credit would be up to $2,500 for each apprentice so employed, and the tax credit may be awarded up to 20 apprentices per year. The program would be administered by the Kansas Department of Commerce.

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 was heard in the Senate Judiciary Committee on Feb. 2. Stakeholders are currently working on tweaking language to address specific concerns.

Cannabis Legislation

The following cannabis bills have been introduced this year to legalize marijuana in some fashion, but are not currently scheduled for hearing:

Senate Bill 135 would create the medical cannabis regulation act to regulate the cultivation, processing, distribution, sale, and use of medical cannabis.

Senate Bill 171 would create the veterans first medical cannabis act to regulate the cultivation, distribution, sale, possession and use of medical cannabis.

House Bill 2367 would establish the adult use cannabis regulation act to allow for the lawful cultivation, manufacture, possession, and sale of cannabis in this state.

Other Bills We Are Monitoring:

SB 86 requiring local governmental officials to disclose substantial interest in renewable energy projects

SB 166 public disclosure of application for a transmission line siting permit under KCC jurisdiction

SB 196 reinstating transfers to the local ad valorem tax reduction fund (LAVTRF)

HB 2159 providing revenue for water program management fund and creating new fees for various UIC injection wells

HB 2192 creating a Kansas Secretary of State website for grants, applications, and awards

HB 2222 prohibiting enforcement of federal regs and enforcement of state regulations to carry them out

HB 2366 providing for transfers from state general funds to local ad valorem tax reduction fund

HB 2368 enacting the making work pay act to increase the Kansas minimum wage