20 May 2024 Kansas Legislative Update – Post Session Update
Before adjourning the 2024 Kansas legislative session earlier this month, the legislature sent Governor Laura Kelly a comprehensive tax relief bill and an omnibus budget bill. Yesterday, as was predicted, Governor Kelly announced her veto of the tax bill and multiple line-item vetoes in the budget bill.
The Governor also announced she intends to call the legislature back in for a, “Special Session,” – likely following the Memorial Day weekend – to seek passage of a new tax package.
Because the 2024 legislative session has adjourned, no bills would carry over from the regular 2024 session into the Special Session. In addition, any bill passed by the legislature during the Special Session can be vetoed by Governor Kelly and the legislature would not have an opportunity to override the veto.
Omnibus Budget
The omnibus budget bill CCR HB 2551 provided budgetary adjustments for fiscal years (FY) 2024 through 2027. Governor Kelly maintains line-item veto authority of any item in the budget. This week, the Governor signed the budget bill into law while line-item vetoing about thirteen provisions of the bill. Find the Governor’s Veto Message outlining the vetoed items Here. For FY 2024, total state expenditures were $25.4 billion, including $10 billion state general funds (SGF). This is an all funds increase of $1.1 billion, or 4.5 percent, and a SGF increase of $1.2 billion, or 14.2 percent, above FY 2023. For FY 2025, the bill includes expenditures totaling $25.4 billion, including $10.6 billion SGF. This is an all funds increase of $52.8 million, or 0.2 percent, and a SGF increase of $622.4 million, or 6.2 percent, above the FY 2024 budget. Major FY 2024 budget provisions include: $30 million for Human Service Caseloads, $2.5 million SGF for Mirror, Inc. to create a regional inpatient juvenile substance use treatment center in south central Kansas; and $20 million bonding authority from special revenue funds for the construction and equipment of a NIAR technology and innovation building on Wichita State University’s innovation campus. Major the FY 2025 budget provisions include: $45 million to the State Water Plan Fund (SWPF), $7.5 million from the SWPF to the Water Projects Grant Fund, $2.5 million from the SWPF to the Water Technical Assistance Fund, $6 million for small town infrastructure drinking and waste water projects, $5 million SGF for the Eisenhower Library Educational Facility, language distributing revenues above $71.5 million from the State Gaming Revenue Fund to the Attracting Professional Sports to Kansas Fund, and language amending the Build Kansas Matching Grant program to allow a community to request funding for water, transportation, energy, cybersecurity, or broadband infrastructure projects that are eligible for federal funding requiring a match.
Comprehensive Tax Relief
Also this week, Governor Kelly vetoed CCR SB 37, the comprehensive tax relief bill passed by the legislature with strong support earlier this month. The tax bill, which would have reduced taxes by $1.463 billion over the next three years, contained the following provisions: restructured the individual income tax brackets and rates to provide for a two-bracket system; increased the standard deduction and personal exemptions; exempted social security income from taxation; increased the residential property tax exemption from the statewide school levy (from $40k to $100k); decreased the ad valorem mills collected for schools to 19.5 mills (currently 20 mills); established 0 percent sales tax on food beginning July 1st; and abolished the local ad valorem tax reduction fund. In vetoing SB 37, Governor Kelly stated that “Kansans need responsible, comprehensive tax relief,” and castigated the Legislature for “playing political games with reckless tax policies.” The Governor has indicated support for tax cuts of about $425 million a year and has provided the legislature with two different tax plans she would support. Governor Kelly stated her intent to call the Legislature back for a Special Session in the coming weeks to pass a new tax relief package.
Foreign Ownership of Real Property
CCR on SB 172 would have prohibited 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 exempts individuals and properties previously verified by the federal interagency Committee on Foreign Investment in the United States. The House passed the bill 86-39, and the Senate passed the bill 24-14. Status: Governor Kelly vetoed the bill and there was no opportunity for a legislative override.
Eminent Domain
This session, the legislature considered eight separate measures intended to strengthen landowner rights concerning the exercise of eminent domain. The bills would have required county commission approval before exercising eminent domain authority; removed eminent domain authority from the secretary of wildlife and parks; required landowners whose land was taken by eminent domain for electric transmission lines to be compensated not less than 150% of fair market value; and allowed for an income tax subtraction modification for sales of property subject to eminent domain. On a unanimous vote, the legislature passed Conference Committee Report on SB 455, which prohibits public utilities from exercising eminent domain for the purpose of siting or placement of solar facilities. Status: Governor Kelly signed the bill into law.
Animal and Ag Facilities Protection
CCR HB 2047 would prohibit a person from entering, or remaining on, and knowingly making false statements to gain access to, animal facilities and field crop production areas. The bill amends current law to apply to physical trespass or making a false statement on an employment application to gain entry into an animal or ag research facility. The bill was introduced in response to the 10th Circuit U.S. Court of Appeals decision which found unconstitutional parts of a current law intended to keep undercover investigators off the property of animal facilities. The Senate passed the bill 34-2 and the House passed it 108-12. Status: Governor Kelly signed the bill into law.
Personal Property Tax Exemptions
CCR on HB 2096 contains provisions that would exempt certain personal property, such as ATVs, watercraft, and trailers from personal property tax. The Senate passed the bill 23-11 and the House passed the bill 91-26. Status: Governor Kelly vetoed the bill and there was no opportunity for a legislative override.
Commercial Property Valuations Under IRC 1031
SB 311 would require that the sale price or value at which a property sells or transfers ownership in a federal Internal Revenue Code Section 1031 exchange would not be considered an indicator of fair market value or as a factor in arriving at fair market value for property tax valuation purposes. Federal IRC Section 1031 exchange transactions would not be used as comparable sales for valuation purposes or as valid sales for purposes of sales ratio studies conducted by the Director of Property Valuation at the Department of Revenue. Proponents argued that commercial properties should be valued at fair market value and not on the amount of potential income the property can generate. The contents of the bill were placed into CCR on HB 2096. Status: Governor Kelly vetoed the bill and there was no opportunity for a legislative override.