Terry L Calloway

This week most of the action has taken place in committees working to hear and amend Senate bills so they can be heard by the full House. Committees held hearings on many core priorities including legislation aimed at reducing the cycle of education litigation and eliminating the corporate and individual income tax through a five-year phase-out. These complex issues require time to be fully vetted through the committee process before the House can take action on them. The House remains on target to pass a substantial portion of its economic priorities. The House is committed to passing deliberative and thoughtful pro-growth policies.

Below is an overview of This Session at the Statehouse, a preview of upcoming events, Words to Watch and this week’s Kansas Trivia Questions. The Speaker’s testimony before the House Education Committee in favor of HCR 5018 and HCR 5019 is also attached.

This Session at the Statehouse

Conference Committees on the Governor’s Freeze Bill

Throughout the conference committee process, the House has been committed to the Governor’s proposal to provide a $35 million balance at the end of FY 2011. Starting the allotment process of bringing the state to a zero ending balance provides a good starting point, but the House wants to go farther to ensure fiscal stability.

The House appreciates the Governor’s willingness to make the necessary allotments to balance revenues and expenditures. However, the House remains committed to establishing a healthy ending balance after funding necessary programs.

With the aim of helping the Governor avoid the need to make allotments, the House called a conference committee on Friday to propose an offer that contains the provisions on which the conference committee has already agreed. This offer would result in a FY 2011 ending balance of $35 million. However, the Senate conferees did not attend the conference committee to hear the proposal.

Governor Brownback has invited us to provide a rescission bill that creates an ending balance. While the House is disappointed that the Senate has failed to even hear the offer, the House is anxious to continue working through the conference committee process to achieve the Governor’s goal of a $35 million ending balance.

Making Classroom Funding a Priority

It is troubling that in school districts facing reductions, there is far more talk of reductions of teaching staff than administrative staff reductions. Many school districts currently share a number of educational services but cling to their separate layers of school administration, at the expense of teachers and those who directly impact the area of student instruction.

HCR 5019 is designed to restructure school district administration to ensure that more education funds are spent paying teachers in the classroom. The resolution encourages the State Board of Education to reorganize administration to reduce the amount of non-instructional administrative costs. Since on average, the salary of one superintendent equals pay for three teachers, this mandate would increase the money spent on classroom instruction.

Unemployment Insurance Reform

This week the House Commerce and Economic Development Committee passed SB 77 which establishes the Employee Security Interest Assessment Fund to pay interest and principal owed to the U.S. Department of Labor. This is a critical step toward repairing the damage caused by the depletion of the current system and establishing stability for the business community. The House plans to run SB 77 next Monday

In 2011, the bill would authorize 50% of the surcharge revenue derived from negative balanced employers. The bill increases the number of rate groups for negative balanced employers from ten to twenty for an interest assessment to be deposited into the fund. The surcharge rate on negative balance employers would increase from 2.0% to 4.0%. The bill also repeals the provision of the “waiting week” which saves the fund $11.5 million. To help with cash flow, the bill allows for the Kansas Department of Labor to borrow up to $3 million from the Pooled Money Investment Board for interest payments that would be subject to approval by the State Finance Council.

Community Defense Act

On Thursday, the House passed the Community Defense Act which requires sexually-oriented businesses be located at least 1,000 feet from the property line of existing businesses, day-care facilities, schools or places of worship. The Act requires a six-foot distance between patrons and performers and prohibits the establishments from operation between midnight and six am.

Progress on Growing the Economy

Because social issues are controversial and fairly easy to understand, the media spends more time covering them. This makes it seem that we are spending a disproportionate amount of time on them. In addition, many people categorize some economic issues as social. For example, in-state tuition for illegal aliens is costing the state money. By dealing with that issue, which some will categorize as a social issue, the House is saving the state money. Another example of this is defining a “suitable” education. This may seem like a social issue, but it is an essential part of ending the cycle of education litigation that has driven up state spending with the end result being a budget shortfall filled by a tax increase. Classification is complex because almost every issue the legislature deals with is interconnected. However, as you can see by the side-by-side comparison below, the House has put more time and energy into creating jobs than regulating social issues.

Looking Ahead

Tax Debate

The House will take up tax policy next week. The following bills will be considered as the House works to implement a holistic tax policy that will spur economic growth.

• HB 2117 – As amended, this bill would make several technical changes to the sales and use tax imposition statutes that would generally strike certain expiration and never-utilized provisions. Although the original bill was designed to repeal defunct language in the sales tax imposition statutes, this was amended in committee.
• HB 2317 – This bill would make several changes to existing tax policy:
  • A new state income tax deduction know as “expensing” for certain qualified investments;
  • Repeal or phase-out of a number of existing state income tax credit and sales tax exemptions;
  • Repeal of the Kansas Economic Opportunity Initiative Fund (KEOIF);
  • Create the Job Creation Program Fund (JCPF).
• HB 2331 – As amended, this bill would designate forty counties as Rural Opportunity Zones (ROZ), effectively providing an income tax exemption for certain out-of-state taxpayers who relocate to those counties. Those forty counties would be authorized to participate in a state-matching program to repay student loans of up to $15,000 for certain students who are relocating and who attended out-of-state higher educational institutions or who had lived outside the state for at least three years and had not Kansas source of income for at least two years.
• HB 2091 – This bill would decrease the sales and use tax rate from 6.3 to 5.3 percent on July 1, 2011. The State Highway Fund would receive 13/106ths of the receipts at the 5.3 percent rate and the State General Fund (SGF) would receive the balance.
• Sub HB 2161 – In its current form, this bill would change a number of statutory rules for purposes of in-state sales tax transactions from destination-sourcing (where the applicable local sales tax rate is determined at the location where the consumer receives the purchased item) to origin-sourcing (where the applicable local sales tax rate is determined at the seller’s location).
• HB 2381 - Eliminating corporate and individual income tax on a five-year phase-out plan.

Words To Watch

Local Option Budget (LOB) – In current statute, the local option budget is the amount of money a school district is allowed to raise locally. Districts can raise an LOB amount equal to 30% of the district’s general fund budget. If a district has an election and the voters approve, a district can go one percent higher, to 31%. Approximately ten districts in Kansas have held elections and have the ability to raise 31% for LOB. However, the law specifies that the amount cannot be higher than 31%.

Local Activities Budget (LAB) – The LAB is currently a proposal. It was first introduced last year and was in HB 2201 this year. It would allow a district to raise money above the 31% ceiling currently in place for the LOB. HB 2201 would allow the districts that have raised their LOB to 31% to increase the LAB by 5%. In this proposal, unlike the LOB, the state would not “equalize” the local option budget for the LAB. The funds raised would go to pay for non-mandated school programs.

Kansas Trivia Questions

Question: What two lawyers argued before the Kansas Supreme Court in the Brown v. Topeka Board of Education school desegregation case?
Answer: Paul Wilson argued for the state of Kansas and Charles Sheldon Scott represented the Brown family.

Question: Neosho County formerly was called Dorn County. Why did residents change its name?
Answer: Because Major Jackson Dorn, for whom the county was originally named, joined the Confederacy during the Civil War.

Question: What two Kansas towns and their counties are named after a famous former publisher and his newspaper?
Answer: Horace Greeley, editor of the New York Tribune. Horace and Tribune are cities in Greeley County.

Question: New Boston was the name originally considered for what two Kansas towns at different times?
Answer: Both Lawrence and Manhattan.

Question: What Kansas town was first named Palmetto, after the symbol for South Carolina?
Answer: Marysville.