Legislative Update No. 5

The legislature was quiet Monday and Tuesday with the cold weather shutting down most of the Capitol building’s legislative operations. However, the House Appropriations Committee continued to aggressively push through with subcommittee recommendations in an effort to build a budget bill as quick as possible. The committee approved the Higher Education Budget Committee’s recommendation that the Governor’s Recommended Budget be approved with the modification that language be added to review an additional $10M for the higher education block grant that goes to the six four-year institutions at omnibus. Omnibus is usually the last bill of the session that is passed to fix technical errors in previous legislation as well as additional appropriations that are based of more accurate economic estimates that are created in April. An amendment was added stating the universities should refund 50% of a student’s tuition for classes that moved to a virtual format. While the amendment was adopted, the Chair stated his desire to have universities come and testify in committee about their transitions to an online environment, what federal funds have been spent on and what has been provided to students. From a higher education standpoint, there is cautious optimism that both Senate and House appropriations committees have signaled they want to look at restoring funding to higher education at omnibus.

In addition to ongoing budget work, a number of other bills that are leadership priorities continued to advance. The House Tax Committee passed SB 13, the truth in taxation bill, that requires public notification if the County or City wishes to spend property tax revenue that is derived from increases in assessed valuation. It’ll now go to the House floor likely sometime next week.

Late last Thursday, the Senate passed SB 61 which would expand the tax credit to low-income students who want to attend a private school. The legislation has reignited the K-12 debate in the Capitol which has been comparatively quiet since the school funding bill had passed four years ago satisfying the Supreme Court lawsuit. Opponents of the bill see this harming public K-12 schools in the long run if students transition to a private option. The House has a companion bill that had hearings multiple days this week and was perhaps an even more divisive conversation in the K-12 Budget Committee.

Bills

SB 249 – A bill that impacts how IT projects are reviewed was introduced Monday morning and would move the threshold for review form a cost model (currently $250K) to a risk model that is desired by the Department of Administration. As higher education is one of the largest IT consumers in the State, this would have an impact on how it handles IT purchases going forward.

HB 2199 – A bill that authorizes sports wagering in Kansas including betting on college sports. HB 2199 had a hearing in House Federal and State Affairs Committee Wednesday and Thursday.

HB 2264 – Permits student athletes to profit off their name, image and likeness (NIL) while attending a post-secondary institution. There are currently about 30 other states that have either adopted or have introduced NIL legislation or something similar as well as congressional interest. For background, about two years ago, California passed a law that would allow something similar, but it had a five-year moratorium for Congress to create a federally uniformed law for across the country or for other states to pass similar legislation. The NCAA has been resistant to NIL early on; however, now sees it as a compromise avoiding “pay-for-play” and preventing the distinction from being blurred between student athletes and professional athletes. HB 2264 had a hearing in House Judiciary Thursday.

SB 43 – Establishes the Kansas PROMISE Act that pays for two-year college and four-year not for profit private institutions courses in select fields. In addition to previous amendments, the Senate Education Committee capped the program at $6M. The bill was then voted out of committee with a favorable recommendation. It will likely go to the full Senate early next week.

SB 208 – Creates the Fairness in Women’s Sports Act which prohibits biological males from engaging in women’s sports. SB 208 has a hearing next week in Senate Education.

HB 2265 – Creates a sales tax exemption for college textbooks bought at a university bookstore and will be heard Monday in House Tax Committee.

HB 2101 – Extending the University Engineering Initiative Act for another ten years was passed out of House Appropriations Thursday with an amendment requiring universities report on the number of graduates that are retained in the state.

Next Week

The budget committees will near the end of hearing from subcommittees and closer to assembling the MEGA Budget Bill. There are also a number of policy bills that can be found in the tracker (link below) that have hearings. Also look for the House and Senate to continue taking action on leadership priorities such as school choice legislation and tax bills. The appropriations bills were finally introduced in the House this week as well as the KPERS reamortization which will likely set the stage for a confrontational hearing in the House over the Governor’s plan to reamortize KPERS and House and Senate Republicans resisting that plan.

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Legislative Update No.4

In both the House and the Senate, budget subcommittees were hearing testimony from agencies about the Governor’s Recommended Budget and often times asking for consideration of additional funds to replace the reductions that were in that budget. Also, this week, the House K-12 Education Committee continued its work on advancing a version of expanded scholarships for K-12 students to go to private schools. This was prompted by the number of public-school districts that went fully virtual during the pandemic and anecdotal evidence of students leaving public school for a private in-person school or home school. This will likely be a critical issue during session and could face the Governor’s veto and possibly a court challenge. Tax bills also continued to advance in both the House and Senate inching nearer to final floor votes and then on their way to the Governor’s desk for signature or veto. Overall, this was a very busy week in Topeka.

Bills

HB 2188 – This legislation would require all state agencies, including higher education, to have a committee review all IT expenditures. This was introduced in House Appropriations and had a hearing Thursday.

SB 32 – Allows for school districts to pay for dual and concurrent enrollment and was passed by the Senate on Tuesday.

SB 22 – Focuses on changes and updates to income tax laws especially responding to changes in the 2017 federal tax law. Included in this legislation is the much-desired decoupling provision that would allow a Kansan to itemize on their state taxes regardless of if they take the standard deduction at the federal level. This was prompted because of the 2017 change at the federal level that doubled the standard deduction on federal taxes. Kansas is one of a few states that mandates if you take the standard deduction at the federal level, you must also take the standard deduction at the state level preventing many Kansans from taking advantage of itemized deductions. There are also a number of corporate tax provisions that will likely be the subject of debate between the Republican leadership and Governor Kelly who has previously expressed concerns about changing Kansas tax law after Kansas undid the 2012 tax law changes that strained the State’s budget. Originally the changes in SB 22 were estimated to cost the State approximately $120M; however, Democrats offered a number of amendments that ultimately ballooned the fiscal impact to approximately $490M a year. Democratic Governor Laura Kelly responded to bill being brought up to a vote with her own tax plan that increased the standard deduction for individuals and couples and paid for it with revenue enhancement from online taxes. Ultimately the Senate adopted the increases in the standard deduction but not the enhancements. It’s unclear what the House will do with this bill, but it passed 24-15 which is not a veto proof majority. Dissenting republicans cited the revenue impact to the budget as a major cause for concern.

HB 2264 – This is the Name, Image and Likeness (NIL) bill that allows student athletes to profit off their name, image and likeness while in school. As other states like California and Florida pass similar legislation, there is a growing desire to pass NIL in Kansas while Congress debates the issue at the federal level. The bill was introduced in House Judiciary Monday.

HB 2265 – This legislation provides a sales tax exemption for required textbooks and authorizing a local sales tax on required textbooks. This was introduced this week in House Tax and currently not scheduled for a hearing.

SB 208 – Would prohibit males from playing in women’s sports at a collegiate level.

Budget

Senate Subcommittee for Higher Education met almost all-day Monday and heard presentations from every sector of higher education and all of the four-year universities. Presentations largely focused on higher education’s impact on our communities, economy and workforce; providing education during the pandemic; handling of federal funds and; implications of State budget reductions. Two of the four members of the subcommittee were freshman senators, and there were a lot of fundamental questions about budgets, revenue streams and expenses. The Senate Subcommittee recommended the Governor’s Budget be adopted including the reductions to higher education but added higher education be reviewed at omnibus to potentially add funds then, and that was accepted by the full Senate Ways and Means Committee on Friday.

The House Higher Education Budget Committee met Monday, Tuesday and Wednesday to do exactly the same thing the Senate had done on Monday and focused largely on the same questions. Thursday the committee recommended to adopt the Governor’s Budget which includes the $4.5M reduction to WSU and $42M reduction to higher education overall. They did suggest to review at omnibus adding an additional $10M to universities. These recommendations will be reviewed by the whole House Appropriations Committee next week.

Next Week

As subcommittees finish their work this week and next, the full appropriations committees in the House and Senate will have to review their recommendations and accept or change them. Once that is done, look for the full House and Senate to move quickly on voting on budget bills to allow the conference committee to start working. If that can get done relatively quickly, there is a lot of speculation with what happens next. Constitutionally speaking, passing a budget is the legislature’s only responsibility and, in an environment, where there is a lot of concern about safety, will there be a push to go home and wait for veto session to take action on outstanding issues?

Federal Update

As the Biden Administration continues to push an aggressive stimulus package, higher education is analyzing its potential impact on universities and colleges. Currently, the Association of Public and Land Grant Universities have put together an estimate of what the President’s plan would allocate to universities. Included in the proposal is an additional $26M for WSU including over $1M for direct student aid. This is separate from the last two rounds of stimulus that also allocated funds to universities and directly to students. Both the the House and the Senate have passed a budget resolution using the reconciliation process, and the White House has a target of early March for signing the bill into law.

As the State continues to develop its budget, the Governor has previously signaled the need for federal assistance to mitigate the impact of the economic fallout from COVID-19. In this proposed stimulus bill, states and local unites of government would receive $349B total. The State of Kansas would receive $1.6B and local unites of Kansas government would receive $1.2B. As these are merely recommendations from the Biden Administration to the Congress, it’s too early to say what, if any, impact they will have on the State’s budget. However, in late April and May, the Governor will have the ability to make Governor’s Budget Amendments (GBAs) to the legislature based on new economic information including federal stimulus (if it passes by then).

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Legislative Update No. 3

The week started off with jabs between Republican leadership in the legislature and the Governor over Medicaid Expansion and medical marijuana. Expanding Medicaid to cover more individuals has been a contentious and ongoing issues for several session, and this year is no different. With the recent election of more conservatives to the legislature, one of the Kelly administration’s chief political goals likely became impossible to achieve or at the very least very difficult to imagine. However, that did not stop the Governor from including funding for Medicaid Expansion in her budget and on Monday she announced a plan to pay for it by legalizing marijuana. The Governor noted that many states surrounding Kansas have already expanded Medicaid, legalized some portion of marijuana or both. This quickly triggered a reaction by Republicans who reminded the Governor that voters had a chance to send legislators to Topeka to expand Medicaid and chose not to. Practically speaking it is unlikely that any legislation that does either of these things will advance out of committee with conservatives controlling both Senate and House committees, but this is likely a preview of the Governor’s re-election campaign.

It wasn’t all doom and gloom in the Capitol though. As the month of January came to a close, the legislature received another month’s worth of revenue data. For the month of January, tax revenues for the State exceeded estimates by over $90M. Included in that is the fact that January revenue in 2021 was $71M more than January 2020 prior to the pandemic’s impact on the economy which could be a sign of economic rebounding.

A piece of legislation receiving attention is the SB 32 legislation which would allow school districts to pay for dual/concurrent enrollment. This legislation was proposed by Kansas Board of Regents and is supported by the Kansas Association of School Boards (KASB). USD 259 testified in support of the legislation last week noting that many students who would want to engage in dual/concurrent enrollment are unable to attend due to costs, and this legislation would help reduce or remove that barrier. The legislation was recommended by the Senate Education Committee as favorably for passage. It is unclear when the full Senate will take up the legislation.

The Senate Education Committee began amending the SB 43 legislation today. This legislation would create the KS Promise Scholarship which is a “last dollar in” scholarship that would allocate state funds to students who qualify and go to a two-year program or not for profit university to pay for the first two years of college. The two amendments that are the most relevant are 1) does establish income thresholds for families using this scholarship and 2) adds early childhood development as an approved field of study. The general understanding is that the income thresholds are just beyond what pell eligible students would be covered under, which would capture the students that fall in the gap of not qualifying for pell but still not going to college due to costs.

The HB 2101 bill has also received a hearing this session. This bill would reauthorize the University Engineering Initiative Act (UEIA) for another ten years. The original authorization focused on providing universities resources to grow the number of engineering graduates at KU, KSU and WSU. Industry, chambers of commerce, and contractors as well as higher education all testified in support on Tuesday. Private colleges testified neutral asking that the act be expanded to private institutions. There was also discussion by the Department of Commerce and members of the committee to focus on not only growing the number of graduates but also retaining them in the state. HB 2101 will likely be worked in the next couple of weeks.

The SB 22 tax legislation is being discussed again this session. This is the income tax legislation that has been greatly contested since the beginning of the session out of fear that it could lead to similar impacts caused by the 2012 tax law changes. A number of changes were made to the bill to reduce the fiscal note, but it will still be a sizeable reduction to revenue and could have an impact on the budget development. The bill will likely be worked on the Senate floor next week.

The biggest agenda item for higher education next week will be budget hearings in both the Senate and the House with WSU testifying first in the Senate Sub-Committee for Higher Education on Monday and then in-House Higher Education Budget on Wednesday. The Senate Ways and Means Committee will receive recommendations and act on them Wednesday.