The KBA Advocate is the weekly KBA legislative newsletter that contains up-to-date information on legislation that impacts your practice. It is only published when the legislature is in session and is sent to all KBA members electronically via the KBA Weekly.
The Kansas Legislature headed home for the weekend last Friday guaranteeing at least a month-long veto session. There have been several warnings of a 7-day work week to finish off the year but those threats have gone unfulfilled. We first had Mother’s Day and this past weekend may high schools were celebrating graduation. We can expect to hear a similar threat this week by leadership but with Memorial Day coming up fast those threats may again be idle.
After three weeks, nothing has really changed. The politics remain the same as do the fiscal issues. The state is still in the hole $450 million on July 1 and another $450 million for FY19. K12 plan may run an extra $150 million for FY18/FY19. Those floor debates are still on the horizon.
The issue remains how to pay for these shortfalls and school finance. Earlier this session, the legislature passed a bill that would have funded state government with $590 million but Gov. Brownback vetoed that measure, and the Kansas Senate was unable to override the veto (the vote was 24-16; they needed 27). Thus, far the options are poor: pass a plan similar to the one Gov. Brownback vetoed and hope to override it, or pass a plan that doesn’t cover the hole and make cuts.
Timing is also significant since the Kansas Supreme Court has set a June 30th deadline to come up with a new school finance plan. This deadline has given Democrats and some Moderates leverage over the debate, but leadership would prefer to pass a tax plan prior to the school finance formula to limit Supreme Court review options.
Some hope to create a new money tree by removing the sales tax exemption on a few professional services. Rep. Kristy Williams (R-Augusta) is pushing to restore a sales tax on the following:
The KBA has concerns regarding sales tax on collection agencies. Several law firms engage in debt collection activities as do some doctors' offices, or CPA’s for that matter. Removing the sales tax exemption on collection agencies may prove to be a trickier option than initially envisioned. Debt collection is a volume business that relies upon phone banks, email and snail mail contact. Very little is done face-to-face which means the production can be moved out-of-state or internationally to avoid the sales tax. This would leave in-state entities that cannot move as easily at an economic disadvantage. The KBA is engaged on this topic and has expressed our concerns to the pertinent parties.
After ten days of Veto Session, the legislature has made little progress on the state budget and might have gone backwards on tax policy. Last week the Senate shot down another tax plan. This plan was like one passed during the regular session but ultimately vetoed by Gov. Brownback. The plan would have closed the LLC Loophole, stopped the glide path to zero income tax and reverted to a 3-tiered tax bracket again. Overall, it would have raised nearly $1.1 BILLION over the next two years. This is a bill most democrats and moderates campaigned on but the x-factor is the cost of school finance plan.
Many are hesitant to pass a tax plan before the final numbers are in for school finance because the tax plan may not raise enough money to fund both. This would lead to another fight on raising taxes and another vote. So, we wait until they complete the school finance issue.
Speaking of the school finance issue, it has long been agreed that funding levels should be increased by $150 million per year for 5 years, for a $750 million bump. However, this bill has been amended nearly 60 times, with dozens more amendments to come. Many of these additions will require more money. How much more is unknown, but democrats believe leadership is using the amendment process to create a bill so large, it is impossible to fund. The endgame for this strategy is to run out the clock without a school finance plan, force an agreement on a smaller plan with the promise to fix it later, allow some of the governor’s proposals (securitization etc.) to be discussed again, and pass a much smaller tax increase with some cuts. For conservatives/leadership to accomplish this, they must break the Mod/Dem coalition built upon school finance. How this plays out remains to be seen.
For KBA purposes this has been a good week. Both chambers have passed HB 2153 dealing with public benefit corporations, and the bill now heads to the governor’s desk. Special thanks to the KBA General Corporation Code review subcommittee chaired by Bill Matthews. Members include, Bill Quick, Prof. Hecker, Prof. Harper-Ho, Joe Jarvis, Bob Alderson, Bill Wood and several members of the Kansas Secretary of State’s Office. Once signed, this brings to a close a nearly three-year project to update the Kansas General Corporate Code.
Also, the judicial budget got their extension on a surcharge bill passed last Thursday. The bill will now go to the governor’s desk. I am happy to report that the judicial budget will be funded to requested levels, sans pay raises for employees. Democrats bit their tongues in voting for the surcharge bill because this single provision raised a fee from $59 to $100. Many thought this was too large an increase on individuals already having difficulty paying fines/fees. Rep. Carmichael carried the issue to the Democrats during caucus and did a fine job of clarifying the issues. Many thanks to him.
Beginning next Monday, both chambers will work 7 days a week till the job is done. Items that still need to be completed are FY18 & FY19 budgets, the school finance formula & a tax plan to pay for it all. This could take a while.
On Monday, the Kansas Legislature returned to finalize the 2017 session. To close shop and head home for the year, legislators must agree on three items: a biennial budget, a tax policy capable of paying for that biennial budget, and a school finance plan that includes a revenue source.
Legislators will attempt to resurrect a tax plan previously vetoed by the governor that includes a three-tiered tax bracket system, closes the LLC loophole, and stops the “glide-path” to zero income tax policy implemented in 2012. That proposal would see the highest earners pay an additional .85% per year. The main difference is that this proposal does not include a retroactive provision. The hope is to secure a 2/3 majority that would survive a gubernatorial veto. Getting to that number is tricky in the Senate.
The state did receive some good news on Monday as April revenue numbers showed a slightly higher than projected increase. Kansas took in $1.8 million more dollars than previously forecast. This was in line with projections from the April Consensus Revenue Estimating Group, but it still leaves the state in a $900 million hole.
The school finance issue will also play a vital role in ending the session since the Kansas Supreme Court added a June deadline to their spring decision. The basic format would be to increase school spending by $150 million each year for five years. The issue is how to pay for the increase. Sen. Jim Denning has proposed a utility tax of $3 per individual water meter and $10 for business meters. This would raise $159 million in revenue that would be earmarked for schools.
If legislators could agree on these items in short form, they could adjourn as early as next week. However, odds-makers believe we are in for a long veto session. We will know a lot more once the tax bill is debated by the Kansas Senate this week.
The Kansas Legislature will begin its Veto Session on Monday, May 1. Historically the Veto Session is a rather short event when legislators put the final touches on a budget and attempt to override any vetoes the governor has signed. This year, there remains much to accomplish—including crafting the FY18 & FY19 budgets, agreeing to a school finance plan and figuring out a way to pay for it all.
Legislators are faced with a $900 million shortfall over the next two fiscal terms. This means raising additional revenue or figuring out how much to cut and from what section of the government. Neither are attractive options, which means a long drawn out veto session.
While the legislature grapples with funding issues, the court system is in the middle of an important election. This election is for the statewide chair of the Kansas Supreme Court Nominating Commission. This election is by mail-in ballot, which if you are registered with the clerk of the court, you should have already received.
To be eligible to vote and receive a ballot, you must be a resident of the state of Kansas and comply with KSA 2016 Supp. 20-170. If you neglected to register, you are unable to vote in this election.
The candidates for Chair of the Kansas Supreme Court Nominating Commission are:
Mikel Stout, Wichita
Mary Curtis, Lawrence
Your ballot, along with your signed certificate, must be received by the court on or before May 15, 2017. Please use the self-addressed return envelope enclosed with your ballot and certificate.
The Kansas Legislature reached First Adjournment mid-afternoon on April 7. This deadline effectively kills any bill not already passed by at least one chamber. Of course, there are exceptions and those are very similar to the exceptions used after Turnaround (House Appropriations, Senate Ways & Means, Tax etc.). The plan is to return on May 1to pass a tax plan, to set the budget for FY18 & FY19 and finalize a school finance formula with a revenue stream. None of these are easily accomplished and many forecast an extended Veto Session.
The Kansas Legislative Research Department has complied a listing of those bills that have already passed the legislature and been signed into law by the governor. To review these new laws please visit the following link: http://bit.ly/2oaEqc9.
On the judicial branch front, I am happy to report that HB 2041—extending the judicial branch surcharge fund—passed both chambers, but the Senate amended the bill to include parts of HB 2053 dealing with debts owed the courts and the process for collecting those debts. HB 2041 as amended will now be voted on as a conference committee report.
In addition, the judicial branch required an extension of the DUI reinstatement fee to help fund its budget. The court receives a percentage of the fees collected for reinstatement of a driver’s license after the conviction of a DUI; this amounts to nearly 950K. The House passed this bill on April 7 on a 72-52 vote. The concern was that the increase of $41 was too great and would merely increase the instances of driving while suspended.
The remaining judicial budget issues concern personnel increases. For its part, the Kansas Senate passed SB 189 giving all state employees a 2% raise. House Appropriations included a raise for Judicial Branch employees totaling $6 million and added approximately $840,000 in new positions related to juvenile justice. There is a push to limit these increases to nonjudicial personnel.
The Judiciary Conference Committee consists of six members: the chair, vice-chair and ranking minority members of the Senate and House Judiciary Committees. The Senate members are Sen. Richard Wilborn (chair), Sen. Julia Lynn (vice-chair) and Sen. David Haley (ranking minority). The House is represented by Rep. Blaine Finch (chair), Rep. Fred Patton (vice-chair) and Rep. John Carmichael (ranking minority).
The conference committee negotiated 12 bills that passed both chambers but with differences that had to be reconciled. These bills are considered “bills in conference”. The conference committee also discussed bills that have only passed one chamber. These bills are referred to as “conference-able” bills. The committee can bundle bills that meet a subject matter requirement, including those bills passed by only one chamber.
The judiciary conference committee considered and agreed to combine SB 50 and contents of HB 2397 during conference. House Sub for SB 50, as amended, would create an unconscionable act or practice under the Kansas Consumer Protection Act related to the unauthorized practice of law, and amend law regarding membership of the Advisory Committee to the Kansas Commission on Interstate Cooperation and the Joint Committee on Special Claims Against the State.
House sub for SB 50 passed the KS Senate 38-0 and waits for approval by the Kansas House during Veto Session.
Both of our proposals dealing with arbitration passed the Kansas House. However, HB 2186 – Enacting the Uniform Arbitration Act was amended to include a teacher due-process provision. The House passed the amendment 66-59 and then passed the bill 72-53. The Senate was not interested in debating the teacher due process issue so HB 2186 remains below the line and will not be considered this session.
HB 2126 dealing with ADR in trust instruments also remains below the line in the Kansas Senate due to a growing concern that democrats would try to amend the teacher due process provision into it. This proposal has passed the Kansas house twice now both times on near perfect votes, 124-0 & 122-0.
Finally, HB 2125 passed the Kansas House 124-1 but failed to get out of the Senate judiciary committee. Sen. Mary Pilcher-Cook had ideological concerns about benefit corporations. However, I am happy to report that this bill was discussed and agreed to in judicial conference committee. The language in the bill was removed and placed into Sen Sub for HB 2153. It will be voted on during the Veto Session.
Rep. Steven Becker (R-Buhler) and Rep. Boog Highberger (D-Lawrence) introduced a bill to repeal major portions of a law passed last year allowing the Kansas Secretary of State to certify the list of attorneys registered with the court. Many lawyers are concerned that their personal information (home address, SSN, etc.) could be compromised. This bill will undo those requirements and remove the KSSOS from the equation. This bill failed to be passed by House Judiciary.
SB 63, as amended, would enact the Revised Uniform Fiduciary Access to Digital Assets Act (2015). The Act would authorize access to digital assets by four common types of fiduciaries. Specifically, the Act would apply to: A fiduciary acting under a will or power of attorney executed on or after July 1, 2017; a personal representative acting for a decedent who died before, on, or after July 1, 2017; a guardianship or conservatorship proceeding commenced before, on, or after July 1, 2017; and a trustee acting under a trust created before, on, or after July 1, 2017. SB 63 was approved by the governor on April 4, 2017.
SB 86 as amended, would amend the Kansas Open Records Act (KORA) regarding fees charged for public records, who may request and inspect public records in Kansas, the format of minutes kept at meetings of state legislative and administrative bodies and agencies, and the exemption for criminal investigation records in KORA. This bill is a concern to our Title Standard Committee as it limits access to public records to Kansas citizens. There are currently no plans to work the bill.
There are only five days left until First Adjournment, which means committee meetings are over and most work will take place on the floor of either chamber or in conference committees involving members of both chambers.
The judicial branch budget continues to be unresolved. As it currently stands, none of the judicial branch budget requests have been passed. HB 2041, the judicial surcharge extension, has been referred to the judicial conference committee, and the senate still has HB 2279, DUI reinstatement fees, below the line for debate. The senate passed over HB 2279 yesterday due to a new $25 fee added to the bill. If the DUI reinstatement bill is not passed, the judicial branch is looking at a $950,000 shortfall.
Most pressing is the uncertain judicial branch salary increase issue. To date, both chambers have discussed raising salaries for judicial branch employees, but there remains a concern about increasing judges’ salaries.
For their part, senators passed SB 189 last Thursday. This bill gives all state employees a two percent raise. House appropriations included a raise for judicial branch employees totaling $6 million and added approximately $840,000 in new positions related to juvenile justice.
Muddying the water is the recent revenue shortfall for March. The state was down $12 million for the month, although it is still up around $48 million for the year. Many legislators have expressed a desire to wait until the veto session before revisiting the judicial branch enhancement issue and then only if more funds become available. With the downturn in revenue for March, an April miracle seems unlikely.
The court has sent out a “Call to Action” on the judicial branch budget. Should you wish to participate, you can locate your legislators using the following links:
Last week, Senate judiciary heard and worked the KBA proposal concerning ADR in Trust instruments. The bill is uncontroversial and was passed out favorably on Wednesday, March 20. The committee also heard HB 2041 which extends the judicial surcharge fee through FY19. That bill was also passed out of committee on Wednesday but the committee decided to add another judicial funding bill focused on DUI reinstatement fees. That bill, HB 2279, is worth $950K to the court, and if the bill is not approved, the court will face a shortfall for the next 2 fiscal years. Both pieces of legislation should go to the Senate floor before the next deadline.
The Senate judiciary committee also heard HB 2125 concerning benefit corporations. Unfortunately, the committee decided not to work the bill, so it remains in committee. To pass the bill this session, it will need to navigate the conference committee process. This is a viable option that is amenable to both chairs. If you recall, the KBA used the same process last session to pass the General Corporate Code update.
On Monday, House judiciary heard HB 2397, dealing with the Unauthorized Practice of Law. It passed out of committee on Thursday. The bill was amended to include further clarification that court employees and court-approved individuals (think CASA and domestic abuse advocates) were exempt for this law. The committee then used a procedure called bundling to add the UPL bill (HB 2397) to a senate bill dealing with the lack of lawyers in the Senate (SB 50). Thus, the provisions for the UPL bill are now embedded into SB 50. If you are interested in tracking this bill as it moves through the process, the bill to watch is House substitute for SB 50.
The judicial branch funding issue has gotten considerably more complicated this week as Sen. Laura Kelly (D-Topeka) added pay increases for classified and non-classified state employees. The idea was to give non-classified employees and correction officers a two percent increase but give all classified employees a six percent raise. Non-classified and corrections employees received raises last session, so this helps bring everyone up. However, it is not entirely clear whether certain judicial staff would see these enhancements because they may not be part of the classified state employee workforce.
Yesterday, Rep. Bill Sutton made a motion in House appropriations that would add $6 million for nonjudicial salary increases and $840 K to help fund personnel to implement the juvenile justice act. This is a reduction from the $22 million the General Government Budget sub-committee recommended. Interestingly, Rep. Sutton is chair of the General Government Budget, and by this motion, overruled his own committee. It is important to at least get some form of employee raises into the mega-budget to avoid serious pay-go issues on the House side.
Rep. Sutton did agree to discuss further enhancements during Omnibus, but absent any new revenue, this would be unlikely. If the money isn’t added in committee then a floor amendment would be needed to add the funding. However, pay-go rules dictate that any funding added on the floor must be accompanied by an equal or greater cut. Thus, it is harder to add money on the floor than in committee.
Both chambers will be on the floor next week working bills leading up to the second house deadline, Thursday, March 30th (the deadline for consideration of a bill by the second chamber—the opposite chamber from the one in which it originated). Drop Dead Day or First Adjournment is Friday, April 7th.
Chief Justice Nuss took center stage this week as he addressed a joint session in the House chambers for the State of the Judiciary speech for the first time in five years. Nuss focused on the judicial branch’s many programs and efficiencies but the main point of the address was to advise the legislature of the need for salary adjustments for judges and staff.
The Kansas Senate passed a rescission bill late last night that avoid any late year cuts. There were at least three attempts to pass across the board cuts of 2.0 percent, 1.0 percent and 0.5 percent. None garnered more than 10 votes. In the end, the Kansas Senate passed a bill 27-13 that transferred $280 million from long term investments and delayed again payments to KPERS. The bill will head to conference committee with the House for further negotiations. It is expected that the State will end the year with a positive balance of $50 million.
The KBA will provide testimony on three bills next Monday in Senate Judiciary. They include HB 2125, Benefit Corporations, HB 2126 ADR/Mediation in trust instruments, and HB 2041 extending the judicial branch surcharge fee.
Each bill has already passed the House on near perfect votes, 123-1; 124-0 and 122-0 respectively.
The Senate Judicial Committee has been very active this past week, hearing 17 bills. That pace will continue as they have a full agenda through Wednesday. Thus, hearings will be truncated to accommodate the large number of conferees.
Bill Matthews will represent the KBA on HB 2125, Benefit Corporations, and I have the pleasure of explaining our trust bill and the surcharge extension bill.
House Judiciary has a full set of hearings this week as well. On Monday, they heard a newly introduced bill creating an unconscionable act or practice under the Kansas consumer protection act for people who engage in the unauthorized practice of law. The KBA will monitor is proposal and share testimony from the hearing when available.
Last week there were two huge events, both focusing on Governor Brownback. The first was the Senate’s quick and decisive action to kill Gov. Brownback’s tax plan. The bill would have raised around $200 million dollars, well short of the amount needed to end the fiscal year with a balanced budget. Both republicans and democrats agreed that the bill wasn’t enough and the governor needed to come to the table with a better plan. The vote to kill the bill was 37-1.
Where we go from here is anyone’s guess, but there is talk of reintroducing the bill the governor vetoed earlier, with minor changes such as removing the retroactive provision. Again, the issue is raising enough money to close the funding gap while garnering enough support to withstand a veto. A tricky proposition in the Kansas Senate.
A senate subcommittee also killed the governor’s proposal to consolidate certain boards in state government. These mergers have normally passed both chambers, think KDOT/Turnpike but even the simplest of consolidations are no longer guaranteed. For instance, the governor proposed merging the board of cosmetology and barbering earlier this year. This week the Senate Ways and Means subcommittee decided against that approach and kept the funding for both boards independent.
The second big event of the week was the unconfirmed report that Gov. Brownback will be appointed as Ambassador to the United Nations for food and agriculture.
The Governor has not confirmed or denied the possible job offer, but many see this as a possible way out, given his waning influence in the Capitol. Thus far, the legislature has successfully pushed back on many of the governor’s ideas, causing a significant policy shift in the Capitol. Should Gov. Brownback leave, additional options for passing a tax plan may be available.
The KBA continues to monitor legislative activity. The house judiciary committee began working on senate-introduced bills this week with some minor technical bills receiving hearings. The house judiciary agenda for next week looks very similar.
The senate judiciary committee will be churning through 17 bills next week and looking at a similar number for the week starting on March 20. KBA bills, except for HB 2186, will most likely be heard during the March 20 week. We are working to confirm that information.
Finally, the Kansas Supreme Court is accepting comments of a proposed change to Rule 122, dealing with E-filing. The deadline to submit comments is close of business this Wednesday, March 15, 2017. Comments can be submitted via email.
School finance lawsuit dominates Legislative return
Last Thursday the Kansas Supreme Court delivered its ruling on the Gannon school finance case. The Court found that the current block grant funding formula is unconstitutional and gave the legislature until June 30 to pass a suitable replacement. See; Opinion #113,267
The June 30 deadline comes from the original block grant legislation in which the law allowed a two-year “time-out” so legislators could craft a better option. As of this writing, no funding formula has been proposed.
During the Monday morning House Appropriations Committee, we heard from Dale Dennis. He informed the committee that the state would need another $372 million to get back to FY09 funding levels. Dennis also stated that support staff for teachers are down and special education teachers are also down. Dennis provided anecdotal evidence when he stated that 5th grade classes in Emporia average 28 students. Garden City is short 38 elementary teachers, Kansas City down almost 100.
This funding issue will persist throughout the remainder of the session. However, legislators must still craft a tax plan, a budget, and consider Medicaid expansion and teacher due process. Over the break, several legislators held town hall meetings or coffee meet-ups around the state. The response from constituents ran the gamut. See; Kansans urge lawmakers push amid fights over taxes schools - cjonline.com
This KBA proposal was subject to an amendment from Rep. Stogsdill (D-Prairie Village) who offered to include a provision dealing with teacher’s due process rights. The amendment was germane to the underlying bill because HB 2186 amended arbitration statutes, and teacher due process rights would be subject to these new laws. After more than two hours of debate the amended bill passed 68-57.
The KBA worked with the Kansas Land Title Association and the Kansas Attorney General’s office on SB 10. The original language of the bill contained a provision criminalizing the filing of certain liens on public officials. The KBA negotiated with KLTA and the KSAG on a compromise amendment that satisfied all parties. However, when the amendment was added to the bill, Sen. Mary Pilcher-Cook expanded the protection against such liens from “public officials” only, to the “public” in general. The KBA finds this significant change unacceptable. As such, the KBA Title Standard Committee opposes the bill. The KLTA and the KBA sent a letter to senators opposing the amended bill. Prior to debate, SB 10 was referred to an exempt committee and remains alive for the remainder of the 2017 session.
HB 2279 was heard in house appropriations, an exempt committee, which means this measure is unaffected by the turnaround deadline. Under current law the judicial branch receives 33% of reinstatement fees. If HB 2279 is not passed, these fees will be diverted to other groups and the judicial branch will be out around $950K. These funds are already in the FY18 & FY19 judicial budget request. If the bill does not pass, the courts face a significant budget cut.
These two bills are the judicial branch’s stand-alone budgets for the next two fiscal years. The judicial budget has already been folded into the mega-appropriations bill, but should it be stripped out, the judicial branch can fall back on these two measures.
The second half of the legislative session begins on March 6. Legislators will work until First Adjournment scheduled for April 7. Legislators will then recess until Veto Session which begins on May 1. House and senate Leadership projected the 2017 session to last 100 days with the 2018 session lasting only 80 days, averaging out to 90 days per session. However, many anticipate the 2017 session will run much longer. As a reference point, May 14, will be the 90 day of the session.
One highlight of the 2017 session is the ability to access some hearings via the internet. A good link to use is Upcoming Events. This link provides the time and date of the committee meeting along with a very easy access port to hear, and in some cases, see the committee in action.