NEWS FROM THE CAPITOL—March 5, 2010
BLUE STEM BISTRO COFFE CHAT TODAY
NOTE: Hawk Coffee Chat is Saturday, March 6, 9:00 to 10:00 AM at Blue Stem Bistrow. Hope you can make it for an informal chat and brainstorming about the progress of the session and how you want to see some solutions over the next few weeks.

Gov. Parkinson meets ’10 shortfall
(below is from the Hawver Report)

Maintaining that the $106 million revenue shortfall is front-loaded, Gov. Mark Parkinson Friday morning proposed $85 million in shuffles and savings to balance the FY ’10 budget to date.
At a crowded press conference in his office, Parkinson said his proposal isn’t good government but necessary because of a profligate Legislature that over the past decade has given billions in tax breaks to businesses and the rich which are now squeezing the middle class.
Parkinson said that the $70 million shortfall in tax-only receipts in February, punctuated by a $33 million shortfall in personal income tax receipts, is an anomaly, caused by some 50,000 more refunds (worth $15 million) being granted than in a typical February. Oh, and there was another big refund to someone—a corporate-use tax worth $6 million; by state law, the recipient can’t be named. Those recognitions pared the $106 million shortfall to $85 million.
From the $85 million that Parkinson made his target, he can do $31 million of it himself, and lawmakers will have to take action to raise the additional $54 million—including passing primary seatbelt law, which the Senate has done and the House hasn’t.
Here’s the list (Parkinson does the first two; the Legislature would do the last four):
• The state will benefit from a reduced clawback of Medicaid funds to the federal government, saving $16 million.
• Booking some $15 million in savings from the Temporary Assistance to Needy Families welfare program. That’s possible, Parkinson said, because Kansans receiving unemployment benefits generally don’t qualify for the TANF program.
• Establishing a system of managed care organization privilege fees, essentially a tax to operate in Kansas, worth $4 million and requiring legislation.
• Not making one fiscal quarter of KPERS death and disability payments, worth $12 million, because the money isn’t needed for the fund to be actuarially sound. Legislators need to vote on that.
• Receiving $10 million in federal funds for passage of the seatbelt law.
• Canceling some $87 million in highway maintenance projects planned for letting this year. The action, which will require legislation, saves $28 million in FY ’10 and $59 million in FY ’11.
Much of Parkinson’s press conference dealt with blasting the Legislature for eroding the state’s tax base, costing the state some $9 billion in the last decade.
He sharpened his tone to say that big business and the rich have gotten most of those tax breaks, and the shortfalls in revenue are now affecting the middle class through lower spending on education, on social service programs and the like.
“We have impacted the integrity of programs that Kansans want and need through tax breaks,” Parkinson said.
He said TEA Party folks are rightly mad about taxes, but they are mad at the wrong people. He stopped just short of calling for class warfare, but said TEA Party people just don’t know where to direct their anger to do themselves the most good.
***
Oh, Parkinson also signed the FY ’10 rescission bill, with the state officials’ pay cut provision that strikes his own paycheck and that of legislators and judges.

February Revenue Far Below Expectations

The news just keeps getting worse when it comes to the state’s budget crisis. Last Friday we learned tax revenues for February were 27% lower than expected – about $71 million. This marks the third month in a row of lower than expected receipts. This news really throws the budget process underway at the Statehouse into chaos.
The current state budget – Fiscal Year 2010 that ends June 30th – is now $105 million short of what is needed to cover all budgeted expenses. There is no time between now and June 30th to increase taxes to cover the gap.
The Legislature and Governor have two choices: use some accounting tricks that either moves funding from one source or another in the 2010 budget or moves the shortfall into the 2011 fiscal year (such as moving federal stimulus money dedicated for 2011 to 2010 and creating a bigger hole for 2011) or make more cuts to spending. Complicating things even further is the fact 2011 is already projecting a $416 million revenue shortfall.
While some lawmakers are calling for more cuts to balance the current budget, others are asking for patience, hoping there is an improvement in March. They point to a higher number of Kansans filing their income tax refunds in February which could mean lower refunds in April and May – creating a bounce back of sorts.
Still - I am very concerned about the trend of our state tax revenues. We have already made cuts to the 2010 budget five times. And it appears our economy is not rebounding.

Hawk Bills Advance

HB2445, the Military Encroachment Bill passed out of Committee on Wednesday. I expect passage in the Senate. It stayed un-amended in the Senate.

HB2160 passed the House with over 90 votes and then had a hearing and a favorable response from the Senate Finance Committee. We had excellent testimony again from Pam Spaulding, Aaron Madison, and myself to point out the unacceptable practices of out-of-state banks during our Manhattan Tornado disaster. I expect the bill to come out of committee next week and have talked to the President of the Senate and the Minority Leader about the importance of this bill.

HB2698, the bill to allow the City of Ogden to upgrade it’s waste water treatment plant according to KDHE and EPA standards, was carried by me on Wednesday morning and then passed out of the House. My appreciation goes to Chair Schwartz for getting this bill heard and advanced on the calendar.

HB2716, a bill to help eligible state retirees maintain their KPERS calculations if there are state furloughs had a hearing on March 2. I wrote this bill to address the concern of County Commissioner Al Johnson regarding the potential furloughs for our District Court personnel. Hopefully, this bill will wind up in a conference committee report.

House Expands Incentive Jobs Program

The Kansas House voted to expand a business tax incentive program to encourage companies to bring or retain jobs in the state.
The existing tax incentive program known as PEAK allows businesses to keep 95 percent of the income taxes withheld from their employees' paychecks if they move jobs from another state to Kansas. Companies must create at least five new jobs paying the average wage in the county.
HB 2538 would require wages paid by the company meet the community’s median wage. It also allows the break to companies that buy Kansas firms and keep the jobs in the state.

While I know we must grow jobs and our state economy, I have serious doubts that giving away close to $95M over the next five years with the PEAK bill is wise at a time when we cannot even balance our budget yet. It is frustrating to me that legislators, knowing how big our budget shortfall is and the impact on education, the disabled, and our court and corrections systems, still float proposals that restrict the tax base and cost us money we don’t have. Just yesterday in Tax we discussed an interesting proposal to allow a bigger deduction for health insurance in small companies…..tax bite on that was $27M. I like the idea, but don’t see how we can afford these kinds of programs with a $400M-$500M revenue hole in 2011 budget!

Bill Closes Education Funding Loophole

Legislation that would close a loophole for catastrophic funding for special education has support from educators across the state. The Senate Education Committee passed out SB 359 to address the funding issue.
The issue came to light this session after a Legislative audit report found three Johnson County school districts found a legal way to make claims for millions in catastrophic aid – funding that otherwise would have been shared with all Kansas school district to cover special education costs. The money is meant to help schools serving students with extremely expensive needs.
SB 359 would increase the qualifications required for the catastrophic aid and eliminate provisions that allow double dipping.
Under the current law, the three Johnson County districts increased their claims for catastrophic aid payments, sometimes using a loophole that allowed them to be doubly reimbursed for costs. That helped push money spent on catastrophic aid claims to $12 million last year, up from $1.1 million in 2005.

Committee Endorses Amendment to State Constitution

A House committee has endorsed a proposed "Health Care Freedom Amendment" to the state constitution. The Health and Human Services Committee sent the measure to the House for debate on a 12-9 vote Tuesday.
House Concurrent Resolution 5032 would add a provision to the constitution prohibiting the state from requiring any individual or business to buy health insurance or to participate in a particular health care plan. Supporters said the constitutional amendment would put the state in a better position to challenge federal health reforms that Kansans oppose.
Critics expressed concern that the amendment could cause legal issues for the state if it wants to participate in federal health reform.
2/3 of both the House and Senate must approve the measure before it would be considered by Kansas voters in next November’s General Election. There is a similar resolution in the Senate Judiciary Committee. I have great concern about this amendment which may reach the full House next week.

Sales Tax Exemption Bill Advances

A proposal to eliminate certain sales tax exemptions cleared a committee this week. House Bill 2549 would require church to pay the 5.3 percent sales tax items they purchase as well as levy the tax on utilities and on state lottery tickets.
The bill would raise about $127 million. Most of the money would come from reinstating the state sales tax on Kansans’ water, electric and natural gas bills. Currently we only pay local taxes on our utilities. Collection of the state sales tax on utilities was stopped in 1979.
While the House Taxation Committee voted to send the bill to the full House on a voice vote, committee members did not recommend it for passage as is the normal procedure. Committee members who don’t support increasing taxes acknowledge that it was important for the Legislature to debate the issue. I expect 2549 to be debated on the House floor next week on Wednesday. There are some aspects of the exemption bill which I do support. I have gotten several emails on both sides. It is clear to me that we need to respond to the Legislative Post Audit and close many of the unfair loopholes that have narrowed our tax base and helped put us in this crippling shortfall. The difficulty is in determining which of the “exemptions” are fair and getting a more systemic approach to awarding them. I most strongly support a moratorium on any other exemptions or tax give-aways until we balance our budget and are sure the economy is stronger.

House Bill Addresses Unemployment Compensation Fund Crisis

The House passed a measure aimed at helping Kansas businesses handle recent increases in the rates for the state unemployment compensation fund.
Under a 2007 law, unemployment tax rates are cut automatically for businesses with no or low number of layoffs when the trust fund appears to have more than enough money to pay a year's worth of benefits. Some businesses paid no tax in 2009. The same law automatically increases tax rates when the fund balance dips. Companies with a high number of layoffs face rates as high as 7.4% when the fund is low.
Kansas Department of Labor reported in August because of the dramatic increase in unemployment payments being made, the fund would soon run out of money. 69,500 Kansas businesses received notices in mid-December that their 2010 unemployment tax rates were being increased to cover the shortfall. In some cases, it meant an increase of tens of thousands of unexpected taxes for businesses.
House Bill 2676 as passed by the House would cap the rates for most businesses (in rate groups 1 through 32) at the original 2010 tax rate for calendar years 2010 and 2011. Businesses that experience a higher rate of unemployment (in rate groups 33 through 51) would be capped at 5.4%. Companies also would have a 90-day grace period to pay what they owe before being charged a penalty or interest.
The bill now goes to the Senate for its consideration.


Grass bill takes root

A push by a group of Kansas students could lead to the state’s official grass. House Bill 2649 which would designate the Little Bluestem grass as the state’s official grass passed out of the House THIS week.
House members had a good discussion about the significance of recognizing something as a state icon. While the bill doesn’t get to the big issues facing the Legislature this session, it does help provide a great civics lesson and a common bond for all Kansans. Kansas would be the 18th state to designate a state grass.
Kansas has plenty of other state icons. Can you name the state mammal? How about the state soil? State amphibian? These and other state symbols are listed at the end of my newsletter.

BILLS ON THEIR WAY TO THE GOVERNOR

Legislature Passes Statewide Smoking Ban

The House took up the highly anticipated debate on a statewide smoking bill.
Senate Sub for House Bill 2221 would ban smoking in restaurants, bars, 80% of hotel rooms, daycares, taxis and limos. Smoking would still be permitted in tobacco shops, private clubs, designated areas of adult care buildings and the gambling floors of state-owned casinos.
Supporters say the bill is important to improving the health of Kansans and protecting them from secondhand smoke. They pointed out the bill sets the floor for a statewide smoking ban and allows cities and counties to adopt a local ordinance that is stronger if they choose to do so.
Those against agreeing with the Senate’s proposal argued such rules should be left for local governments. Nearly 40 cities and counties have passed their own smoking bans.
After more than two hours of very passionate and pointed debate, the House voted to agree with the Senate’s smoking ban proposal 68-54. HB 2221 now goes to the Governor for his consideration. Governor Mark Parkinson has said he would sign the bill into law.
HB 2221 leaves Manhattan’s ordinance intact. I have supported some kind of statewide smoking ban for the last year and pleased with the passage of 2221.

Bill to Ban Man-Made Marijuana and Ecstasy Passes Legislature

The Kansas Legislature has approved a measure to add chemicals used to create synthetic marijuana and ecstasy to the state’s list of banned substances.
Representative Rob Olson (R-Olathe) introduced HB 2411 this session after learning from Kansas law enforcement about two man-made chemicals named JWH-018 and JWH-073 found in a smokable herbal product known as K2. The bill also would ban HU-210. The chemicals are very similar to tetrahydrocannadbinol, or THC – the chemical in marijuana that gives users a “high”.
The House Committee on Corrections and Juvenile Justice added other substances to the bill called trifluomethylphenyl piperazine, or TFMPP and benzylpiperazine, or BZP. When these two synthetics are combined, it mimics the high of ecstasy.
There is so much that is unknown about these and other unregulated synthetic drugs. House Bill 2411 would add these chemicals to the state’s Schedule I and make possession, use, sale and possession with intent to sell them and products such as K2 containing them illegal in Kansas.
The House approved the measure 110-11 while the Senate voted 37-1 in favor of the bill. With the Senate’s approval Thursday, the bill is now headed to the Governor’s desk for his consideration.
I do think there might be a “medical marijuana” bill come before the body to be used in a very narrow way for people with terminal illnesses. Former Attorney General Bob Stephen supports this action. I doubt that there are votes to pass such a measure, but using drugs to prevent suffering is not a bad thing….figuring out the details so it would be regulated properly might be more difficult. Stay tuned on this one as we come to the end of the session.

Stay in Touch/Upcoming Events

Please join me and other area legislators for the next Eggs and Issues meeting sponsored by the Manhattan Chamber of Commerce. It is scheduled for Saturday, March 27th, at 7:30 a.m. at the Train Station.
I hope you find my newsletters helpful in keeping up with the work I am doing on your behalf in Topeka. As always, it is an honor to serve you. Please do not hesitate to contact me about the issues before the Kansas Legislature.
Sincerely,
Tom
Rep. Tom Hawk
67th House District
785/296-7655
Tom.Hawk@house.ks.gov

So what are some of our state icons?
State mammal – American bison
State Tree – Cottonwood tree
State Bird – Western Meadowlark
State Soil – Harney silt loam
State Amphibian – Barred Tiger salamander
State Reptile – Ornate Box Turtle
State Flower – Sunflower
State Song – “Home on the Range”