JUDGE BULLOCK’S RULING AND SCHOOL FINANCE
Currently the state of Kansas is being sued by a group of schools that feel the school finance formula treats them unfairly. In December of 2003, in response to the lawsuit, Judge Terry Bullock, a Shawnee County District Court Judge, issued a preliminary decision. He said the school formula was not fair and the Legislature had until July to correct the formula or he would address the inadequacies that he found.
That decision was appealed to the Supreme Court.  Some legislators have criticized the judge for overstepping his bounds.  However, the judge originally dismissed this case and it was revived by the  Kansas Supreme Court. Immediately following the conclusion of the Veto Session, on May 11, Judge Terry Bullock, issued the long awaited order and remedy in the Montoy v. The State of Kansas. Bullock’s decision found that the school finance law was unconstitutional and asked that county treasurers, the State Treasurer, and members of local school boards withhold money that would normally be sent to school districts, essentially closing down schools this summer and fall. The Attorney General has asked the Supreme Court to stay the order until a final decision from the higher court has been handed down.
A decision on the stay should come some time before the July 1 deadline.
A bipartisan group of House members worked throughout the session to come up with an education bill that would address both the concerns of the court and the needs of local schools.  Their efforts resulted in the passage of a $155 million education package earlier in the session.  Unfortunately, the Senate rejected that proposal and during the closing days of the 2004 session leadership in the Senate demonstrated an unwillingness to truly compromise with those who desired a meaningful education bill.
During the final days, several proposals were considered that either failed to raise adequate money for schools or lacked a sound funding mechanism to do so.  The education impasse reached its conclusion Saturday evening, the 89 day of the session.  The final proposal failed to provide enough dollars for schools, damaged the state highway plan and would create a deficit in the next fiscal year.  According to Transportation Secretary Deb Miller, the funding proposal would force her to “re-evaluate future projects because funding for the Comprehensive Transportation Program will no longer be guaranteed.
In addition, the bond rating agencies already have Kansas on a watch list which makes it imperative that Kansas maintain a sound fiscal management It was frustrating that a compromise could not be reached, however, it was important to many that we maintain a sound state budget to avoid the possibility of midyear budget cuts which happened two years ago.  It was also important that any education legislation contribute further to the very inequities currently being challenged in the courts.  In addition, the bond rating agencies already have Kansas on a watch list which makes it imperative that Kansas maintain a sound fiscal management.
COMPROMISE REACHED ON TAX BILLS
A conference committee came to a compromise on the most important tax bills of the session during the last week.  This bill included a variety of different issues consolidated into one bill.
Streamlined Sales Tax
- Origin-based sales tax means that retailers must charge sales tax based on where an item is delivered, rather than where it is sold.  Last year many retailers were concerned that they would not be able to become compliant in the time allowed by the new law.  This bill now gives them until next year. Retailers must become compliant with the origin-based sales tax rules that were passed last session, by January 1, 2005.
- The bill also authorizes the Secretary of Revenue to waive penalties and fees for errors in compliance with new sales tax law when a reasonable effort has been made to be compliant. Another part decelerates from monthly to quarterly the sales tax filing requirements for retailers with annual liability of $1,600 to $3,200.  This will decrease the burden of filing for several thousand Kansas retailers.
Sales Tax Exemptions
- A section of the bill extends sales tax exemptions to several groups, including the Heartstring Community Foundation for providing training, employment and activities for adults with developmental disabilities. Another exemption was extended for the Kansas Coalition Against Sexual and Domestic Violence, groups that provide meals to elderly and disabled people or homeless individuals. Exemptions were extended for the Cystic Fibrosis Foundation for the development of cures and treatments of cystic fibrosis and for improving the quality of life for those with the disease. The exemption for those who dispense and fit people for hearing aids and the Spina Bifida Association were also extended.
Franchise Tax
The bill makes changes to the franchise tax for 2004 and thereafter.  The rate of tax is reduced from 0.2 percent of shareholder equity or net worth to 0.125 percent.  The maximum liability cap was increased from $5,000 to $20,000.  The administration of the franchise tax is also transferred from the Secretary of State to the Department of Revenue.  Businesses will continue to pay franchise fees to the Secretary of State.
Property Tax
- The bill expands the Homestead Property Tax Refund Program for 2004 and increases the upper income level from $25,000 to $26,300. It clarifies that all wireless communication towers, broadcast towers, antenna and relay sites as personal property for tax reasons. This bill has no fiscal impact on the State General Fund and is expected to be signed by Governor Sebelius.
INSURANCE BILLS PASS BOTH HOUSES
The House of Representatives approved four insurance bills this week.  Several components will help Kansans gain access to much needed affordable health care. Currently, affordable health care is a topic that need the utmost consideration, by both government and business.  As health care cost continue to rise, many Kansans are left without insurance coverage.  Several provisions in these bills will not only lower the cost of providing insurance for insurance companies, but grant access to people that have not had access to affordable health care.
Health Savings Accounts
Senate bill 348 works with current federal law to create Health Savings Accounts (HSA) for Kansans. The new HSA allows Kansans to deposit 100% of their health insurance deductible into the account and carry over any balance to future years.  This money is contributed before state and federal taxes are applied.  Employers may contribute to the accounts for employees. This money can be used for co-pays, dental expenses not covered by insurance, vision care and over the counter medicine.  Kansans need to seek this service through their current health care service to see if this is offered.
- HSA is substantially different from current medical savings accounts.  The medical savings account required a minimum of $2500 entered into the account and the balance had to be used within the year and would be lost if not used during the current calendar year. This money from the HSA can be used upon retirement for long term health care and it is hoped to reduce the burden on Medicaid or supplement the services Medicare doesn’t provide. Employers may buy lower cost  catastrophic health coverage for employees.  HSAs may then be used to fill in the gap of the high deductable.
HB 2545 also creates a procedure by which an insurance company can transfer coverage to another company.  If coverage is transferred, the company must inform the policy holder of the transfer.  The policyholder has the right to refuse the transfer and any payment of premium to the new company within 24 months will indicate acceptance of the transfer.  If no denial or acceptance has been made by the policyholder within 24 month, acceptance will be assumed.
House bill 2545 also updates mortality tables that are used to determine the minimum reserve that must be established for credit life insurance.  These tables had not been updated since 1958. House bill 2597 takes away the requirement that insurance agents carry errors and omissions insurance.  It also provides procedure for insurance contract in other languages besides English.
Business Health Partnership
House bill 2597 allows the Health Policy Committee created by the Business Health Partnership Act to approve health plans that employers who have not provided insurance to their employees in the past two years can offer to their employees. The Health Policy Committee will be responsible for arranging affordable health care for eligible employees. This program will assist small businesses that may not have been able to provide health care to their employees in the past. House bill 2563 raises the threshold of damage that must be met in an automobile accident before that accident must be reported to an authorized police authority.  The current amount is $500 and this bill will increase that amount to $1,000.  This bill will decrease the number of accidents that law enforcement will be required to investigate, which will increase savings and efficiencies within police departments.
Furthermore, accident amounts had not been changed since 1984. The bill also allows electronic submission of accident reports from law enforcement to the Kansas Department of Transportation. The bill also includes a provision requiring companies that offer motor vehicle liability insurance to provide verification of coverage on-line or electronically. House bill 2549 extends the sunset date included in a law requiring parity in coverage of health and mental health benefits in all group health policies, except for small groups.  This change is required for Kansas to remain compliant with federal legislation.  Additionally, the law allows the Secretary of SRS to authorize services for recipients of the Healthwave program, which provides low cost insurance to children, that may not be included in their group plan.  These services include prescription drugs and transportation services.  The bill also bars insurance companies from using a member’s social security number as a plan identification number.
CHILDREN’S ADVOCACY CENTERS ESTABLISHED
The legislature has established children’s advocacy centers.  Currently, when a child has been physically or sexually abused, he/she faces the extreme trauma of being interviewed by a number of parties on several occasions–SRS, law enforcement, therapeutic intervention and maybe others.  This bill creates the situation in which the abused child is interviewed only once.  An interdisciplinary team meets to determine what questions/issues need to be answered (law enforcement may need different kinds of info than SRS).  Then one person who has been trained in interviewing children conducts the interview seeing that all the issues are covered.
Johnson County and a few other places already have such centers where the benefits have been proven.  This legislation will truly make a difference for the most vulnerable Kansas children.
GAMING LEGISLATION KILLED IN SENATE
The Senate defeated the Governor’s Expanded Gaming Opportunity Act.  An amendment was added to the bill allowing more than 100 bowling centers and other recreational businesses across the state to receive video gaming terminals. The Expanded Gaming Opportunity act calls for a board that will review proposals for state-owned casinos.  State-owned casinos, though owned by the state, would be managed by outside parties, such as developers and tribal groups.
Governor Sebelius said that she is going to continue negotiations with Senators and look at what the House, if the Senate did pass something, might do.  She said, “It’s never over ’til it’s over.”  Sebelius said discussions with state residents over the past couple of weeks have stiffened her conviction that Kansans want expanded gambling in the state.  She believes that Kansans want some “destination possibilities” for their communities and that casinos as part of tourism destinations will be good for the Kansas and local economies.
SENATE PASSES UNIFORM LIQUOR LAW; NO SUNDAY SALES
Last week the Senate passed that made the Kansas Liquor Control Act apply uniformly to all jurisdictions.  The bill would prohibit Sunday sales of beer and liquor. Fourteen cities and one county have opted themselves out of the state’s Liquor Control Act and are currently allowing the sale of liquor on Sundays.  This follows a March 2003 ruling in Wyandotte County that said if a law was not uniformly applied to the whole state, communities are allowed to apply home rule power over the issue. If the House passes the Senate version of the Liquor Control act, cities and counties currently allowing Sunday Sales will have to cease sales.
STRICT CRIME LAWS PASS
Two bills were passed that amend current Kansas crime laws in order to clarify current law, or provide more punishment for crime. House bill 2271 amends current criminal law to:
- increases the total property value of stolen property for a crime to be considered a felony from $500 to $1000.  This amount had not been updated for ten years and was updated at the request of the Attorney General.
- The bill also increases the punishment for theft of $25,000 to $100,000 of property or services.
- Another provision in the bill increases the punishment of thefts over $100,000.
- A final provision doubles the punishment for repeat rapists if a conviction is the second or subsequent rape conviction.
House bill 2777, also passed this week, clarifying penalties for methamphetamine crimes.  Those convicted of manufacture, distribution, or sale of methamphetamine will be punished at the level 1 felony, the highest penalty for a drug crime.  The bill also increases the fines, penalties, and forfeitures that go to the Crime Victims Compensation Fund.  This fund provides financial assistance to the victims of crime.
GOVERNOR SIGNS LIFE BILL ALLOWING LIFE WITHOUT PAROLE PRISON SENTENCE
Governor Sebelius signed a bill that would make a life sentence with no possibility of parole an option in capital cases.  Currently, state law provides for a hard 50 sentence where someone would still have the option of parole in 50 years.  The life sentence with no possibility of parole would replace the hard fifty.
Currently, studies show that juries may be more likely to recommend death sentences because of fears that a person found guilty of a capital case may be released from prison.
Another argument for this law is that it would decrease the expense associated with capital cases.  Costs in death penalty cases are traditionally higher than cases that do not involve capital punishment.  In these cases, the state generally picks up about 85% of the costs, at an average cost of $1.2 million per death penalty case.  Some prosecutors argue, however, that plea bargains induced by the threat of capital punishment reduce trial costs.
VETERANS LOTTERY RENEWED
A scratch-off lottery benefiting veterans was renewed with House bill 2899.  This program allows the Kansas Lottery to manage a scratch off ticket game where 50% of proceeds for to providing scholarships to member of the National Guard and their families.  The other 50% of profits will go to benefit the Kansas Soldiers’ Home, the Kansas Veterans’ Home, and the state veterans’ cemetery system. This lottery program began last year and was scheduled to end this November.  The new law will allow tickets to be sold from May to November every year.
ECONOMIC GROWTH ACT SIGNED BY GOVERNOR
Governor Sebelius signed the Kansas Economic Growth Act which provides several economic development initiatives for the state. The  Kansas Bioscience Authority Act this week aims at creating 40,000 new jobs in the state by 2015 through the growth of a bioscience industry in Kansas.  While producing new medical, agricultural, pharmaceutical, and other products, bioscience investment also creates growth and jobs for biologists, chemists, physicists, regents universities, and business leaders.
This law will facilitate public and private investment in companies who start bioscience enterprises in the state.  Bioscience is an emerging industry across the nation and proponents hope that this bill will help put Kansas on the forefront of this industry.
The law provides for Rural Business Development Tax Credits, which are tax credits to be awarded to individuals and businesses that provide money to establish regional business development funds.  This bill would allow $7 million in tax credits across the state over three years.  These funds would provide capital for entrepreneurial efforts in rural communities.
It also sets up the Kansas Center for Entrepreneurship, which is a resource center ensuring collaboration and efficient use of resources with existing economic development agencies across the state.  This center will also manage the Kansas Community Entrepreneurship Fund, which will provide funds to rural and low-income communities for entrepreneurship.
The Angel Investment Tax Credit  was also passed, creating Angel Networks that provide seed and start-up capital for entrepreneurial ventures.  Senate Bill 520, also passed, is the Kansas Downtown Redevelopment Act, which promotes, stimulates, and develops downtown areas in low income and rural communities.
Changes were made to the IMPACT program, which is funded through state withholding taxes.  It gives the Secretary of Commerce the ability to make direct investments in educational and workforce development institutions.  It will redirect existing dollars that are currently used to pay the  administrative costs of schools into a workforce training trust fund.  These funds will then be reinvested in our schools for the purpose of infrastructure, human capital, and training expertise programs.

Paid for by Tom Holland for Kansas Senate
Kris Marsh, Treasurer