June 25, 2021

Legislative Bulletin

2021 Kansas legislative review

Faced with a possible COVID-related early shutdown, the Kansas Legislature got off to a brisk start and that pace continued throughout the entire session that was never really impacted by the pandemic. The ability to watch and provide testimony online during committee hearings and to observe live House and Senate action online proved invaluable. Some 769 House (454) and Senate (315) bills were introduced this session. By our count, a whopping 120 passed both houses, nine of which were vetoed and five of those vetoes were overridden by two-thirds majorities in both houses. In addition, several line-item vetoes were overridden. Kansas law provides that bills that are not acted upon in odd-numbered years, and which are not adversely reported, automatically carry over to the following even-numbered year session and remain at the point in the process where they were when the first session ended.

The following are brief summaries of bills of interest to the commercial and industrial building construction industry. Bills passed by the legislature and signed into law by the governor take effect on July 1, 2021, unless otherwise noted.

Extension of the COVID-19-related state of disaster emergency

As previously reported, the Kansas Legislature wasted no time passing Senate Bill 14, which extended the COVID-19 state of emergency declared by Governor Laura Kelly on March 12, 2020. SB 14 ratified and continued compromise emergency legislation (House Bill 2016) approved during the 2020 special session and subsequent extensions approved by the State Finance Council and extended the state of disaster emergency until March 31, 2021. This prohibited the governor from proclaiming a new COVID-19 state of emergency without approval by a least six legislative members of the nine-member State Finance Council and prohibited the issuance of any order that substantially burdens or inhibits the gathering or movement of individuals or operation of any religious, civic, business, or commercial activity, whether for-profit or not-for-profit. Importantly, the bill extended business immunity from liability for COVID-related claims by providing that, notwithstanding any other provision of law, a person, or an agent of such person, conducting business in this state shall be immune from liability in a civil action for a COVID-19 claim if such person was acting pursuant to and in substantial compliance with public health directives applicable to the activity giving rise to the cause of action when the cause of action accrued. The bill was introduced on Jan. 11, signed into law on Jan. 25 and took effect that same day upon its publication in the Kansas Register.

Related legislation, Senate Bill 283, was approved by the House (96-28) on March 30 and by the Senate (30-10) the following day. This bill amended the COVID-19 Response and Reopening for Business Liability Protection Act by extending the expiration date of the statute governing COVID-19 claim immunity for persons or agents of persons conducting business in the state by one year (until March 31, 2022). This bill was signed immediately upon adoption and became effective on April 1.

Governor extends supplemental federal unemployment compensation payments of $300 per week

On May 26, the last official day of the Kansas 2021 legislative session (sine die), both the House and Senate passed a resolution urging Governor Kelly to opt out of a new round of federal unemployment compensation payments of $300 per week that will be added to unemployment compensation payments made by the state. This followed the same appeal delivered to the governor and cosigned by nearly 150 Kansas Chamber of Commerce members, local chambers and other affiliated associations and organizations. In addition, U.S. Senators Jerry Moran and Roger Marshall and U.S. Representatives Ron Estes, Jake LaTurner and Tracey Mann of Kansas sent a joint letter to Kelly calling on her to help get Kansans back to work by halting the increased federal unemployment benefits. In part their letter stated, “The extension of the generous $300 per week in additional federal benefits until September, when coupled with the extended state benefits, provides a lucrative government incentive to stay home despite clear signs that the economy is recovering and life is trending toward normal … We must end the federal incentive to stay home so that we can truly reopen the economy, provide Kansans with meaningful and purposeful work, and get our country back to normal.” However, Kelly has chosen to accept these additional federal funds. According to the Kansas Department of Labor, unemployment decreased from a record high of 12.6% in April 2020 to 3.5% in April of this year. The bordering states of Missouri, Nebraska and Oklahoma have elected to opt out of the federal supplemental unemployment compensation payment extension.

Governor Kelly vetoes COVID-19 Small Business Relief Act

The conference committee report for House Substitute for Substitute for Senate Bill 273 was approved by both the House (68-42) and Senate (24-14) on April 7 and was vetoed by Kelly on May 21. No motion to reconsider was made when legislators returned for sine die on May 26, as some moderate Republicans joined Democrats to prevent supporters from achieving the two-thirds majorities needed to override the governor’s veto. SB 273 would have potentially provided hundreds of millions of dollars in compensation to small businesses that were hurt financially during the COVID-19 pandemic. The bill directed a portion of uncommitted federal COVID-19 relief funds coming to the state, counties and cities be used for settling claims due to government-ordered shutdowns or restrictions on normal business operations. The amount could have been substantial as the state would have been required to set aside 25% of its uncommitted federal COVID-19 relief money for this purpose. Cities and counties that put restrictions in place during the pandemic would have had to earmark 35% of their federal relief money for compensation. State and local governments are expected to bring in about $2 billion in federal relief money. In her veto message, Kelly said that the bill was well-intentioned, but that it violated federal rules for using the latest round of COVID-19 relief money approved by Congress.

Changes made to the Kansas Emergency Management Act

The conference committee report on Senate Bill 40 was approved by both the House (118-5) and Senate (31-8) on March 16, signed by Governor Kelly on March 24, and became effective the following day upon its publication in the Kansas Register. SB 40 creates and modifies law regarding the Kansas Emergency Management Act (KEMA) and procedures for the declaration and extension of a state of disaster emergency under the Act. Among other things, the bill ended all statewide mandates, including the statewide mask mandate, by March 31 and continued the governor’s Emergency Declaration through May for federal assistance reasons. Any party aggrieved by a governor’s executive order (EO) that has the effect of substantially burdening or inhibiting the gathering or movement of individuals or the operation of any religious, civic, business or commercial activity (whether for-profit or not-for-profit) may file a civil action within 30 days after the issuance of the EO in the district court of the county where the party resides or in Shawnee County District Court, and the court must conduct a hearing within 72 hours of receiving a petition. The court must grant the request for relief unless the court finds the EO is narrowly tailored to respond to the state of disaster emergency and uses the least restrictive means to do so.

Addressing fraud and modernizing the unemployment compensation system

The Kansas Legislature moved in a big way to address the massive unemployment fraud problems experienced in Kansas since the beginning of the COVID-19 pandemic. Kansas legislative auditors estimate that fraudulent claims accounted for at least $600 million worth of unemployment payments since the pandemic started and an antiquated computer system has produced prolonged delays in payments to legitimate claimants. Several secretaries of the state’s department of labor have come and gone as frustration boiled over during the past year. After much study and input the Kansas Legislature unanimously adopted the conference committee report for Senate Substitute for Substitute for House Bill 2196 on April 9. The bill was approved by the governor on April 26 and became effective upon its May 13 publication in the Kansas Register. Among many other things, the new law creates the Unemployment Compensation Modernization and Improvement Council; requires the Kansas Department of Labor (KDOL) to modernize its information technology (IT) infrastructure; makes temporary changes to the membership of the Employment Security Review Board; makes changes to Employment Security Rates tables; requires the Secretary of Labor to provide tax notifications and certain Employment Security Fund Data Reporting; provides for certain employer account protections; provides for transfers of federal coronavirus relief aid to the Employment Security Fund and the Legislature Employment Security Fund; prohibits the continuation of federal unemployment compensation programs using state funds; adjusts thresholds for maximum benefits and modifies the shared work program.

Local control over wages and fringes on construction projects

As previously reported, House Bill 2306 died in the House Commerce, Labor and Economic Development Committee after failing to meet the March 5 deadline for consideration of non-exempt bills in their house of origin. Current Kansas law provides that, unless otherwise required by state or federal law, no city, county or local government unit shall enact or administer any ordinance, resolution or law that requires an employer to: (1) provide employees any leave from work; (2) pay compensation for any leave from work; (3) pay compensation or wages at any rate higher than the minimum wage; (4) offer an employee benefit; or (5) alter or adjust any employee scheduling. HB 2584 would have stricken the prohibition against the adoption of ordinances, resolutions or laws requiring payment of compensation or wages at a rate higher than the minimum wage. Current law does not apply to state economic development incentive programs or to city, county, local government or local economic development agency business attraction, retention or recruitment programs.

Criminal penalties for filing a lien with bad intent

Although it received considerable attention during the session, Senate Bill 58 ultimately died in conference committee as the session came to a close. SB 58 passed the Senate (39-0) on Feb. 9 and the House passed (122-0) an amended version of the bill on March 25. The Senate did not concur with the House amendments, however, and that set in motion the appointment of several conference committees and a number of meetings over the following weeks but to no avail. This bill would have provided for a severity level eight, nonperson felony for presenting unlawful liens or claims against personal or real property. As introduced, the bill would also have amended current law by requiring a court to enter an order prohibiting an individual from filing subsequent duplicate liens or other claims if the court sets aside a lien or other claim. The order would have been required to include an instruction that the filer seek approval from the court before filing subsequent liens or other claims and a warning that violation of the order could lead to civil and criminal penalties.

Changes to the University Engineering Initiative Act are approved

House Bill 2101 was approved by the House (112-12) on Feb. 25, approved by the Senate (37-2) on March 31 and signed by the governor on April 16. As amended, HB 2101 extends the current transfer of the first $10.5 million credited to the Expanded Lottery Act Revenues Fund (ELARF) to the Kan-grow engineering funds at the University of Kansas, Kansas State University and Wichita State University, with each engineering fund receiving $3.5 million in each fiscal year through 2032. The bill amends the goal of the University Engineering Initiative Act to continue to generate the same number of engineering graduates (1,365) per year as is currently set for 2021. The bill adds reporting requirements from the educational institutions, the Kansas Board of Regents, and the Secretary of Commerce to the House Committee on Appropriations and the Senate Committee on Ways and Means. The reports shall include how many engineering graduates remain in the state over the previous three years; what efforts are taken to increase retention of graduates and opportunities for graduates in the state; and information regarding the number of engineering graduates from each state educational institution that were initially enrolled as in-state or out-of-state students.

“Revenue neutral” property tax lid bill is approved

After initial approval by the Senate (34-1) the House amended and passed Senate Bill 13 (120-3) on March 4. The Senate concurred (30-5) with House amendments on March 11 and the governor signed the bill on March 26. As amended, SB 13 repeals the property tax lid law applicable to cities and counties and certain budget requirements applicable to other municipalities on Jan. 1, 2021, establishes notice and public hearing requirements for certain taxing subdivisions seeking to collect property taxes in excess of the subdivision’s “revenue-neutral” rate, prohibits valuation increases resulting solely from normal maintenance of existing structures, and expands the allowed acceptance of partial payments or payment plans for property taxes. This measure took effect upon its April 1 publication in the Kansas Register.

Fast-track licensing bill approved

The conference committee report for Substitute for House Bill 2066 was adopted by the Senate (35-4) and House (105-17) on April 8 and signed by the governor on April 21. This bill shortens the period in which regulatory bodies are required to issue occupational credentials to military service members or military spouses seeking to establish residency in Kansas (from within 60 days of submission of completed application to within 15 days) and provides for expedited credentialing (within 45 days) of non-military prospective residents as well. The bill applies to all licensing bodies except those relevant to the practice of law or the regulation of attorneys. In short, the bill provides that people licensed out of state and/or military spouses who move to Kansas are put on a fast track to obtain a Kansas license unless the requirements are substantially different. The bill would apply to any individual applicant for licensure, reciprocity, or reinstatement who has provided proof that the applicant has established or intends to establish residency. The application would be considered complete if the licensing body has received all information and fees even if the body has not received the criminal background report from the Kansas Bureau of Investigation. The bill would allow agencies to maintain their current processes if reciprocity standards contained within existing law are more favorable. However, if current processes are less favorable to an applicant or there are no current processes, the agency would be required to issue a license if the applicant has a valid license in another state with substantially similar licensing requirements, or if the applicant has met work or experience requirements if no similar license is issued by the other state licensure requirements, if doing so would not jeopardize the safety of the public.

Economic development measures

STAR Bonds bill approved - House Substitute for Senate Bill 124 was passed by the House (101-23) on March 30 and the Senate concurred (30-9) with amendments the following day. Governor Kelly approved the bill on April 15. This bill supplements, amends, and reauthorizes the Sales Tax and Revenue (STAR) Bonds program and extends its sunset date to July 1, 2026. Among other things, the bill provides that no state or local government official shall benefit financially, either directly or indirectly, from any STAR Bond project. The bill adjusts the eligibility requirements for a project under the program by increasing the minimum required capital investment and projected gross annual sales amounts from $50 million each to $75 million each, or $40 million each if the project is in a metropolitan area with a population between 50,000 and 75,000 and the project is deemed to be of high value by the Secretary of Commerce. It adds “major business facility” to the list of terms defined as “eligible areas” for the program and adds the term “rural redevelopment project” to the list of eligible costs for which a STAR Bond project could expend funds. It also modifies current law by changing certain project financing, investment and sales provisions, adding a visitor tracking plan requirement and additional feasibility study requirements with oversight.

HPIP, KIT and KIR decoupling - Senate Bill 65 was passed as amended by the House (121-1) on March 25 and the Senate concurred with House amendments (38-1) on March 29 paving the way for the governor’s approval on April 15. Under current law, taxpayers that claim the High-Performance Incentive Program (HPIP) tax credit are required to participate in either the Kansas Industrial Training (KIT) or Kansas Industrial Retraining (KIR) programs. SB 65 removes this participation requirement when the law takes effect on July 1. The bill also would eliminate the HPIP certification and recertification by a business to dedicate 2% of payroll for training purposes. For projects placed into service on and after Jan. 1, 2021, a taxpayer may transfer up to 50% of the tax credit allowed to one or more transferees, but the total of all transfers shall not exceed 50% of the taxpayer's tax credit. The taxpayer shall make the transfer or transfers within a single tax year. In the event a transferee’s tax liability is less than the amount transferred, the transferee may carry forward the credits for up to 16 years. In the event the tax credit earned by the taxpayer and transferred to a transferee is later disallowed in whole or in part by the secretary of revenue, the taxpayer that originally earned the tax credit shall be liable for repayment to the state.

Angel Investor Tax Credits - Senate Bill 66 was passed as amended by the House (109-12) on March 25 and the Senate concurred with House amendments (29-9) on March 29. Governor Kelly signed the bill on April 15. When this new law takes effect on July 1 it will, among other things, extend the sunset for the Angel Investor Tax Credit from tax year 2021 to tax year 2026, increase the amounts of tax credits allowed, remove certain program restrictions, remove or modify certain restrictions on investments and investors, and modify the claw back provision in the act.

Kansas Promise Scholarship Act adopted

The conference committee report on House Bill 2064 was approved by both the House (118-4) and Senate (35-0) on April 9 and the bill was signed into law on April 23. This bill creates the Kansas Promise Scholarship Act to be administered by the Kansas Board of Regents which must adopt applicable rules and regulations on or before March 1, 2022. It further requires the Board to identify eligible programs in a variety of fields including information technology, advanced manufacturing and building trades. An eligible student would have to meet a number of criteria set out in the bill, maintain satisfactory academic progress and satisfy the requirements of the scholarship agreement. The agreement requires scholarship recipients to be full-time students; complete the scholarship-eligible program; and, within six months after graduation, commence work in the state for at least two years or enroll full-time in a Kansas postsecondary educational institution.

P3 construction for certain corrections projects is approved

House Bill 2401 was passed as amended (37-3) on April 8 and the House concurred with Senate amendments (120-2) later in the day. The bill was signed by the governor on April 22.

HB 2401 allows the Department of Corrections to enter into agreements with private entities for public-private projects to construct or renovate buildings at correctional institutions for education programs or spiritual services. The bill allows the agency to request approval for the issuance of bonds for a public-private project from the Department of Administration and the Kansas Development Finance Authority. Prior to commencing any public-private project, the agency will be required to advise and consult with the Joint Committee on State Building Construction. The bill allows the Department to establish a nonprofit corporation for fundraising and to use such funds for public-private projects without bidding provided state funds are no more than 25% of the cost of the projects The Senate Ways and Means Committee amended the bill to add a provision requiring the Secretary of Corrections to submit an annual report to certain legislative committees regarding the status of active public-private partnership projects and associated renovation and construction projects, as well as the outcomes of programs supported through such partnerships.

Asbestos remediation fund bill is approved

House Bill 2023 was passed as amended by the Senate (39-1) on March 30 and the House concurred with Senate amendments on April 8. Governor Kelly approved the bill on April 21. This bill allows penalties and fees collected for the Asbestos Program to continue to be remitted to the Asbestos Remediation Fund rather than the State General Fund. Last year’s appropriation bill, Senate Bill 66, established the Asbestos Remediation Fund and authorized all fees related to asbestos remediation to be credited to the Fund for FY 2021 only. HB 2203 allows the Asbestos Remediation Fund to receive these monies annually beginning in FY 2022 (i.e., on July 1, 2021).

Storage Tank Act adopted

House Bill 27 as amended was approved by the Senate (39-0) on Feb. 1, approved by the House (123-0) on Feb. 24, and signed into law by the governor on March 3. Effective on July 1, SB 27 makes several amendments to provisions of the Kansas Storage Tank Act, which is administered by the Kansas Department of Health and Environment (KDHE). The bill increases the maximum per facility liability of the Underground Petroleum Storage Tank Release Trust Fund (Underground Fund) and the Aboveground Petroleum Storage Tank Release Trust Fund (Aboveground Fund) from $1.0 million to $2.0 million and extends the sunset dates of both funds from July 1, 2024, to July 1, 2034. It increases the maximum amount KDHE may reimburse facilities for approved underground storage tank replacement costs from $50,000 to $100,000 per facility. Reimbursements will be for the costs of secondary containment systems. The provisions regarding reimbursements for underground storage tank replacements are extended from June 30, 2020, to June 30, 2030. Under current law, underground storage tank fees are deposited into the State General Fund. SB 27 directs underground storage tank fees to the Storage Tank Fee Fund. The bill also extends the UST Redevelopment Fund and the UST Redevelopment Fund Compensation Advisory Board from July 1, 2024, to July 1, 2032.

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