2020 Kansas Legislative Updates
The legislative session is in a fluid state as they wind up their work for the week. Next week is the last full week of regular committee work, so committees are working hard to get any bills worked and ready for their respective full body to consider before March 25. However, with the discussion and implementation of social isolation due to the coronavirus, COVID-19, legislative leaders and the governor are considering options to ensure that a budget gets passed and approved should the legislature need to adjourn early.
Both the Senate Ways and Means Committee and the House Appropriations Committee passed their budget out for full floor action. As of this report, the full House appears to be planning to hear their budget on the House floor this afternoon. It appears the Senate will hear their budget early next week. The budget is the one piece of business that must be accomplished every legislative session; therefore, both chambers of the legislature would like to be prepared to pass a basic budget in a timely manner.
The legislative standoff regarding Medicaid Expansion and the Constitutional Amendment dealing with abortion are still at the forefront of the legislative session. State government's essential function, as it deals with the economic and health effects of the coronavirus pandemic, has added a new layer of intrigue to the discussion of all bills due to the uncertainty of when or how the session will wrap up.
Insurance policy and legislation were quiet this week. Looking ahead to next week, however, the House Insurance Committee will hear SB402 on Mon., March 16. As you will recall, this is the Kansas Insurance Department bill that updates producer licensing statutes pertaining to appointment, fees, licensing, renewal dates, continuing education, suspension, revocation, and denial of licensure and reinstatement. After months of negotiations with the Insurance Department, KAIA testified as neutral on the bill in the Senate and will do the same in the House committee.
We will see how the legislature responds to COVID-19, but it is becoming more apparent that opportunities to pass policy beyond the budget are in question before they break.
The legislature was on break the beginning of the week after last week's rush to meet turn around deadlines. The legislature worked two days this week. Both the House and Senate continued to work through the tedious details of the budget. Given that passage of the budget is the ONLY item that the legislature MUST do, its movement to completion opens the door for adjournment. Although the budget is moving, the full Senate Ways and Means Committee and the full House Appropriations committee have several subcommittee budgets to analyze over the next few weeks. Each committee will then consider the passage of a budget to their respective full chambers. As the media has reported, yesterday Senate Republicans had a contentious caucus meeting involving movement of bills that could be amended to bring Medicaid Expansion to the Senate floor. Calls for debate on Medicaid expansion and a Constitutional amendment to allow the legislature to regulate abortion loom over the building.
Notes and Quotes
As reported in the Topeka Capital-Journal, there was quite the dust-up in the Senate Republican caucus meeting on Thursday. Some members, including Senate President Susan Wagle (R-Wichita), expressed frustration with Senate Majority Leader Jim Denning (R-Overland Park) for his vocal support of Medicaid expansion. Denning joined Governor Laura Kelly in Wichita to push for Medicaid expansion over the legislative break. “For us, all of a sudden you changed direction,” Wagle, who is running for U.S. Senate, said. “You stood with the governor, and you carried the governor’s water on a bill she wanted. And now, we’re being put in a very bad situation in Sedgwick County.” Ethan Patterson, the chief of staff for Denning, said: "a small faction" of six or seven Senate Republicans was trying to block the legislative process. "If the caucus does decide Jim Denning is not the leader for them anymore, we know we’re on the right side of this issue — not only for our district but for the state — on what people want and what the masses want,” Patterson said. “So, we’re going to sleep easy — easy — tonight and moving forward.” The political drama is undoubtedly heating up here in Topeka.
Monday was the final day for nonexempt committees to meet before Turnaround day. So committees spent the day sending many bills to their respective chambers in advance of the deadline. The House churned through bills, mostly noncontroversial, on the floor all day on Tues. , Feb. 25 and Wed., Feb. 26, wrapping up their work late Wednesday afternoon. The Senate, meanwhile, worked through Thursday and gaveled out shortly after noon on Turnaround day. The legislature takes a brief break and returns to the second half action on Wed., Mar. 4. While the 2020 headline issues—Medicaid expansion, Constitutional Amendment on Abortion, taxes—remain, the legislature did make some progress on noteworthy legislation this week.
The Senate sent to the House a gaming bill that would allow for sports wagering in Kansas. The bill backed by the four state-owned casinos would allow for betting on professional and college sports and horse racing. Unlike other versions floating around the statehouse, this bill would restrict the placement of bets to the casinos and over the internet. The bill does not permit other locations to participate, such as horse and dog racetracks and stores where you play the Kansas Lottery. The bill levies a 10% tax on internet bets and a 7.5% tax on bets made in-person at one of the casinos. The state would collect about $10 million in new revenue in the first year, according to estimates.
Also, this week the Senate passed out a much-discussed property tax bill. SB294, effective in 2021, would eliminate the so-called “property tax lid” and establish new notice and public hearing requirements for specific taxing subdivisions before property tax increases above a revenue-neutral rate. The bill would not apply to school districts or any taxing subdivisions receiving less than $5,000 annually in property taxes. So, if enacted, the current tax lid, which limits the local municipalities’ ability to increase property tax rates, would be replaced by taxpayer notice and municipal body vote requirements. The bill would require governing bodies to notify county clerks of their intent to exceed revenue-neutral rates. County clerks subsequently would be required to notify each taxpayer with property in the taxing subdivisions of public hearings regarding the intent to increase rates. Following the hearings, the bill requires a majority vote of the governing body to increase rates above the revenue-neutral rate. It passed the Senate on a 39-0 vote.
Finally, the House put a stake in the heart of the Governor’s plan to refinance the state employee pension system. Kelly’s plan to refinance the state’s retirement system would initially raise a few hundred million dollars but would result in a roughly $4.4 billion hit to the fund’s long-term liability. Met with opposition by Republican leaders and other stakeholders, the House gutted the plan this week but retained the portion of the measure that makes a $268 million payment to the fund for previous shortfalls. What’s the practical effect? The Governor’s budget recommendation, which relied upon the pension re-amortization, took a hit. That likely means proposed spending in the Governor’s budget will bite into reserves more than initially planned.
The Senate on Thurs., Feb. 27, sent to the House the Kansas Insurance Department’s bill dealing with producer licensure statutes. SB402 passed on a 32-6-1 vote and now heads to House Insurance Committee for consideration. As you will recall, the bill updates producer licensing statutes pertaining to appointments, fees, licensing, renewal dates, continuing education, suspension, revocation and denial of licensure and reinstatement. After months of negotiations with the insurance department, KAIA testified as neutral on the bill.
Among other things, SB402 would require a resident agent and business entity to submit a renewal application to the Insurance Commissioner and pay a biennial renewal application fee of $4. The bill would change the definition of the biennial due date to the last day of the birth month of an agent and the last day of the month of the initial licensure for a business. Further, the bill would increase the number of continuing education credit hours required for biennial license renewal from 12 to 24 for agents qualified for any combination of the following lines of authority: life, health, property, casualty, accident, and personal. Of the education credits, the bill would increase the hours of insurance ethics from one to three hours and would require that no more than six hours would be in insurance management. SB402 would remove the automatic appointment of affiliated agents for companies. If adopted, companies can appoint individual agents but not agencies.
For an explanation of SB402, CLICK THIS LINK.
In other news, SB323 appears dead for the session. If you recall, the bill will amend current law related to altering the terms of an insurance policy not considered a denial of renewal of the policy if the insured is provided with proper notice. KAIA testified in opposition to the bill brought forward by State Farm. SB323 provides, instead of sending a notice of non-renewal when a policy is changed, a company may send a copy of the renewal policy or make it available electronically, in accord with the notice requirements of the statutes. There is no requirement the company identifies what changes they are making. Not only were there concerns from other carriers about the notice standards outlined in the bill, but the Insurance Department also expressed concern that bill could lead to insurers reducing or eliminating coverage without the consent of the policyholder. Due to expressed concerns, State Farm decided to pull the bill from consideration.
As we plod to the Turnaround deadline, the House and Senate remained relatively quiet. The two chambers moved a handful of noncontroversial bills across the rotunda as the controversy surrounding Medicaid expansion and the constitutional amendment on abortion continued to choke movement of significant pieces of legislation. Meanwhile, committees worked furiously to move bills out of committee ahead of Mon., Feb. 24, their last day to meet before Turnaround.
The logjam created by the politics of the abortion amendment and Medicaid expansion continued this week. The Medicaid expansion bill stalled in the Senate committee. The committee made a handful of amendments, which expansion proponents contend may kill the effort, then failed to advance the new version of SB252. An amendment to impose a “participation” requirement on the newly covered beneficiaries. Different than a work requirement, this amendment would require a beneficiary in the expanded population to work, volunteer, or go to school.
Additionally, there was an amendment that allowed providers to invoke a conscientious objection to performing abortions. Finally, there was an amendment that would delay enactment of expansion until after the Supreme Court of the United States rules on the pending case challenging the Affordable Care Act and until after the people of Kansas vote to pass a constitutional amendment. After some fiery debate, the bill did not move out of the committee on two attempts. It remains alive in committee where we expect they will take it up on Mon., Feb 24.
All House and Senate sub-budget committees met through this week and continued to pass their recommendations for government agency budgets to the full committees for their consideration. Seemingly, most committees are only making minor changes and not additional money above what the Governor included in her recommended budget. Many of the sub-committees are suggesting that significant changes be delayed until omnibus budget discussions begin in late April.
Again, the committees’ final day to meet will be Mon., Feb. 24. The House and Senate will be on the floor all day on at least Tues., Feb. 25 and Wed., Feb. 26, in advance of Turnaround day on Thurs., Feb. 27. The legislature will take a long weekend and return to second half action on March 4.
The Senate FI&I Committee heard two bills this week of interest to the Kansas Association of Insurance Agents (KAIA.)
First, SB323 would amend current law related to altering the terms of an insurance policy not considered a denial of renewal of the policy if the insured is provided proper notice. KAIA testified in opposition to the bill brought forward by State Farm. SB 323 provides, instead of sending a notice of non-renewal when a policy is changed, a company may send a copy of the renewal policy or make it available electronically, in accord with the notice requirements of the statutes. There is no requirement the company identifies what changes they are making.
Further, assuming a company does send the altered policies to the agent, if SB 323 is enacted, it will create an enormous burden and enormous errors and omissions (E&O) exposure for agents. An agent would have to determine changes in policy without the benefit of input from the company that made the changes. Comparing policies to determine coverage differences can be very difficult and time-consuming. If an uncovered loss occurs because an agent failed to identify a change in coverage, the agent may be subject to an E&O claim.
The original draft of this bill required the companies to identify and describe changes in renewal policies, which KAIA testified that we would support that version. State Farm, in their testimony, offered an amendment that would require companies to do just that. If the committee amends the bill to include that requirement, KAIA will change its position from opposition to support. American Family Insurance and The American Property Casualty Insurance Association testified in support of the measure. The Kansas Insurance Department (KID) was neutral but expressed concern that the provisions would erode renewal protections in current law. The committee plans to work the bill on Mon., Feb. 24.
Next, the Senate committee heard SB402, which updates producer licensing statutes pertaining to appointment, fees, licensing, renewal dates, continuing education, suspension, revocation, and denial of licensure and reinstatement. After months of negotiations with KID, KAIA testified as neutral on the bill.
SB402 would require a resident agent and business entity to submit a renewal application to the Insurance Commissioner and pay a biennial renewal application fee of $4. The bill would change the definition of the biennial due date to the last day of the birth month of an agent and the last day of the month of the initial licensure for a business. Further, the bill would increase the number of continuing education credit hours required for biennial license renewal from 12 to 24 for agents qualified for any combination of the following lines of authority: life, health, property, casualty, accident, and personal. Of the education credits, the bill would increase the hours of insurance ethics from one to three hours and would require that no more than six hours would be in insurance management.
While the additional CE requirements come at an additional cost, in both time and money, KAIA agreed not to oppose the bill because KID made concessions in other areas. For example, lowering the newly created license renewal fee to $4 biennially from what the KID initially proposed. Also, these changes will allow agents to use the National Insurance Producer Registry (NIPR) to renew their out-of-state and Kansas licenses. Currently, Kansas agents can use NIPR to renew their out-of-state licenses but must renew their Kansas licenses through KID. Streamlining this procedure will benefit both KID and agents.
SB402 would remove the automatic appointment of affiliated agents for companies. If adopted, only individual agents and not agencies will be appointed by companies. This change will remove burdensome reporting requirements for agencies when there are staff changes.
In addition to the insurance department, the Kansas Association of Professional Insurance Agents, State Farm, the National Association of Insurance and Financial Advisors of Kansas, and Advisors Excel testified in support of the bill. We expect the committee to work the bill on Mon., Feb. 24.
The fallout from the House's failure to pass Senate Concurrent Resolution 1613, the resolution authorizing a vote on the abortion amendment, took form this week. As expected, the Senate Public Health and Welfare Committee delayed efforts to pass the Medicaid expansion bill. Committee Chair Gene Suellentrop (R-Wichita) announced on Mon., Feb 10, that SB 252 and Medicaid expansion more broadly needed further study. Continuing, he announced that the committee would not actively work or mark-up the bill until further notice.
Additionally, House committees rebuffed a couple of Executive Reorganization Orders (EROs) proposed by Governor Kelly. The House Energy and Appropriations Committees both made negative recommendations on two EROs. A move viewed by many insiders as retribution against Governor Kelly for her efforts in working against the abortion amendment. One ERO would have moved the Energy Office from the Kansas Corporation Commission to the Governor's administration. The other was the high-profile proposal to reorganize various agencies into the singular Department of Human Services. We expect some legislation to move, but Medicaid expansion and measures supported by the Governor will likely sideline until an abortion resolution gains enough votes in the House.
While Medicaid expansion flounders in uncertainty, the House and Senate tax committees moved out some noteworthy tax bills this week. The House committee kicked out a pair of tax bills related to individual income taxes. One proposal would decouple Kansas law from the federal tax allowing individuals to itemize their deductions even if they choose the federal standard deduction. The federal Tax Cuts and Jobs Act increased the standard deduction to $24,000. Many individuals and small businesses chose the standard deduction, which requires them to take the much lower state standard deduction. As a result of the federal change, Kansas coffers have seen about $60 million in new revenue annually as many taxpayers were caught in the middle and are now paying more in state taxes. It's not certain if or when the full House will take up this bill dealing with the so-called revenue windfall.
Meanwhile, the Senate committee passed out a property tax bill that may signal an end to the property tax lid. The bill would require local taxing entities to provide more public disclosure but, in return, the much-publicized property tax lid. Many municipalities question whether the bill represents a “jump out of the frying pan and into the fire" scenario. The tax lid generally requires, with certain exceptions, voters to approve property tax increases higher than the rate of inflation from the previous year. The replacing policy would require local taxing entities to calculate a certified property tax rate annually and prohibit the governing body from levying a tax rate above the certified rate unless the body adopts an ordinance or resolution to do so. The governing body would be required to notify taxpayers of their intent to exceed the certified tax rate by publishing in the local paper of record and by notifying affected taxpayers by mail or electronic means.
This week marked the deadline for individuals and non-exempt committees to introduce bills. We saw a flurry of bills hit the calendar by Friday. Many of these bills may not stand much of a chance to see the light of day. The last day for committees to meet looms on Mon., Feb. 24, followed by Turnaround Day on Thurs., Feb. 27. Committees have a little over a week to get work done on non-exempt bills. As such, committee schedules are jam-packed next week. Due to the logjam created by the politics of the abortion amendment and Medicaid expansion, many of the newly introduced bills are likely to die on the vine.
Other Notes and Quotes
On Mon., Feb 10, Senate leaders sent out separate emails to their colleagues explaining their position on Medicaid expansion following the demise on Friday of the constitutional amendment resolution related to abortion. After the abortion resolution failed in the House, Senate President Susan Wagle removed 13 bills, some of which could have been amendable to Medicaid expansion, from the Senate calendar, and placed them back in committee. She said, “Without the 'Value Them Both' amendment, there will be no 90/10 funding match when it comes to abortion. Kansas taxpayers will instead foot the bill for all Medicaid abortions, in their entirety."
Meanwhile, Senate Majority Leader Denning responded, “The bipartisan work over the interim was tireless and it disrespectful to blatantly disrupt the legislative process and threaten fellow legislators for personal political gain." Denning went on to say, “The constitutional amendment and Medicaid should not be married together and sold as a single issue." But, while Denning and others may not want the two issues to be connected, they most certainly are in the eyes of those who support the constitutional amendment.
The House Insurance Committee held hearings on a bill that would expand the coverage of mental health disorders. The bill was met by resistance by members of the business and insurance community who are concerned about the impacts that such mandates have on the cost of health insurance coverage. HB 2459 would create the Kristi L. Bennett Mental Health Parity Act, which would require health insurers to expand coverage of treatment of mental illness and substance use disorder. For patients who have substance use disorder, are afflicted with suicidal ideation, or are actively suicidal, the bill would require health insurers to provide coverage. Coverage would be required without the imposition of prior authorization, concurrent review or retrospective review, or other forms of utilization review for the first 14 days of medically necessary inpatient and 180 days of medically necessary outpatient treatment and services provided in-network. Committee Chair Jene Vickery (R-Louisburg) has indicated he may appoint a subcommittee to study the bill further.
The Senate Financial Institutions Committee was a tad more active on insurance matters this week. Many of the bills were noncontroversial in nature. But SB 352 grabbed our attention and that of several property and casualty carriers. SB 352 would enact the Peer-to-Peer Vehicle Sharing Program Act. The bill outlines, among other things, liability insurance and licensing requirements for drivers participating in and companies providing a peer-to-peer vehicle sharing program. What is a peer-to-peer vehicle sharing program? Think of Airbnb or Vrbo for your car and not your home or condo. As the popularity of these programs is growing, states have wrestled with the appropriate way to provide liability coverage and licensing. Also, car rental companies have a concern that peer-to-peer programs don't have to abide by the same set of rules. This bill was introduced by Enterprise and is a modified version of the National Council of Insurance Legislators' (NCOIL) model bill. Several carriers were neutral or opposed and expressed a desire for the committee to change the bill to look more like the NCOIL model. If this bill gets worked, we expect a version more closely aligned with the national model will move.
The fourth week of the session turned out to be unique yet similar to the previous weeks. February in Topeka started with a much-ballyhooed Super Bowl win by the local favorite, Kansas City Chiefs, including closing the Legislature on Wed., Jan 5, to allow fans to attend the Super Bowl parade. We also saw much the same as in January: a complete focus on the resolution authorizing a public vote on the Constitutional Amendment related to abortion.
As you will recall, last week Senate Concurrent Resolution 1613 was sent to the House on a 28-12 vote. On Thurs., Jan 6, the full House took up the effort on that measure, which would allow future legislatures - if approved by voters in August - to pass laws regulating the practice of abortion. The preliminary vote fell four votes short of the 84 required votes needed to pass a resolution to amend the Kansas Constitution. The Governor, legislative leaders, and advocates on both sides spent Thursday night twisting arms and using political levers to get or keep votes on Friday morning's Final Action vote. As of this report, the House was still on a "call of the House," and a final vote has not been recorded. If the amendment resolution fails, you can expect Republican legislative leaders to come down with a heavy hand on those who opposed, including measures they support. We expect leaders to do everything in the political and procedural power to block Medicaid expansion until the Constitutional Amendment resolution passes.
Speaking of Medicaid expansion, this week the Senate Public Health and Welfare Committee invited Attorney General Schmidt to provide his insight on the ongoing litigation surrounding the Affordable Care Act (ACA) and the timeline of when the U.S. Supreme Court (SCOTUS) might take up the case. The Attorney General did not have clear guidance on when and how a SCOTUS ruling, which may strike down the ACA, could impact the passage of Medicaid expansion as envisioned in Senate Bill 252. It seemed clear that Committee Chair Gene Suellentrop (R-Wichita) wanted his committee to hear about the potential that the ACA - the federal mechanism authorizing Medicaid expansion - could be struck down. Schmidt was asked about amendments to state plans, including restrictions on abortion or work requirements, were authorizes. He didn't definitively opine. The committee will continue discussions and consider action on SB 252 on Mon., Jan. 10 and Tues., Jan 11—unless plans change if the House fails to pass the abortion resolution.
The Department of Revenue released January tax receipts early this week. January revenues totaled $723 million, which were 8.7%, or $58 million, above estimates. That total is also $80 million over collections in January of last year. To date, revenues are $256 million, or 6.4%, above tax receipts at this point in the last fiscal year. Individual income tax receipts continue to outpace estimates. Certainly, the strong economy is impacting income. Still, the House Taxation Committee heard again that the Federal Tax Cuts and Jobs Act provided Kansas government coffers with a windfall. Kansas law requires taxpayers to take the state standard deduction if they choose to take the higher federal standard deduction that was passed in the Trump tax cuts. The Kansas standard deduction is much lower than the federal level and has resulted in about $60 million more in income taxes, the Kansas Department of Revenue reported. There is a litany of bills addressing taxes, and specifically, this issue introduced and being considered. Look for the issue of taxes to pick up some steam in the next couple of weeks.
Other Notes and Quotes
While the Legislature was closed on Wed., Jan 5, to celebrate the Kansas City Chiefs Super Bowl win, Gov. Laura Kelly did not shut down state government. She did say; however, she was pleased on Sunday to hear that the Chiefs "are my state's team," a reference to President Donald Trump's congratulatory Tweet where he incorrectly referenced that the Chiefs are a Kansas team. In that Tweet, Trump announced, “Congratulations to the Kansas Chiefs on a great game, and a fantastic comeback, under immense pressure. You represented the Great State of Kansas and, in fact, the entire USA, so very well. Our Country is PROUD OF YOU!" A prolific Tweeter, we here in Kansas think this might be President Trump's greatest tweet to date.
The Kansas Insurance Department introduced their bill that they view as modernization of producer licensure laws and the appointment process. KAIA has negotiated diligently with the Department on their plan that would, among many things, increase continuing education requirements, create an agency renewal requirement and fee, and eliminate automatic appointments in agencies. The final bill and language are not complete as of the date of this report.
KAIA is monitoring several bills, two of which had hearings this week:
- On Mon., Jan. 3, the House Insurance Committee held a hearing on HB2480. The bill would amend the definition of long-term care insurance. Current law defines long-term care insurance to mean any insurance policy primarily advertised, marketed, offered or designed to provide coverage for not less than 12 consecutive months. HB 2480 would remove the requirement that the policy would have to be for 12 consecutive months or more.
- On Thurs., Jan. 6, the Senate Financial Institutions and Insurance Committee heard Kansas Insurance Department's bill, SB291. The bill would allow the Insurance Commissioner to conduct investigations and examinations with regards to the insurance code. The Commissioner could appoint investigators to conduct anti-fraud investigations, subpoena witnesses, and compel them to testify, require documents, and order depositions. The bill describes actions that could be taken if a person refuses to obey a subpoena or refuses to testify, including a civil penalty up to $2,000 for each violation. SB 291 would add insurance investigators and special investigators appointed by the Insurance Commissioner to the definition of a police officer under the Kansas Law Enforcement Training Act. An investigator appointed by the Commissioner would have the authority to make arrests, serve subpoenas, conduct searches, and seizures, store evidence, and carry firearms while conducting investigations of anti-fraud.
- Next Thurs., Jan 13, the Senate FI&I Committee will hear SB323. The bill brought by State Farm would amend current statutes related to altering the terms of insurance policy not considered a denial of renewal of the policy if the insured is provided proper notice. KAIA will formally be opposing this bill in testimony. However, we are aware that State Farm will present an amendment for consideration by the committee. If the amendment were adopted, KAIA would support the measure.
In its third week, the 2020 edition of the Legislative Session took form with committee activity and substantive action on the Senate floor. Again, this week the Kansas Constitutional Amendment related to the regulation of abortion and the bill authorizing Medicaid expansion in Kansas were at the forefront. The full Senate considered the resolution authorizing an August vote on a constitutional amendment, which would allow future legislatures to pass laws regulating the practice of abortion. After hours of debate on Wed., Jan. 29, the Senate passed Resolution No. 1613 with a 28-12 vote. The resolution, which was amended on the Senate floor, was forwarded to the House for their consideration. We expect the House to take up that measure sometime next week. Many observers believe that progress on other legislative issues, particularly Medicaid expansion, hinges on the passage of the abortion resolution in the House. So, the passage of the amendment resolution, which Governor Kelly decried on Thurs., Jan. 30, in the Senate may break the logjam on other pieces of legislation.
Speaking of Medicaid expansion, the Senate Public Health and Welfare Committee continued hearings on Senate Bill 252, this week. As you will recall, the committee heard from proponents of Medicaid expansion and the bill last week. This week neutral and opponent conferees testified before the committee. Following several days of hearings, many observers expect the Senate committee will take up the bill next week. The key to the bill's prospects is whether amendments related to restrictions on abortion or work requirements derail or propel the bill.
Governor Kelly and Department of Transportation Secretary Julie Lorenz announced their vision for a new comprehensive Transportation Plan. The plan, dubbed FORWARD, was introduced in the House Appropriations Committee. Unlike previous 10-year transportation plans, the administration envisions their FORWARD proposal to be less rigid and feature a rolling construction and maintenance program that is more reactive to the evolving needs of the transportation infrastructure.
According to Secretary Lorenz, "FORWARD will provide the flexibility to address challenges and opportunity faster - giving KDOT the opportunity to partner with communities and solve problems from the ground up." More details, including long-term cost projections, are to follow.
Other Notes and Quotes
The Governor's Council on Tax Reform released its first report during the 2020 Legislative Session. The report featured some familiar items that have been part of the Governor's public agenda including, the tax on digital goods, a refundable income tax credit for sales tax on food, and funding the Local Ad Valorem Tax Reduction Fund. It also included some interesting—and likely controversial—policy suggestions, like vertical equity.
The report said, "Vertical equity promotes proportional or progressive taxes where tax as a share of income increases [and] as income increases those with greater ability should pay more."
We don't expect a measure like vertical equity to gain any traction in the Republican-controlled legislature. Still, it will be interesting to see what political hay is made of this recommendation.
This past week was quiet regarding bills that directly impact agents. However, the House and Senate Insurance Committees did hold hearings on a few bills affecting companies and health insurance. The Senate Financial Institutions and Insurance Committee held hearings on SB281 and SB282. SB281 would establish the Healthcare Price Disclosure Act, which would require healthcare professionals and healthcare facilities to make available to the public, upon request, the direct pay price for common services. SB282 will create the Patient's Right-to-Know Act, which would require a healthcare provider to give a patient or patient's agent, upon request, an estimate of the charge for service, diagnostic test, procedure, or course of treatment if the charge exceeds the minimum cost. Members of the healthcare provider community expressed concern about compliance. The committee also heard a bill brought by the Kansas Association of Property & Casualty Insurance Companies. The bill, SB 304, would allow an insurance reciprocal to convert to a Kansas mutual insurance company.
The House Insurance Committee held hearings on HB2478, a bill updating certain definitions and requirements of the third-party administrators' act, and HB2479, which would codify the NAIC corporate governance model regulation into statute.
The House Commerce, Labor and Economic Development Committee held hearing on an interesting bill that could have implications for school district liability insurance. HB 2507 would exempt any business that accepts a secondary student in a work-based learning program from certain claims arising from a student's negligent act as a result of participating in the program at the business or work site. Except for incidents arising from gross negligence or willful misconduct, a student's school district would be solely responsible for civil liability for these claims. The bill would allow school districts to purchase insurance contracts to insure against liability claims.
The House Insurance Committee will hold a hearing on HB2480, a bill that would make some updates and changes to the long-term care insurance statutes. The House committee will also hold a hearing on HB2459, which makes substantive changes to the act governing insurance coverage of mental illness and substance abuse disorders. The bill would have the effect of increasing/creating new health coverage mandates. We expect the business community and health insurance carriers to express concern about this bill.
On Wed., Feb. 5, the Senate Financial Institutions and Insurance Committee will have a hearing on SB 291, a bill that would authorize subpoena and investigative powers for the commissioner of insurance and certain law enforcement powers for insurance investigators in pursuance of insurance fraud violations. Additionally, the committee will hold a hearing on SB303, which would require fingerprinting of Kansas Insurance Department employees. The Department brought this bill to the legislature for consideration.
After taking a day off to observe Martin Luther King, Jr. Day, the pace of work in the legislature picked up this week. The statehouse this week was full of advocates on both sides of the debate on the constitutional amendment on abortion and Medicaid expansion. Noncontroversial and perfunctory committee hearings and work whirred along in the background. But the abortion amendment and Medicaid expansion were front and center. Both the House and Senate committees held hearings. They quickly passed out like versions of a resolution authorizing an August vote on a constitutional amendment, which would allow the legislature to pass laws regulating the practice of abortion. Those resolutions, in response to a 2019 Supreme Court decision ruling Kansas abortion laws unconstitutional, appear to be fast-tracked. Medicaid expansion, however, could be a different story.
The Senate Public Health & Welfare Committee began hearings on a bill designed to expand Medicaid coverage as envisioned in the Affordable Care Act. The bill is the result of negotiations between Governor Kelly and Republican Senate Majority Leader Jim Denning and has 22 co-sponsors, 11 Republicans and 11 Democrats. The measure would expand Medicaid to about 130,000 people who don't have health insurance and who earn less than 138% of the national poverty level. In his testimony, Senator Denning urged the committee to keep the bi-partisan proposal clean of any amendments such as work requirements and prohibitions on abortion. However, many believe the committee is likely to consider amendments when they mark-up the bill before sending it to the full Senate. Proponents of the bill testified this week, and opponents will testify next week.
Republican legislative leaders and other stakeholders continued to condemn Governor Kelly's plan to re-amortize KPERS. Kelly's plan to refinance the state's retirement system would initially raise a few hundred million dollars but would result in a roughly $4.4 billion hit to the fund's long-term liability. The proposal designed to help pay for the administration's planned budget increases appears to be dead on arrival. Additionally, Republicans have pushed back against Governor Kelly's plan to tax digital goods (imposing a tax on media goods such as music, video, and books that are downloaded electronically). This proposal projects to generate over $22 million in revenue and, in part, supports the Governor's recommended budget. It will be interesting to see how the budget shapes up if Republicans successfully block KPERS re-amortization and the adoption of a new tax on digital goods.
Finally, House Republican leaders unveiled their plan to "Make Kansas Work." They claim the five-part proposal will help build the workforce, spur rural economic development and health care access, and promote homeownership. The five parts of the plan are:
- Rural Hospital Innovation Act. A $30 million public-private grant program designed to fund innovative programs at hospitals in the state's rural counties.
- Targeted Employment Act. A proposal that would give tax credits to businesses that contract with integrated workshops that employ people with disabilities.
- The Kansas Promise Act. A bill that would provide last-dollar tuition support for students seeking a certificate in an approved high-need technical program at a two-year college or technical school. The recipient would have to work or perform community service and would be required to stay in Kansas for two years.
- First-time Homebuyers Program. Like a 529 College savings program, this measure would allow parents and grandparents to create tax-deductible savings accounts for their children to buy homes in Kansas.
- Social Security Exemption. A bill that would raise the current $75,000 exemption from state income tax to $100,000 for Social Security recipients to keep those recipients working while avoiding state income taxes on their Social Security benefits.
Other Notes and Quotes
The Kansas Supreme Court this week dismissed a lawsuit brought by six Kansas judges, which sought to order the legislature to put millions of dollars into additional judicial branch funding. The dismissal removes a major burr from the legislature's saddle, many of whom swiftly and harshly criticized the lawsuit when it was filed. Legislative leaders were vocal in their frustration that judges would file a lawsuit challenging the legislature's role as the appropriating branch, particularly considering the recent Court directed K-12 finance settlement.
Chief Justice Marla Luckert said, “We have the utmost respect for our state's republican form of government under which three coequal branches of government each perform the unique functions entrusted to them by our carefully calibrated constitutional structure."
In response to the dismissal, Speaker of the House Ron Ryckman proclaimed, “I appreciate the court's recognition of separation of powers and their renewed commitment to open communication."
For the most part, all was quiet on the insurance front this week. The House Insurance Committee did hold a hearing on HB2053 on Wed., Jan. 22. HB 2053 would amend the definition of short-term, limited-duration health plans to mean plans with a policy period of less than 12 months with extensions up to a maximum policy period of 36 months. The bill would also require insurance companies that issue short-term, limited-duration health insurance policies to disclose information to consumers regarding the Affordable Care Act requirements concerning preexisting conditions and minimum essential coverage.
We anticipate the Kansas Insurance Department bills related to producer licensure, the appointment process, and fees to be introduced sometime next week. Hearings on those bills could be scheduled for the first week of February.
The 2020 Legislative Session kicked off Mon. Jan. 13, with not much fanfare in Governor Kelly's second year. Unlike the pomp and circumstance of last year's Inauguration week festivities, the week was relatively quiet as legislators settled back into their offices and routine. Most legislative committees were introductory and informative if they met at all. There will still be a significant amount of informational hearings over the next couple weeks, but hearings on specific legislation will begin in earnest in the next week.
On Wed. Jan 15, Governor Kelly offered her "State of the State" address. In her speech, Kelly touted the successes of her first term, most notably the settlement of the K-12 school finance case. But she also broadly laid out her 2020 policy priorities. The Governor urged passage of Medicaid expansion, calling upon the legislature to move quickly on the bipartisan plan supported by her and Senate Majority Leader Jim Denning (R-Overland Park). She also announced she would be pursuing tax policy that she says would help with Kansans' food and property expenses. First, her Administration would offer legislation implementing a refundable sales tax credit on food purchases. Second, her budget recommendation would put money back into the Local Ad Valorem Tax Relief Fund (LAVTRF) to assist local governments to keep property taxes lower.
Further, the Governor promised to put forth a new comprehensive transportation plan which relies upon transportation department money, indicating she plans to continue to curb transfers from the "bank of KDOT" to the State's general fund. Finally, the speech generally focused on her pledge to stabilize the budget and avoided some hot button issues like the constitutional amendment on abortion. Following the speech, attention quickly turned to her budget recommendation, which was released the following morning.
Budget Director Larry Campbell unveiled the Governor's $7.85 billion budget to a joint meeting of the House Appropriations Committee and Senate Ways and Means Committee on Thurs. Jan 16. The highlights of the budget included:
1) spending $17.5 million in FY21 and $35 million in FY22 on Medicaid expansion;
2) the re-amortization of KPERS;
3) dedicating $53.2 million to implement a refundable food sales tax credit;
4) transferring $54 million from the state general fund to the LAVTRF;
5) a state employee pay raise of 2.5%;
6) an uptick in spending on public safety and corrections;
7) nearly $22 million in enhancements to human services such as child protection and Family First Prevention services;
8) a minor increase in higher education spending.
The Administration claims that the budget is structurally balanced. That is, spending does not outpace revenue, and the out-year projected ending balances remain above the statutorily required 7.5% ending balance. However, critics have immediately pounced on the budget's reliance upon the re-amortization of the state employee pension plan, KPERS, over 25 years. The proposal to refinance KPERS an additional ten years will provide the state about $130 million in revenue this year and next. The money comes at a huge cost in the long-term. Stretching out the payment of actuarial shortfalls to KPERS will end up costing the state an estimated additional $4.4 billion. Republican leaders blasted this proposal and virtually signaled it is dead on arrival.
Both the House Appropriations Committee and the Senate Ways and Means Committee began meeting this week to review the Governor's proposed budget as well as the financial profile of the state. You can find the Governor's entire budget recommendation at this link.
The legislature will begin in its work on legislation and the budget. Committees will be holding substantive hearings on actual legislation in the coming week. Specific to the budget, it will be interesting to see how budget committees contend with Kelly's budget recommendation. Legislative leadership was more than skeptical of Governor Kelly's budget recommendation, particularly drawing a bright line on their opposition to the Administration's proposal to re-amortize KPERS—a budget maneuver Kelly opposed in the past.
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