How Did Small Business Fare in the 2019 Legislative Session?

Date: June 12, 2019

Usually, the end of the Kansas Legislature is peaceful and ceremonial, but this year’s final hours included attempts at overriding the Governor Kelly’s veto of a scaled-down tax bill, HB2033, and some budget line-item vetoes.

While the Republican-controlled legislature was successful in overriding the Democratic governor’s budget line-item vetoes, they were unable to muster the necessary votes in the House to override the tax bill veto.

Below are some of the headline issues that NFIB Kansas worked on this regular session.

While the regular session is over, our work on behalf of small and independent businesses does not end. The legislature moves into the interim session where will monitor interim activities. Importantly, we will continue the push to move the legislature to act on the income tax issue related to the recently passed federal tax bill.

Tax Bill Veto Sustained

Governor Kelly was successful in having her veto of HB2033, the major tax relief bill of the session, sustained. This bill was a scaled-down version of SB22, which the Kansas Senate was not able to override earlier in the session. HB2033 would have decoupled Kansas tax laws from the federal code following the passage of the Tax Cuts & Jobs Act.

Take action: Contact your legislators about the failed tax reform veto override

The base bill would decouple Kansas code so that individuals can continue to itemize at the state level if they choose to use the standard deduction when filing their federal return.

Also, the bill would prevent the state from collecting taxes on corporations’ foreign income that was not previously taxed before the federal changes. The bill also had provisions related to the collection of internet sales taxes and a reduction in the food sales tax rate.

Generally, the additional revenue captured by taxing internet sales would be used to reduce the rate on food sales by 1%.

NFIB Kansas and other advocates actively called upon the legislature to override Governor Kelly’s veto of HB2033. Unfortunately, we fell short. The House fell short of getting the 84 votes required to override a veto. NFIB will work over the interim to develop another plan to address the unintended state income tax increase created by the new federal tax law.

Medicaid Expansion

Concerted efforts to pass Medicaid expansion fell short this session. A bill to expand Medicaid, as contemplated in the Affordable Care Act, did pass the House. However, the Senate never took up the bill, which would cost the state at least $75 million annually according to one study.

Legislative supporters did hold the budget hostage to force a vote in the Senate during the veto session. But those legislators ultimately relented after assurances were given that an interim committee would be formed to study the issue and develop a plan for consideration in the 2020 session.

Expect Republican legislative leaders, most of whom oppose expansion, to try and craft the most “Republican” plan for consideration by next year’s legislature as it appears momentum is swinging in favor of supporters of expansion.

Health Care

The governor allowed HB2209, the bill with association health plan (AHP) and Kansas Farm Bureau member health benefit language, to become law this session. The Senate and House passed the conference committee report for HB 2209 with veto-proof majorities.

The bill included language authorizing Kansas Farm Bureau to sell member health benefits to individuals to cover their health needs. The coverage is defined as “not insurance” in the bill, which allows the plans to be noncompliant with the Affordable Care Act. Thus, the bill received very active opposition from insurance companies and advocacy groups.

But, with a veto-proof majority in both chambers, and the powerful voice of the Kansas Farm Bureau, Governor Kelly decided to allow the bill to become law. In so doing, she made another call for Medicaid expansion as a compliment to the Farm Bureau’s free-market approach.

In addition to the Farm Bureau language, the package also includes several health insurance provisions related to the regulation of association health plans (AHPs) and small employer plans which are designed to make the formation of AHPs more accessible given the new rules promulgated by the Trump administration.

Workers’ Compensation

NFIB Kansas was successful in keeping several bills related to workers compensation from becoming law this session. These bills, if enacted, would undermine our very healthy work comp climate in Kansas.

  • HB 2012 would amend the work comp law by replacing the word “prevailing” with the word “substantial,” which would lower the threshold for compensation.
  • HB 2013 & SB92 would remove amend the law to revert from the sixth edition of the American Medical Association guides from evaluation of permanent impairment to the fourth edition.
  • HB 2260 would increase the amount an employee may recover from an employer for unauthorized medical expenses from $500 to $1,500. The bill would allow the employee to receive an amount to defray their expenses and a per diem rate for legislators. The bill would also require an employer to pay the actual costs of transportation rather than the amount prescribed for state officers and employees in statute. Currently, all medical expenses related to a worker’s compensation claim must be authorized by an employer before they can be charged back to an employer. The bills remain alive for next session—we will remain vigilant in our monitoring and opposition.
Labor

As we did with workers’ comp, NFIB Kansas helped to keep some labor-related bills from seeing the light of day this session. Of the bills, here are some of the more troubling ones:

  • HB 2060 would permit local governments to enact an ordinance that would require an employer to paid leave from work.
  • HB 2061 would allow local governments to enact an ordinance that would require a private employer to pay compensation or wages at a rate higher than the minimum wage regardless of whether the higher compensation is required by state or federal law.
  • HB 2186 would require any employer who provides sick leave benefits to an employee to allow the employee to use the sick leave for absences because of an illness, injury or medical appointment of his or her family.
  • SB141 & HB2022 would enact the Kansas Working Families Pay Raise Act, which includes two increases to the state’s minimum wage for all employees Kansas. By January 1, 2021 the rate would increase to not less than $15.00 per hour.
Civil Actions

HB 2291 would increase the cap on wrongful death actions from $250,000 to $500,000. The bill specifies that beginning on July 1, 2020, and on July 1 each following year, the dollar amounts specified in the bill would be increased by an amount equal to the percentage increase in the consumer price index for all urban consumers. This bill would increase liability costs for small business and invite even more lawsuits. NFIB Kansas successfully fought to keep this bill from becoming law.

Special Session

On May 9, the Kansas Supreme Court held a hearing on the 2019 bill that adds $92 million to K-12 schools this year and the same amount through 2023 to address the Court’s decision on the 2018 K-12 bill. The bill was the legislature’s attempt to remedy the court’s decision which said the legislature failed to address inflation in their funding calculation.

The plaintiff school districts argued that the 2019 bill did not properly calculate the inflationary amount. Plaintiffs argue the 2019-passed bill miscalculated and underfunded inflation by approximately $270 million total over five years.

There has been no announcement when the court will make its decision. If an adverse decision to the state’s position is made, there could be a special session. Most observers believe, however, that the court will side with the state but retain jurisdiction over the case to ensure the legislature continues to fund the settled amount.

Legislative Coordinating Council

The LCC, a committee made of legislative leadership, will meet in July where they will assign topics and committees for the interim session. Rumored topics for study include banking, health care, community college funding, and gaming issues, among others. But the giant elephant in the room is Medicaid expansion.

We expect Medicaid Expansion will be assigned an interim study, which will draw the major interim headlines. Interim committees study issues in-depth, relative to regular session committees. They ultimately make recommendations for the full legislature to consider in the following regular session. Interim committee recommendations are non-binding.

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