Sedgwick County Legislative Update, 2009-05-13

May 13,2009

Sedgwick County Legislative Update Overview This report focuses on the final wrap up of the 2009 legislative session. Other legislation of interest passed during the regular session was included in the early April report. The 2009 Legislature adjourned on Saturday morning. They will return in early June for the ceremonial last day. Resolution on the budget described below suggest there will be lots of action before the 2010 legislative session that will require careful attention. The dire economic situation may produce a special legislative session or more likely gubernatorial allotments or reductions to state general fund expenditures based on miniscule revenue projections. Because the ending balance is so low, the Governor will have a great deal of freedom and flexibility to make downward adjustments to the budget during the coming year. Budget The Legislature approved Senate Substitute for House Bill 2373 which finalized the budget process. The Senate passed the bill 21-17 and a majority of Democrats and Republicans passed the bill in the House 64-60. The Omnibus veto session was in its eight day when the budget bill was finally passed. The House had already failed in its first attempt to pass a budget and they were scheduled to take up the next House budget bill later on 7th. The House bill that was about to return to the floor contained larger reductions for K-12 and its passage was very unlikely and prompted a number of Republicans to vote for the Senate bill. The final budget bill is in addition to 10 percent budget reductions passed in the earlier appropriations bills at the end of April. Now that the final budget bill is done, state agencies will have to make determinations regarding the ways they will make budget reductions. They were directed to make general reductions and will now have to determine how to make those reductions. •

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All State agencies (including K-12 and regents) will receive 2.75 percent reductions o $ 154 million in cuts o $122 million in revenue (Keep the M&E Slider payments, keep $50 million in casino privilege fees, $18 million in fee funds, and others) o $61 million in new revenues (see below) Lost revenue o FY 2009 Machinery & Equipment second half payment of $25 million will not be made

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o FY 2010 Machinery & Equipment payment of $44 million will not be made Other Sedgwick County-specific accomplishments o $5 million protected for fair air fares program o $5 million for the National Institute for Aviation Research at Wichita State University o $2.5 million for the National Center for Aviation Training • One-half the amount requested o Fully funded community corrections, adult residential centers o $3.5 million to the Wichita Center for Graduate Medical Education plus $2.5 million in matching federal funds

Taxes Both the House and Senate passed Senate Substitute for House Bill 2365. The bill was an amended down version of the original bill that had up to $100 million in tax increases. The tax bill was finalized after the budget bill was completed so that only enough revenue was increased to get the state's ending balance above $0. Based on the budget bill and the tax bill, the state will have $17,000 in an ending balance on June 30, 2010. • $61 million in taxes o Mainly tax amnesty o Delayed or reduced tax credits • No cuts to Liquor Tax (888) funds. Legislature rejected the Governor's recommendation to eliminate the $27 million fund going to local units of government Other Legislative Issues Annexation On the last night of the session, in the last bill passed, both the House and Senate passed Senate Bill 51. The bill was the only annexation legislation passed this year. • Senate Bill 51 summary from the League of Kansas Municipalities o Could have been much stronger—does not include public vote requirement o • Section 1. Requires a copy of the plan for extension of services to be sent by certified copy to the board of county commissioners not less than 10 days prior to the public hearing required by K.S.A. 12-520a. o • Section 2. Amends K.S.A. 12-531 to require the county commission to hold a hearing three years following an annexation or four years following the conclusion of litigation relating to annexation to determine whether the city has provided services in accordance with the submitted plan. Also gives the judge discretion to award attorneys fees to the prevailing party if the county commission refuses to hold the required hearing. D o • Section 3. Allows land owners to petition for deannexation two years following the conclusion of the hearing required by K.S.A. 12-531 or two years following the conclusion of litigation relating to the hearing (current law allows

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deannexation petitions after 2 !/2 years). This section also increases the time limitation from one year to four years before the city can attempt to annex the area that has been deannexed and requires the city to pay for the recording with the register of deeds. It also gives the judge the discretion to award attorneys fees to the prevailing party if the board of county commissioners refuses to hold the deannexation hearing. D • Section 4. This section defines the terms "municipal services" and "municipal infrastructure." D • Section 5. Amends K.S.A. 12-521 to prohibit the annexation of any unplatted tract of land devoted to agricultural use of more than 65 acres. This is a limitation on county-approved annexations. D • Section 6. Amends K.S.A. 12-520 to prohibit any city from annexing a "narrow corridor" to gain access to noncontinguous tracts of land. It further provides that the "corridor of land" must have a "tangible value" and purpose other than for enhancing future annexations. These terms are not defined and even apply to annexations that are completely consensual in nature. D • Section 7. This portion of the bill requires that for one year from the date of annexation, the city must spend all proceeds from ad valorem taxes levied against the annexed property to provide municipal infrastructure and municipal services in the area. D • Section 8. Requires notice to be given not less than 60 days before the effective date of an annexation ordinance to any rural water district in the area. U • Section 9. Authorizes the city to contract with the rural water district to provide water services to all or portions of the annexed area. D • Section 10. Provides that the rural water district continue as the water provider unless the city gives appropriate notice and considers certain factors. D • Section 11. Amends K.S.A. 82a-612 to allow anyone who is charged a franchise fee for water service provided by a rural water district to be considered a "participating member" of the district. D • Section 12. Amends K.S.A. 82a-646 to require the board of a rural water district to consider certain factors whenever lands are petitioned for release from the district. D • Section 13. Makes sections 8-10 part of the Kansas rural water district act.

Unemployment Insurance The South Central delegation gave strong support to passage of House Bill 2374 which amended state unemployment insurance law to benefit local aircraft manufacturers to allow employees to work three-day work week while also participating in the unemployment program and retraining. • House Bill 2374, a package of alterations to the state's unemployment laws that also captured $70 million in unemployment money from federal stimulus funds

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HB 2374 would allow employees to work part time to collect an unemployment check for a calendar year instead of the current 26 weeks. Part-time status, for aviation workers, for example, would allow employees to benefit from training while still working three days per week Sought by Spirit AeroSystems

Future • Ending balance problems o The minimal ending balance of $17,000 in the state budget suggests there will be a great deal of attention to monthly revenue • Allotments o The Governor, when the state budget drops below $100 million in a projected ending balance, and again when revenues are less than $0, has extensive unilateral budget cutting authority called "allotments" o The Governor will be able make targeted reductions to all budgets to address the financial crisis o The Governor, and the Joint Legislative Budget Committee, will monitor revenue • How agencies will adjust o It is very likely state agencies, and local units of government will have further reduced budgets in the middle of the fiscal year due to the allotment procedures Wrap Up The Legislature will meet one last time for sine die on June 4, the ceremonial end of the session. It is possible there could be a special session and there will be great attention given to the status of the budget. Additionally, interim committees will begin meeting in June or July to monitor a variety of issues. If you have any questions, please let me know. Stuart J. Little, Ph.D. Little Government Relations, LLC 800 SW Jackson, Ste. 914 Topeka, Kansas 66612 785-235-8187 Office 785-845-7265 Mobile 785-435-3390 Fax stuartj little@mac .corn

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