“ SHARE THE VISION”

2012 Session Preview

Dear Friends & Neighbors,

The 2012 legislative session starts January 9. Decisions will be made that will have a long term impact on our state. Here is a preview of some of those issues and the bills I plan to sponsor this session.

GOOD NEWS ON THE STATE BUDGET

Fiscal year 2011 revenues were up $685 million over fiscal year 2010. We ended the year with $164 million in the bank on June 30, 2011. That’s great news for Kansas and shows that the efforts we’ve made over the last few years to turn the economy around are working. The news is also good for our current 2012 fiscal year that ends June 30, 2012. If we stay on track, we should end the year with over $350 million in the bank. That is still short of the amount the state is supposed to have by law for an ending balance each year, but it’s much better than we’ve seen since the national economy went south.

BILLS I’M PROPOSING

My thanks to you for your ideas for bills this session. Here are some of the bills I am proposing:

Tax credits for post‐secondary education: This bill would provide a tax credit to individuals who have post‐secondary education expenses. If you qualify for the federal tax credit for post‐secondary education, you would get an additional 10% of that amount on your state income tax return.
Tax credits for businesses sponsoring apprenticeships for job training: This bill helps businesses who need trained workers and sponsor apprenticeship programs. If the business employs the apprentice at least 7 months of the year and provides training, they can get up to $1000 a year for four years in tax credits. This will especially help small businesses having a hard time finding trained workers.
Job training: Kansas is behind other states in providing post‐secondary technical education so workers can get better jobs. Most technical colleges have waiting lists for courses. The problem is that, like K12 education, we have a funding formula but we don’t fully fund it. I am proposing that we fully fund our technical education programs over the next three years. This will open up training courses, help schools upgrade old equipment, and attract companies needing trained workers. In cities like Topeka, where technical schools are located, these courses would be available to high school students as well.
E‐verify: This bill requires employers bidding on public works projects to use E‐verify to check the employment status of new employees.
Annexation: Requires county commission approval for any unilateral annexation plan proposed by a city.
KPERS retirees: Increases the amount KPERS retirees returning to work for their employer can earn from $20,000 to $25,000 a year.
County treasurer: I’m filing a bill that would change the term of the county treasurer to match other county officials. Under current law the county treasurer serves until the November of the year following the general election.

ITS’ ALL ABOUT JOBS!

worker I’ve been working this fall to help constituents get jobs and find job training. But sometimes it takes more than one person to make big things happen. So the Democratic caucus is proposing a number of initiatives to help attract and keep jobs in Kansas. My contribution to that effort is three bills related to job training listed above. Here are some other proposals we are putting forward this session:

T‐Works, the state’s long‐range transportation plan, is on its way to creating thousands of Kansas jobs. We are asking to accelerate $50 million worth of projects into the bidding pipeline to get Kansans to work even faster.
We are proposing the Hire Kansans First Act to require any contractor or subcontractor working on a state contract worth $100,000 or more annually to ensure that at least 70% of those employees working on the contract are Kansas residents. This would also apply to businesses getting Kansas tax credits like PEAK and Star Bonds.
Bio‐technology is a growing industry in Kansas. We are fast becoming a national force with all of our bio‐tech industries in the corridor between Kansas City and Manhattan. We are asking the legislature to keep its commitment to the underfunded Kansas Economic Growth Act, which provides incentives for bio‐technology entrepreneurs. This would mean $4 million more each year until 2017 to attract investment to our state.
Since 2001, the US has lost over 2.5 million manufacturing jobs. Sending Kansas jobs abroad hurts families and entire communities. The “Keep Jobs in Kansas Act” would prohibit the State of Kansas from contracting with or providing assistance to companies that ship jobs to other countries.
Some employers have started using employment status or credit history to screen pools of job applicants. That practice is unfair in that it assumes those who have been laid off or had a tough time paying bills are less capable in filling job requirements. We are proposing an end to this discriminatory practice by requiring that it cannot be the only reason an applicant was denied. We are also asking that when credit history is used to deny an applicant, the employer must disclose that information.

Kansas revenues turned around in late 2010 and the state is making a positive recovery. We are looking forward to working with the Governor to keep the economic recovery going in Kansas. No one person or group has all the answers. It will take all of us pushing in the same direction to keep things rolling.

GOOD NEWS ON THE JOB FRONT

news Over the past several years, the state has worked to provide incentives and job training to win new employers and keep existing ones. The goal was to broaden our job base beyond the traditional agriculture, aircraft, and oil industries. And it’s working! The good news is that Kansas is becoming one of the leading states for growth in animal science, bioscience, and wind energy. Here are a few announcements this year:

The Kansas Department of Commerce was awarded a $5 million, four‐year technical skills training grant by the US Department of Labor. The money can be used by Kansas employers for on‐the‐job training to support the hiring of engineers. Employers can get up to $25,000 per individual to offset training.
BP Wind Energy plans to build Kansas’ largest wind farm, an $800 million, 419 megawatt electric‐generating facility across 66,000 acres in Harper, Kingman, Barber, and Sumner counties. Most of the electricity will be exported to a company in Missouri.
Washburn Institute of Technology is leading a consortium of seven community and technical colleges that have been awarded nearly $20 million dollars to improve technical education in Kansas. This is good news for our kids and those looking for high‐wage jobs. Employers locate where there is a trained workforce. That was a key to winning the Topeka Mars plant and this grant will help us win future employers. Washburn Tech will receive over $7 million of the grant.
Rubbermaid is investing $26 million to expand its Winfield plant, moving 200 jobs from Texas.
Prathista Industries of India is building a research and development center in Manhattan. This is their first facility in the US. They manufacture animal health and fertilizer products.
New Millennium Wind Energy has chosen Newton as the site of its first manufacturing facility. They will manufacture next generation wind turbines and employ about 350 people in the next three to four years. The facility represents a $20 ‐$30 million investment. One interesting aspect of this operation is that they plan to use high‐tech, carbon‐based composites in the manufacturing. The National Institute for Aviation Research (NIAR) at Wichita State University has been involved in research in these composite materials.

K12 SCHOOL FUNDING

school This issue has quite a history, so let’s start with a little background information. Prior to 1992, some school districts were taxing local patrons over 100 mills when others were taxing only a small portion of that amount. The state legislature changed to a statewide mill levy for schools so that the tax burden would be more equal across the state. That is the 20 mill tax you find on your annual tax statement. The state supplements that with funding from sales and income taxes. Local districts may add up to 31% more funding through a property tax assessment called the Local Option Budget.

The state provides a fixed amount for each student called the Base State Aid Per Pupil. Districts get extra money for transportation, serving special student populations, and other factors. These factors recognize that all students are not created equal. Some students cost more to educate than others. If you want to get into the details, take a look at my “School Funding 101” paper on the home page. I did this piece a couple years ago, so the spending amount has changed, but not the formula.

K12 funding is about half of our state general fund budget, so when money is tight you have to consider how to do things better. But I believe we cut state K12 funding too much last session. We cut funding to a level equal to what we were spending in the 1990s. The result was that many school districts had to raise property taxes just to stay even. If the state continues to cut K12 funding, there will be even more pressure on local property taxes.

We have not seen all the details of the Governor’s proposal for K12 funding, but it clearly shifts more of the cost of K12 funding to local property taxes. It assumes every child costs the same to educate and removes funding for children who need extra services. There is no extra funding for rural districts that bus most students, like our rural districts. It shifts money away from poor areas and increases funding for wealthy areas like Johnson County. It removes the 31% lid on the Local Option Budget and allows school districts to raise property taxes as much as they need. Districts with a lot of poor students like USD 501 (about 70% students in poverty) will not get any increase in state aid for years. That means they will have to raise property taxes just to keep funding level. Poor districts will be back in the situation of pre‐1992 with high property taxes. That’s what got us into court over school funding in the first place. We have to make sure we get this one right. If you have any questions, I’d be glad to address those. Just write to me at ann.mah@house.ks.gov.

TAX REFORM

Governor Brownback is proposing to change the tax structure in Kansas. We haven’t seen the details, but he has made it clear he wants to reduce the state income tax. He believes that lowering our income tax will attract new jobs. The state has three main sources of income: sales tax, property tax, and income tax. Currently income tax is nearly half of our state general fund revenue, so I have some concerns about cutting that leg of our financial stool shorter. I also have concerns about sales and property taxes going higher to cover income tax cuts. I just want to be sure that everyone is paying a fair share and that we don’t raise property taxes.

REDISTRICTING IN 2012

One of the issues that will dominate the 2012 session is redistricting of legislative, state school board, and Congressional districts. Every 10 years when the new census comes out, lines are redrawn to make sure state and federal elected officials have an equal number of constituents.

In Kansas there has been a shift of people to the eastern part of the state. Initial results show that Douglas County has grown quite a bit, but the count will be adjusted to take out college students. The city of Topeka representatives have too few constituents now and need to add some. Our 53rd district has about 1000 too many people. It’s too early to say what exactly will happen. Dozens of proposals will be offered and the legislature will vote on new maps. The revised districts will be in effect for the November 2012 elections.

SHORING UP KPERS

KPERS provides retirement income for teachers, state workers, local workers, firefighters, police, judges, and other public employees. It is a “defined benefit” plan in that employees are guaranteed a fixed amount of income upon retirement. When I first came into office in 2005, we had a $5 billion shortfall in the KPERS fund. That shortfall came about for a number of reasons, but perhaps the biggest reason is the state has not fully funded the employers’ share. In 2005 we also had a plan to restore the fund over about a 20 year period.

The 2008 economic downturn and market fall impacted the fund to the extent that we now have a shortfall of nearly $9 billion. In the 2011 session, the legislature passed a bill to address that shortfall by increasing employer contributions, increasing employee contributions, and reducing some benefits. If we stick to that plan, the fund should be restored to health by 2035.

Some have proposed that the state change to a “defined contribution” plan. That would mean employees contribute to a 401k‐type plan that they manage themselves. The idea here is that the state saves money because it contributes less to the employees’ retirement and has no commitment beyond retirement. Some states are looking at this, but the financials don’t support such a move in Kansas when we have such a large unfunded liability. In fact, the financials presented to the KPERS study committee this fall showed that such a move would actually cost the state more until at least 2060. This will be an interesting debate.

MEDICAID CHANGES

Medicaid is the health care plan provided to low‐income Americans. Most recipients are seniors and children. The cost is shared with the federal government and the state pays 40% of the cost. In Kansas we provide services above what the federal government requires. For example, we provide pre‐natal care to women with incomes up to 200% of the federal poverty level. Medicaid is currently about 18% of our state general fund expense. But the cost is growing to such an extent that it is not sustainable and will become a larger and larger part of our budget if we don’t get the cost under control.

Currently, coverage for children is on a managed care plan. Bids are taken and the plan is managed by an outside vendor. Governor Brownback is proposing to move all other Medicaid recipients (seniors, mental health patients, those with disabilities, other adults) to managed care plans. We don’t have all the details, but bids would be taken and the care would be managed by outside vendors. The Governor believes we can provide the same level of service and save over $100 million a year over time.

I have concerns about moving those with developmental disabilities to this new plan, as they are already on a kind of managed care plan. That will be a topic for discussion this session. I will be interested to see the details as we do need to make some changes.

FINDING ME DURING THE SESSION

I look forward to hearing from you during the session. You can email me at ann.mah@house.ks.gov or call my office at 296‐7668. If you live outside the Topeka calling area, you can call the Legislative Hotline at 1‐800‐432‐3924 and leave a message. I will be doing a regular email newsletter. If you do not get the newsletter and would like to, just email me and let me know.

As always, it is an honor to serve.

Regards,

Ann Mah speaking