I had anticipated that this would be my last report of the 2008 legislative session. However, the House and Senate budget negotiators failed to reach agreement on the final budget bill Saturday evening and we adjourned until Monday. The differences between the House & Senate on the final budget are significant. The House, on Saturday, rejected the Senate’s version of the budget by a vote of 116-4. The House had hoped that Senate negotiators would agree to stay and continue working on a compromise, but when the Senate learned that the House planned to adjourn to allow the remaining lawmakers to return to their districts Sunday, the Senate adjourned and Senate budget negotiators broke off negotiations. So, it appears that no further progress on the budget will be made until sometime Monday and it’s likely the session will extend into Tuesday or possibly Wednesday, depending on their progress.
The budget stalemate is disappointing as the House has agreed to give the Senate over 60 of the Senate’s positions on the final budget while retaining only about 20 of the House positions. Two powerful Senators are still holding out for special projects for their districts; projects that the House has overwhelmingly rejected. Senate Majority Leader Derek Schmidt wants $39.5M in bonding authority for the Department of Corrections to build additional prison space, including an $11.4M facility in the Senator’s district. Our bed space projections show we have no need for the additional bed space and won’t have a need for the foreseeable future. The community of Yates Center has candidly admitted that it wants a substance abuse prison facility built, not because of a demonstrated need for bed space, but rather for economic development reasons. Such a facility would create jobs for the region. The Senator has made funding of this unnecessary bed space a higher priority than other critical state funding needs.
Senator Dwayne Umbarger, the Senate Ways & Means Committee Chairman, has insisted that we include $750,000 in funding in the budget bill to build a road and entrance to the abandoned Parsons Ammunition Plant. The State has no interest in the property but the Senator wants the State to fund the road and entrance project rather than have it funded locally or privately. These two personal projects have held up negotiations and have caused a good deal of bitterness among lawmakers who want to wrap up the session and return home.
While budget negotiators continue their work, the House is working on one more attempt to salvage the session’s energy bill, including authority for Sunflower Electric to build their proposed energy plants. The plan is being rolled into an economic stimulus package which includes economic development projects still in play. One piece has state bonding assistance for an intermodal rail project in Johnson County near Gardner, some economic development assistance for Hills Pet Food Company in Topeka, and an IMPACT aid program for new and expanding businesses that would provide some corporate tax relief and allow for a mechanism for the state to accumulate funds to create incentive packages to lure new businesses to the state. It is hoped that the package will succeed in garnering enough voters to withstand another veto by the governor which could be overridden when the legislature returns for the ceremonial adjournment May 29.

After a three week break following first adjournment, the Kansas Legislature returns Wednesday for the traditional wrap-up session. The Legislature should finish its work for the 2008 session by the weekend at the earliest, and more likely the first part of next week.
The major remaining pieces of the legislative puzzle include the final budget bill for the fiscal year, consideration of either a veto override on the energy bill or a new compromise, and passage of final conference committee reports on issues held over from the regular session. Immigration legislation may also be considered during the wrap-up session.
The major budget work of the year always follows the last consensus revenue estimates preceding final adjournment. Those estimates were released April 16 and, unfortunately, the Committee decreased the overall estimates for both fiscal years 2008 and 2009 by a combined $129M relative to the previous estimate last November. The group consists of members of the Legislative Research Department, Division of the Budget, Department of Revenue, and three consulting economists from our state universities.
The decision to reduce fiscal year 2009 estimates relates primarily to the presumed effects on state revenues from the recently passed federal “stimulus” package. Because state tax rates are tied to the federal rates, the new federal depreciation and expensing provisions will automatically flow through and also affect state income tax rates. State revenue estimators have concluded that there will be a negative impact on state receipts that is in excess of any positive impact on sales or other state excise tax receipts occasioned by the federal stimulus package, which will put millions of dollars of rebates into the hands of Kansas taxpayers. The revenue estimators fear that, based on poll data, only about 19% of taxpayers will make new purchases with their rebate money. Approximately 45% claim they will pay existing bills and 32% claim they will put theirs into savings. The legislature relies on the estimating group’s projections, so, accordingly, the final budget bill for the session will reflect the projected lower revenues. House & Senate leadership have agreed to hold state spending increases this year to 5% or less, after back-to-back years of increases over 9%.
With regard to the status of the Sunflower Electric energy bill, the Governor vetoed a second attempt at a regulatory compromise and the House is within one vote of having enough support for a veto override that may well come up this week. In the meantime, a third compromise has been floated out that would reduce from 700-megawatts to 600 mega-watts the size of each of the two new proposed plants near Holcomb. The new proposal would also accelerate renewable energy development, add more load management/energy efficiency programs and would add carbon dioxide measurement and verification features. This is the best offer the Governor is going to get and a refusal to deal may well bring onboard sufficient votes for a veto override, if the votes aren’t already there. Recall that there has been broad bi-partisan support for the prior energy compromise. The bill is seen as critical for Kansas and particularly western Kansas which would benefit greatly from the resulting economic development in the area.