A short, but action packed week.

Legislative Update - Week Eleven

A short, but action packed week. This week, the House worked two long days on Monday and Tuesday with business concluding at 10:30 Tuesday night. The House then adjourned Wednesday morning for the Easter break. Before the House left town, we passed several key pieces of legislation and the House began meeting with the Senate to work out the differences on the budget and tax proposals.

The Kansas Public Employees Retirement System (KPERS) currently faces an approximate $9 billion shortfall between what it has promised to pay members and what it is projected to pay out. This week, the House took action to further address this unfunded liability by passing HB 2403, a bill that would authorize the issuance of not more than $1.5 billion in bonds by the Kansas Development Finance Authority (KDFA) to be applied to the unfunded liability. One or more bonds could be issued but could not exceed the amount of $1.5 billion plus cost
of issuance and could not exceed a maximum 5 percent interest rate.

The issuance of these bonds is attractive because of the current low interest rates. The KDFA lists the rate for the $1.5 billion bond at 3.93 percent. These bonds would not be new debt but would rather re-characterize a portion of the current debt by using the principal of the bond proceeds to be invested in the KPERS portfolio. If the invested principal can earn more than the cost to borrow, this would be a way to fund the liability. Based on conservative assumptions on the KPERS portfolio, the chance of outperforming 3.93 percent over a 30 year timeframe is 90 percent.

University of Kansas Midwest Stem Cell Therapy Center
This week the House passed SB 199 which would establish the Midwest Stem Cell Therapy Center at the University of Kansas Medical Center. This center would focus on scientific advances for adult, cord blood and
related stem cell and non-embryonic stem cell research, and therapies for patient treatments. This facility will also produce clinical grade stem cells and facilitate the delivery of therapies. They will conduct clinical trials while also maintaining a resource database for physicians, and provide education training for physicians while informing the public of therapeutic options regarding stem cell advances.

The bill creates a new fund to ensure federal grants, private funding, and other dollars will cover the cost of the new project. The new facility will be governed by a 13-member board and advised by the Director of the Stem Cell Facility, who will report to the Executive Vice Chancellor of the KU Medical Center.

Drug Testing for Government Assistance
An increasing number of states have adopted, or are considering, measures to ensure government assistance is being used for its intended purposes. In 2012 alone, 28 states considered legislation regarding drug testing of welfare (TANF) and food stamp (SNAP) recipients. This session, legislation along these same lines was drafted
and passed in the Senate and, this week, was subsequently passed in the House.

The bill, SB 149, would prohibit an individual who fails a drug test from receiving assistance until they have completed drug treatment and job training programs. A second failed drug test would result in the individual having their assistance suspended for a year. Long term suspension would be for recipients who fail a third, or subsequent, drug test. In instances where a parent fails a drug test, the portion of cash assistance allocated for their children could go to a third party to administer on the child's behalf.

Last February, Congress approved a measure allowing states to drug-test individuals who receive unemployment benefits. Under this legislation, Kansas would also require potential employers who have a
job applicant fail or refuse to take a drug test report that outcome to the Kansas Department of Labor. Failure of or refusal to take the drug test would result in the individual losing their unemployment benefits until they complete drug treatment and job training programs. This provision is similar to laws already enacted in Mississippi, Georgia, Arizona and Indiana.

The bill is not intended to be punitive to those who rely on these programs but to identify those with substance abuse problems and assist them in getting the help and job skills needed to be productive members of the job market. The end result must be one that is a responsible, targeted approach to help families overcome the evils
of drug addiction and ensure the proper use of welfare and unemployment benefits.

Legal Liability of Doctors
In order to protect doctors from liability associated with "wrongful life" or "wrongful birth," the House passed SB 142. This bill would add a new section in the civil code specifically defining protections for doctors in cases of a birth in which a guardian or minor seeks damages from a doctor because of the decision of the birth. This would include protections for doctors in cases in which a baby may be born with a disability and the guardian of the baby seeks damages from the delivering doctor.

Keystone Pipeline
President Obama's refusal to approve the construction of the Keystone XL Pipeline that would be used to import oil derived from Canadian oil sands to the United States has recently been at the forefront of national policy discussions. Last Friday, the U.S. Senate voted 62 to 37 to back the project as in the best interest of the U.S. because of the jobs it would create and the significant step it would be toward energy independence. This vote was significant because the project received the support of six additional senators from last year when it
received 56 favorable votes.

In light of growing support at the national level, the House this week passed HCR 5014, a resolution that urges the U.S. Secretary of State to approve the Keystone XL Pipeline application from TransCanada. The resolution finds that for decades to come, the U.S. will remain dependent on imported energy and needs a secure supply of crude oil free from potential threats and disruptions of an unreliable crude oil supply from less secure parts of the world. It also finds that the project will create approximately 9,000 construction jobs as well as thousands of manufacturing jobs

Oil and Gas Valuation Depletion Trust Fund
Oil and gas are major components of the industrial base in many western and southeast Kansas counties. Because these resources will not last forever, the Oil and Gas Valuation Depletion Trust Fund was developed. The money credited to the account currently consists of 12.41 percent of the previous year's severance tax receipts and is meant to provide some economic relief to the affected counties once these resources are used up.

This year, the governor proposed in his budget recommendation for FY 2014 and FY 2015 abolishing the Oil and Gas Valuation Depletion Trust Fund and transferring that money to the State General Fund (SGF).
In response to this recommendation, the House worked on a compromise to keep the fund but to decrease the amount of money contributed to it. This week the House passed that compromise, Substitute for HB 2262, which would lower the percentage annually credited to the fund based on the previous year's severance tax
receipts from 12.41 percent to 8.25 percent. This lower percentage contribution to the Oil and Gas Valuation Depletion Trust Fund would increase the amount transferred to SGF by $5 million in FY 2014 and $6.7 million in FY 2015.

February Labor Report
On Thursday, the Kansas Department of Labor released their report detailing the changes in the Kansas labor market since January as well as compared to February 2012. The report indicated the Kansas economy added 2,000 seasonally adjusted jobs state wide. For the past four months the state has continued to show job growth with a total increase of 12,000 new jobs since October. Kansas saw gains in 7 of the 10 major sectors of the Kansas economy. This included manufacturing and professional services industries. Currently, seasonally adjusted unemployment stands at 5.5 percent. The March Department of Labor employment report will be released the third week of April.

Conference Committees
Next week, the House will be working through conference committee reports. These are generated by conference committees which meet to discuss differences in bills passed by each chamber. When a bill is
passed from one chamber to another and amendments are made, they are reconciled in conference where three members of each chamber (two republicans and one democrat, total 6) negotiate the differences. Once the final language is agreed to by the 6 members, they sign a report to that effect and the bill is then send to both chambers for a yes or no vote without any amendments.

This will be the process this next week as we consider and vote on the various reports dealing with the bills we have already voted on and approved. Friday, next week, is the first adjournment deadline at which point the House will be completed with a majority of its work. At that point the House and Senate should have agreements on the budget and tax packages for the next fiscal year.

I encourage you to call me 785-296-7653 or email at John.Bradford@house.ks.gov and let me know your thoughts and/or suggestions. Stop by my office any time you are in the office. I am in Room 166-W (first floor of the Capitol. Thanks for the honor of serving you.