Pub. 8 2019 Issue 1

January/February 2019 9 L E A D I N G A D V O C A T E F O R T H E B A N K I N G I N D U S T R Y I N K A N S A S 2019 LEGISLATIVE SESSION PREVIEW By Alex Orel, SVP Government Relations T here is a new resident at Cedar Crest, the Kansas Governor’s residence, and her name is Laura Kelly. Formerly Senator Kelly, the 48th Governor of Kansas, coincidently represented Cedar Crest and its surrounding communities since her election to the Kansas Senate in 2004, and now she can call it home. Although some are saying this is a new era in Kansas politics with the election of Governor Kelly, which I don’t dispute, some of the same issues mentioned to you last year at this time still remain. Last year the legislature approved a $522 million increase to education over the next five years, but the court said that lawmakers fell short again and needed to add additional funding that also covered the cost of inf lation. After the ruling, the Kansas State Board of Education recommended that an additional increase of $90 million annually over the next four years “could” satisfy the court. The school districts suing the state over inadequate funding have been on the record stating that they would be “satisfied with that.” Kelly’s top campaign promise was to “end the cycle of litigation in school funding” and now it is her top agenda item for her administration. Education will of course control much of the conversation at the Capitol this session but there are other very important items that need to be discussed as well, such as tax reform. With a projected surplus of $900 million at the end of this fiscal year, the legislature has hit the ground running – debating tax reform provisions that fell four votes shy of passing last year that decouple individuals and businesses from the federal tax code. Republican leaders have promised to address the Federal Tax Cuts and Jobs Act impact on Kansans and to return the “windfall” the state is set to gain in April if no action is taken. Due to the significant increase in the standard deduction at the federal level, many Kansans will opt to take the federal standard deduction instead of itemizing. Under current law, if they take the federal standard deduction, they will not be able to itemize expenses such as their mortgage interest or medical expenses at the state level, resulting in a tax increase. Also included in the proposals are many corporate income tax provisions that can also be decoupled such as FDIC premium deduction, repatriation transition tax, global intangible low-taxed income, interest expense limitations, and capital contributions. To address these issues, the Senate has formed the Select Committee on Federal Tax Code Implementation. While these two items above will be the hot topics of the 2019 legislative session, there are many other important topics that will be discussed such as fixing the foster care system, funding our roads, improving our corrections system, funding higher education and addressing mental health. One thing is for sure, because of the dynamics of having a Democrat Governor and a conservative legislature, coalitions will have to be built from both sides to get things done. If not, we could be in for another long session. As the legislative session progresses, the KBA will once again be defending the interests of Kansas banks, including supporting tax proposals that help Kansas banks and the communities and customers they serve. We will also advocate for legislation that allows for banks to be eligible for the Entrepreneurship Tax Credit, a program created to serve potential and existing entrepreneurs statewide.We will oppose any legislation that violates the state’s long-standing policy of lien priority which is a “first in time, first in right” policy. The 2019 legislative session is already shaping up to be a good one and time will tell if either side will be able to live up to their promises.