2023 Kansas Legislative Updates

Last week the Kansas Legislature was in full action as the anticipated long hours of turnaround were met. Committee work wrapped up on last Tuesday as legislators in both chambers were on the floor all day working bills to wrap up the week. Last week was the deadline for non-exempt bills to get out of their respective chambers of origin. Bills that were not blessed by the Speaker or Senate President are now considered dead.

The Legislature will reconvene on Wednesday, March 1st. Bills that passed the House will now move over to the Senate side for hearings to be conducted and bills passed in the Senate will move to the House side to be heard. The process begins all over again. The deadline for these bills to be passed out of their chamber and head to the Governor’s desk will be Wednesday, March 29th. Once this date passes, conference committees will begin to meet to hammer out differences between each chamber's views.

Insurance

The Senate took up and passed several bills pertaining to insurance throughout the week.

• SB119, updates certain obsolete statutory references in chapter 40 of the Kansas Statutes Annotated. This passed the Senate 40 to 0.
• SB24 changes the required number of employees contained in the definitions of “large employer” and “small employer” for purposes of coverage for autism spectrum disorder. The Senate passed this 38 to 1.
• SB27, authorizes the commissioner of insurance to set the amount of certain fees. This passed the Senate 38 to 2.
• SB28, discontinues payments to certain group-funded insurance pools, refunding existing balances thereof and abolishes such funds establishing the group-funded pools refund fund. This passed the Senate 39 to 1.

SB76, a bill introduced by Senator Virgil Peck (R-Havana), did not receive action before the turnaround deadline which means the bill is dead for the session. The bill, opposed by KAIA, would no longer require some continuing education courses and would also exempt some insurance agents and public adjusters from continuing education courses if certain criteria are met that are detailed in the bill. While the bill is dead, the subject matter is never dead.

The KAIA-led bill to reduce the premium tax on surplus lines insurance has been scheduled for a hearing in House Insurance Committee on Wednesday, March 1. SB25, as amended by the Senate Committee on Financial Institutions & Insurance, would reduce the surplus lines tax from 6% to 4%. The bill unanimously passed the Senate earlier this month.

The Senate passed SB75, which changes the legal rate of interest from a fixed rate to a variable rate based on the statutory rate provided for interest judgments. The vote count for this bill was 38 to 0. The bill heads to House Judiciary for consideration.

SB74, a bill for joint liability for costs and sanctions in third-party funded litigation, requiring certain discovery disclosures and requiring payment of certain costs for nonparty subpoenas, did not pass out of the Senate Judiciary Committee. However, Senate leadership “blessed” the bill making it exempt from the turnaround deadline. Thus, the bill remains active in the second half of the session as stakeholders continue to seek amendments that will secure the necessary support to advance the bill out of committee. The KAIA remains a proponent of this legislation.

SB 25 Passes

SB 25, KAIA’s bill decreasing the surplus lines tax rate in Kansas, passed out of Senate last week with a 39-0 vote. At the direction of the GA committee, we worked closely with the Insurance Department and other industry stakeholders regarding this tax, which is tied for the highest surplus lines tax rate in the nation.

The bill passed favorably out of the Senate Financial Institutions & Insurance Committee earlier this year. The bill, as amended, would decrease the surplus lines tax rate from 6% to 4%. The amount of excess & surplus lines written premium in Kansas has doubled since 2017, which reflects the hardened insurance market that all of you are seeing on a daily basis. It shows an increased need for consumers, through licensed agents, to utilize the non-admitted marketplace to meet their insurance needs. The 6% premium tax is an additional financial burden on Kansas consumers and is unnecessary given the current state of Kansas’ finances and the increasing amount of business written with non-admitted carriers.

Thank you for your support on SB 25 and we will continue to be your advocate at the Statehouse and keep you updated on legislation that could impact your business.

Weekly Summary

Committee action began in earnest this past week as committee chairs began to work the bills that they and the leadership in each chamber have determined to be of importance this legislative session. With only two weeks remaining until Turnaround Day, the day that nonexempt bills must be passed out of the house origin to still be considered for action this legislative session, there will be a lot of committee activity this week. The schedule for next week is packed with hearings on bills and a significant amount of time allotted for consideration of bills to pass out of committees.

The budget committees and subcommittees continued the annual slog through the budgetary process. Budget priorities are beginning to take shape as multiple committees look at the priorities for the state as it approached FY 2024. Of note, it appears that the legislature may put an extra one billion dollars into a rainy-day fund. This would put the rainy-day fund at over $2 billion dollars. The legislature is also looking at significant tax reductions and adjustments. The discussion is focused on the removal of more social security income from the state income tax, a flattening and lowering of the income tax, accelerating the food sales tax exemption, and even a bit of property tax reduction. As always, the posturing and balancing of the policy and politics surrounding the budget and taxes is expected to last through the end of the session. Where it all lands, no one truly knows.

The Governor lauded Lieutenant Governor and Secretary of Commerce David Toland for the success in economic and workforce development from last year. The Governor acknowledged the shortage of labor across the state and the lack of trained skilled workers. She reiterated the need for skilled workforce training to keep Kansas’ doors open for more economic development projects in the future. In addition to her economic development goals, Governor Kelly set a goal to make Kansas the best place to raise a family in America. To reach this goal, the Governor has focused on helping families with state support for assisting families to find affordable and abundant childcare, and ensuring children get a strong start from birth to school age.

The Governor called again (as she has for 4 years) for the legislature to pass Medicaid expansion reminding legislators that all the surrounding states have adopted Medicaid expansion. The Governor also called for legalizing medical marijuana.

Meanwhile, Senate President Ty Masterson, delivered the Republican response to the Governor’s State of the State. Senator Masterson announced that he and Speaker of the House Dan Hawkins and their respective super majorities revealed their vision for Kansas called a Better Way-Our Commitment to Kansas which includes cutting taxes, empowering parents, creating jobs, and protecting person liberties. Senator Masterson recognized that the legislature will be working with the Governor to cut taxes and cautioned against spending of the Biden Administration.

Masterson called for educational opportunities for all children and ensuring parents are in control. He called for fairness in women’s sports and reduction in costs of health care and maintaining a safety net for the most vulnerable. Senator Masterson called for an “all of the above” energy policy that includes gas, coal, and nuclear energy to provide reliable energy at lower rates for Kansas consumers. Masterson reiterated Republicans support for a culture of life which includes reduction of the number of abortions, promotion of adoption, expansion of availability of crisis pregnancy centers, and preserving current laws. Finally, Masterson noted that Republicans support the Constitution and vowed to stop passage of laws that abridge the freedom of speech or freedom of assembly or prohibits the free exercise of religion and preserving all other Constitutional rights.

However, the Governor’s budget for FY 2024 and amendments to the FY 2023 budget were released on Thursday. This is the first step for the state legislature to fulfill its constitutional requirement to pass an operational budget for state services. The Governor’s budget recommended numerous tax reductions including an acceleration of the state food sales tax exemption. The Governor is expected to lay out more broad policy objectives during her State of the State address next week. House and Senate Republicans rolled out their policy platform for the 2023 session as well. Like the Governor, their platform includes reducing taxes, paying down debt, and other policies. However, as expected, the approaches to doing so differ.

The Senate Financial Institutions & Insurance Committee met this week to discuss and approve committee rules, accept bill introductions, and hold a few informational briefings. Notably they received an update on the Kansas Insurance Department from Commissioner Schmidt. Meanwhile, the House Insurance Committee did not meet in the session’s first week. That committee will meet for the first time on Wednesday, January 18 to receive the same update from the Commissioner.

Additionally, the Department introduced several bills affecting the industry—see bill tracker. KAIA has met and continues to discuss these proposals with the Department. Finally, KAIA introduced our proposal to reduce the tax on surplus lines from 6% to 3%. That bill has been designated as Senate Bill 25 and we are working to get a hearing scheduled in Senate FI&I soon.

Bill SB 25 was introduced and referred to the Committee on Financial Institutions and Insurance on Jan. 12. This bill would decrease the premium tax rate imposed on surplus lines insurance from 6% to 3%. The 6% rate is tied for the highest in the nation, and there seems to be no sound business reason for the high rate. We have talked to many other stakeholders in our industry and are hopeful about the bill’s success, however, we are always cautious of what unknown opponents may be out there! If you would like to submit written testimony or give oral testimony on this bill, please contact Beth Smoller.