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Committee Reports to the 2004 Kansas Legislature PDF Free Download

Committee Reports to the 2004 Kansas Legislature PDF free Download. Think more deeply and widely.

Committee Reports

to the

2004 Kansas Legislature

Special Committees;

Selected Joint Committees;

Other Committees,

Task Forces, and Working Groups

Kansas Legislative Research Department

December 2003

Legislative Coordinating Council

Chairperson

Senator Dave Kerr, President of the Senate

Vice Chairperson

Representative Doug Mays, Speaker of the House

Lana Oleen, Senate Majority Leader

Anthony Hensley, Senate Minority Leader

Clay Aurand, House Majority Leader

John Ballou, Speaker Pro Tem

Dennis McKinney, House Minority Leader

Kansas Legislative Research Department

300 SW 10th, Room 545-N, Statehouse

Topeka, Kansas 66612-1504

Telephone: (785) 296-3181

FAX: (785) 296-3824

kslegres@klrd.state.ks.us

http://www.kslegislature.org/klrd

Special Committees;

Selected Joint Committees;

Other Committees,

Task Forces, and

Working Groups

Agriculture

Appropriations/Ways and Means

Assessment and Taxation

Insurance

Judiciary

Kansas Security

Local Government

Utilities

Arts and Cultural Resources

Corrections and Juvenile Justice

Economic Development

Information Technology

Legislative Budget

Legislative Educational Planning

Pensions, Investments, and Benefits

School Finance

State-Tribal Relations

Workers Compensation

Health Insurance Issues

Long-Term Care

Kansas Legislative Research Department

300 SW 10th, Room 545-N, Statehouse

Topeka, Kansas 66612-1504

(785) 296-3181 kslegres@klrd.state.ks.us

http://www.kslegislature.org/klrd

FOREWORD

In the 2003 Interim the Legislative Coordinating Council appointed nine special

committees to study some 32 study topics. Legislation recommended by the committees

will be available in the Documents Room early in the 2004 Session.

Joint committees created by statute met in the 2003 Interim as provided in the statutes

specific to each joint committee. Most of the joint committees have reported on their

activities and those reports are contained in this publication. Legislation recommended

by these committees will be available in the Documents Room early in the 2004 Session.

This publication also contains reports of other committees, commissions, and task forces

which are not special committees created by the Legislative Coordinating Council or Joint

Committees.

Reports of the Special Committee on Commerce and Labor, the Joint Committee on

Children’s Issues, the Joint Committee on Health Care Stabilization Fund, and the School-

Based Budget Working Group are not contained in this publication.

Minutes of the special committees; joint committees; other committees, commissions, and

task forces meetings are on file in the Division of Legislative Administrative Services.

A summary of each reporting entity’s conclusions and recommendations may be found on

page v.

TABLE OF CONTENTS

Page

SPECIAL COMMITTEE ON AGRICULTURE ..................................... 1-3

Consolidation of Food Safety Functions ..................................... 1-3

SPECIAL COMMITTEE ON APPROPRIATIONS/WAYS AND MEANS ................. 2-3

Consolidation or Closure of a Mental Health

or Developmental Disability Institution ................................... 2-3

Funding of the Animal Health Department ................................... 2-8

Medicaid Reimbursement Rates-Home and Community Based Waiver for

the Frail Elderly and People with Physical Disabilities ....................... 2-10

Medical Transportation Delivery System .................................... 2-13

SPECIAL COMMITTEE ON ASSESSMENT AND TAXATION ....................... 3-3

Corporation Franchise Taxes .............................................. 3-3

Estate Taxes ........................................................... 3-5

Job Retention Policy ..................................................... 3-7

Local Sales Tax Uniformity ............................................... 3-8

Monitor Streamlined Sales Tax Implementation .............................. 3-11

Motor Vehicle Sales Taxes ............................................... 3-14

Property Tax on Damaged Property ........................................ 3-16

Property Tax Exemptions for Senior-Care Facilities ........................... 3-17

Property Tax Income and Expense Information ............................... 3-19

Severance Tax Administration ............................................ 3-20

Transportation of Cigarettes .............................................. 3-22

Use Tax on Computer Software Customization Services ........................ 3-24

SPECIAL COMMITTEE ON INSURANCE ....................................... 4-3

General review of All Mandated Insurance Coverage ........................... 4-3

SPECIAL COMMITTEE ON JUDICIARY ........................................ 5-3

Allocation of Judicial Resources ........................................... 5-3

Judicial Docket Fees ..................................................... 5-6

Kansas Surety Recovery Agents Act ........................................ 5-10

Kansas Uniform Securities Act ........................................... 5-13

Review of Kansas Liquor Control Act ...................................... 5-15

SPECIAL COMMITTEE ON KANSAS SECURITY ................................. 6-3

Terrorism Exercise ...................................................... 6-3

SPECIAL COMMITTEE ON LOCAL GOVERNMENT .............................. 7-3

Kansas Open Records Act ................................................. 7-3

Local Government Publication Requirements ................................. 7-5

Modernization of Local Governments ....................................... 7-7

SPECIAL COMMITTEE ON UTILITIES ......................................... 8-3

Telecommunications .................................................... 8-3

iii

JOINT COMMITTEE ON ARTS AND CULTURAL RESOURCES ..................... 9-3

Program Descriptions and funding Issues .................................... 9-3

JOINT COMMITTEE ON CORRECTIONS AND JUVENILE JUSTICE OVERSIGHT ...... 10-3

2003 Interim Committee Report ........................................... 10-3

JOINT COMMITTEE ON ECONOMIC DEVELOPMENT ........................... 11-3

Agritourism Limited Liability ............................................ 11-3

Healthcare and the Business Community ................................... 11-5

Kansas Economy and Future Business Developments in Kansas ................. 11-7

Rural Economic Development Initiatives ................................... 11-10

Tourism in Kansas .................................................... 11-12

University Research and Development .................................... 11-14

Virtual Tax Increment Financing District .................................. 11-16

Workforce Development Coordination ..................................... 11-17

JOINT COMMITTEE ON INFORMATION TECHNOLOGY ......................... 12-3

Statutory Duties and Studies ............................................. 12-3

LEGISLATIVE BUDGET COMMITTEE ........................................ 13-3

Board of Indigents’ Defense Services Funding ................................ 13-3

Capital Punishment .................................................... 13-6

Community College Operating Grant ....................................... 13-7

Community Developmental Disability Organization (CDDO) Redesign ........... 13-10

Long-Range Revenue Structure Planning Group (2003 SR 1842) ................ 13-16

Review the Current Status of the State Budget, Both Revenues and Expenditures ... 13-18

LEGISLATIVE EDUCATIONAL PLANNING COMMITTEE ......................... 14-3

Elementary and Secondary Education Postsecondary Education ................. 14-3

JOINT COMMITTEE ON PENSIONS, INVESTMENTS, AND BENEFITS .............. 15-3

KPERS Long-Term Funding Study Assigned by LCC ........................... 15-3

Statutory Studies ..................................................... 15-15

SELECT JOINT COMMITTEE ON SCHOOL FINANCE ............................ 16-3

2003 Report .......................................................... 16-3

JOINT COMMITTEE ON STATE-TRIBAL RELATIONS ........................... 17-3

Fifth Annual Report (2003) .............................................. 17-3

WORKERS COMPENSATION FUND OVERSIGHT COMMITTEE ................... 18-3

Annual Report ........................................................ 18-3

HEALTH INSURANCE ISSUES WORKING GROUP .............................. 19-3

A Comprehensive Study of Health Insurance Affordability

and Availability to the Citizens of Kansas ................................ 19-3

LONG-TERM CARE SERVICES TASK FORCE ................................... 20-3

Year Four Report ...................................................... 20-3

SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS

Special Committee on Agriculture

The members of the Special Committee on Agriculture recommend that legislation be introduced,

in the Senate first, with the following components:

!The bill would transfer food safety programs from the Kansas Department of Health and

Environment (KDHE) to a newly named Department of Agriculture and Food Safety;

!The bill would formally create a working group composed of the Secretary of Health and

Environment; the Secretary of Agriculture; industry officials; Kansas State University

officials; Legislative representatives; the Livestock Commissioner; Federal Food and Drug

Administration officials; Food Safety Inspection Service (USDA) officials; representatives of

the Kansas Restaurant and Hospitality Association; representatives of the Kansas Public

Health Association; local health departments; and others as deemed necessary by the

Secretaries of Health and Environment and Agriculture. The working group would work on

a variety of issues relating to food safety. The working group would report to the Legislature

by February 1, 2005 and would be sunsetted on June 30, 2005.

!The third component of the bill would make necessary statutory changes to bring all "food

processing plants" back under state licensing and inspection. This action would correct 2002

legislative action.

!The final major component of the bill would require communication between the newly

named Department of Agriculture and Food Safety and the Bureau of Epidemiology and

Disease Prevention in KDHE with regard to food safety issues. The Committee believes this

ongoing communication is imperative.

Special Committee on Appropriations/Ways and Means

Consolidation or Closure of a Mental Health or Developmental Disability Institution. The

Committee recommends Larned and Osawatomie State Hospitals remain open and that the 2004

Legislature review bed capacity and staffing levels at these institutions to ensure that the needs

of the mental health community are being met. In regard to Rainbow Mental Health Facility, the

Committee recommends that the discussion remain open to allow for possible opportunities to

privatize or otherwise utilize the facility in the future.

The Committee also recommends that the Department of Social and Rehabilitation Services create

a task force that includes parents with children in mental retardation facilities, developmental

disability advocates, and community providers to recommend alternative usage of editing

intermediate care facilities for the mentally retarded (ICF/MR) and state developmental disability

institutions and report to the 2004 Legislature by March 15, 2004.

Funding of the Animal Health Department. After review of the topic, the Committee recommends

that representatives from each industry work with the agency to develop a fee proposal that would

be acceptable to all interested parties. The Committee encourages the respective industries to

present their proposal to the Legislature by the start of the 2004 Legislative Session. The

Committee notes that this issue has not been resolved, and that those involved in the budgetary

process for this agency need to continue to be aware of this issue. The Committee further

recommends that the agency develop a policy manual to aid in consistent inspections throughout

the state and that the agency needs to focus on targeting inspections on problem areas.

Medicaid Reimbursement Rates-Home and Community Based Waiver for the Frail Elderly and

People with Physical Disabilities. The Committee recommends that the Department of Social and

Rehabilitation Services (SRS) and the Department on Aging (DOA) explore the feasibility,

including the initial cost, to become the employer of record. The Committee has concerns about

the State becoming liable for items for which payroll agents now have responsibility such as

workers compensation, unemployment and other liability. The agencies also should provide

more detailed information regarding the reimbursement differences for individuals on the

HCBS/PD waiver. The departments should use FY 2003 as a base, look at the total amount of

money being paid for HCBS/PD and FE waiver services, and identify the amounts that were paid

to gather a true average cost per hourly basis. The Committee suggests that SRS look at the wide

range of services provided by payroll agents in the State since it seems to vary significantly. In

addition, the Committee recommends reviewing the Independent Living Centers and the for-profit

organizations in regard to services they provide, including administrative costs.

The Committee also recommends that SRS look at other states and consult with the Center for

Medicaid and Medicare Services (CMS) to see what is being done in regard to the cash and

counseling model and how that might apply to Kansas. The Committee recommends that SRS

come back with a report to the 2004 Legislature with an overview of the program.

Medical Transportation Delivery System. The Committee believes that it is important to address

the issue of the medical transportation delivery system in the best way possible to avoid

negatively impacting Medicaid recipients. To that end, the Committee recommends that the

Department of Social and Rehabilitation Services (SRS) meet with Assisted Healthcare and other

transportation providers and consider the suggestions noted by the representatives of the

transportation service providers. The Committee recommends that SRS report its findings to the

2004 Legislature, and include conclusions as to whether the provider suggestions can be

implemented.

The Committee also recommends that SRS explore the availability of other federal funds,

community funds, or funding under the Americans with Disabilities Act, and whether there is any

incentive to use those funds.

Special Committee on Assessment and Taxation

Corporation Franchise Taxes. The Committee finds that the corporate franchise tax rate

increases in the 2002 law were particularly burdensome for small Kansas businesses and therefore

recommends the introduction of legislation to return the rate and structure of the tax to the pre-

2002 provisions. The Committee also recommends the introduction of legislation that would

move the net-worth portion of the tax to the Department of Revenue while simultaneously

retaining a small annual filing fee with the Secretary of State.

Estate Taxes. The Committee makes no recommendations regarding this topic.

Job Retention Policy. The Committee finds that allowing certain tax credits to be transferrable

would assist small businesses in helping retain low-income workers and recommends the

introduction of legislation that would allow the transferability of credits for employer health

insurance contributions.

Local Sales Tax Uniformity. The Committee recommends a two-fold approach to providing

additional "breathing room" in order to assure that uniformity is restored to the local sales tax law

on a permanent basis. The Committee recommends legislation which would reduce the number

of classes in the local sales tax law to two by effectively extending additional sales tax authority

to a number of cities. The Committee further recommends introduction and placement on the

November 2004 ballot of a proposed constitutional amendment that would expand to ten the

number of classes the Legislature may utilize for the purpose of limiting or prohibiting taxation

by cities.

Monitor Streamlined Sales Tax Implementation. The Committee recommends the introduction

of legislation that would provide a tax credit to help offset software costs for certain small

businesses associated with implementing the state's new destination-based sales tax sourcing

provisions. The Department of Revenue is requested to develop the legislation and submit it to

the standing taxation committees in January.

Motor Vehicle Sales Taxes. The Committee recommends that the Department of Revenue prepare

legislation for introduction in January that would statutorily codify the linkage between motor

vehicle license renewal and sales tax compliance; and would provide clear statutory guidance

with respect to when the amounts reported for certain private sales are deemed to be questionable

and should be replaced by a proxy estimate of vehicle value.

Property Tax on Damaged Property. The Committee makes no recommendations regarding this

topic.

Property Tax Exemptions for Senior-Care Facilities. The Committee makes no recommendations

regarding this topic.

Property Tax Income and Expense Information. The Committee makes no recommendations

regarding this topic.

Severance Tax Administration. The Committee requests SB 267 be withdrawn from the Senate

Assessment and Taxation Committee and referred to the Senate Utilities Committee. The

Committee further suggests that the latter committee consider introducing a substitute bill based

upon the most recent set of amendments suggested by proponents.

Transportation of Cigarettes. The Committee encourages a working group formed by the

Department of Revenue to continue to work on the provisions of a substitute bill for HB 2422,

which should be ready for introduction in January.

Use Tax on Computer Software Customization Services. The Committee recommends that the

2004 Legislature strongly consider repealing the sales tax on computer software customization

services. The Committee also believes that current lack of a use tax places Kansas-based

businesses performing computer software customization services at a substantial competitive

disadvantage. In the event the 2004 Legislature does not repeal the sales tax on such services, the

Committee recommends legislation enacting a use tax to help protect Kansas businesses against

competition from outside the state.

vii

Special Committee on Insurance

General Review of All Mandated Insurance Coverage. The Committee reviewed current statutory

mandates and sees no need for change at this time. The Committee held hearings on proposals

from the 2003 Session to mandate coverage for contraceptives, clinical cancer trials, and common

therapies utilized in early intervention of developmental disabilities. The Committee:

recommends that the Legislature not enact proposed legislation mandating coverage for

contraceptives; has no recommendation regarding proposed legislation mandating coverage for

clinical cancer trials; makes no recommendation regarding mandating coverage for common

therapies utilized in early intervention of developmental disabilities; and withdrew from

consideration the proposed study on hair prostheses.

Special Committee on Judiciary

Allocation of Judicial Resources. The Committee recommends the Legislature adequately fund

the Judicial Branch and that the “one judge per county” requirement be allowed to be met by part-

time judges.

Judicial Docket Fees. The Committee recommends that a $5 fee be added for filing garnishments,

that the docket fee increase to fund the Kansas Judicial Council be made permanent and that

sheriffs be allowed to charge a $10 fee for service of process.

Kansas Surety Recovery Agents Act. The Committee recommends legislation be enacted to

require notification by sureties or bounty hunters before attempting to apprehend a person who

has violated a bail bond and that persons convicted of felonies and certain misdemeanors not be

permitted to be bounty hunters.

Kansas Uniform Securities Act. The Committee recommends the Uniform Securities Act be

passed by the Legislature without the inclusion of variable annuities included in the definition

of security. The Insurance Commissioner and Securities Commissioner should develop suitability

standards for the purchase of variable securities.

Kansas Liquor Control Act. The Committee recommends legislation to allow Sunday sales of

liquor and amendments to make the Liquor Control Act and the Cereal Malt Beverage Act

uniformly applicable to all cities.

Special Committee on Kansas Security

Terrorism Exercise. The Special Committee on Kansas Security recommends the development

of a clarifying definition for the term "first responder" to conform with federal definitions; the

creation and maintenance of a state-wide communication system which would provide

interoperability for all state agencies and local units of government which would connect to the

system; a review of Homeland Security funding received by state agencies; the creation of an

Oversight Committee or the endorsement of the Governor’s Council on Homeland Security to

review and approve the distribution of Homeland Security funding by state agencies; the drafting

of a letter from the Legislative Coordinating Council (LCC) to the Environmental Protection

Agency (EPA) and the Kansas Congressional Delegation to address concerns relating to state

access to vulnerability and threat assessments conducted on community water systems; the LCC

to continue the development of contingency plans for the continuity of government activities for

viii

the Legislative and Judicial Branches; the continued review by the LCC of the potential issuance

of key-cards to registered lobbyists in order for them to access the Capitol; and the introduction

of legislation to amend the Kansas Open Meetings Act and the Kansas Open Records Act to allow

the closure of meetings by local units of government when they are discussing matters of

terrorism, emergency response plans, or homeland security.

Special Committee on Local Government

Kansas Open Records Act. The Committee recommends the Kansas House and the Senate each

appoint a special Committee during the 2004 Legislature to begin a thorough review of open

records exceptions.

Local Government Publication Requirements. The Committee makes no recommendations on

this topic.

Modernization of Local Governments. The Committee makes no recommendations on this topic.

Special Committee on Utilities

Telecommunications. The Committee recommends that:

!KAN-ED provide services to medical clinics in those communities that do not have a hospital.

!The House Utilities Committee, Senate Commerce Committee, and Joint Committee on

Information Technology meet jointly during the third week of the 2004 Session for an update

on KAN-ED implementation.

!The Legislature consider increasing the maximum administrative fine that can be imposed by

the KCC for violation of its orders.

!The Department of Transportation provide to the House Committee on Utilities and to the

Senate Commerce Committee during the 2004 Session documentation supporting the

Department’s policies regarding use of the 800 MHz radio towers.

!A link be created between the KDOT fiber backbone that runs along I-10 through Topeka and

the Capitol in downtown Topeka.

Joint Committee on Arts and Cultural Resources

Program Descriptions and Funding Issues. The Committee endorses the programs and goals of

the Kansas Arts Commission, the Kansas Humanities Council, the Kansas State Historical Society,

the Kansas State Department of Education, the State Librarian, and the Kansas Film Commission.

The Committee strongly urges the exploration of other revenue sources to enhance arts and

humanities programs. The Committee believes that these programs enhance not only the quality

of life of Kansans but also foster the economies of Kansas communities. Thus, they merit the

strongest support of the Legislature.

Joint Committee on Corrections and Juvenile Justice Oversight

Additional Inmate Capacity. The Committee recommends the construction of an additional

housing unit at the El Dorado Correctional Facility. The Committee also recommends the

Legislature and the Kansas Department of Corrections (KDOC) consider privatization options

regarding construction and operation of correctional facilities as appropriate.

Capital Punishment Where the Defendant is Mentally Retarded. The Committee recognizes the

need to modify Kansas law with respect to capital punishment when the defendant is mentally

retarded and supports modification of the law in light of the recent U.S. Supreme Court cases.

The Committee wishes to receive the Judicial Council report on this subject before making a

recommendation on this topic.

Juvenile Justice Authority Act. The Committee recommends introduction of a bill in the House

of Representatives, which would repeal the sunset provision related to the Juvenile Justice

Authority.

KDOC Risk Management Philosophy. The Committee endorses the KDOC risk management

philosophy.

Prison Fellowship Program. The Committee recommends continuation of the InnerChange

Freedom Initiative Prison Fellowship Program as presently administered by the KDOC.

Records of Children in Need of Care and Juvenile Offenders. The Committee (1) takes no

position on SB 67, but rather leave this to the SB 67 Senate-House Conference Committee to take

such action as the Conference Committee deems appropriate and in the best interests of the state;

and (2) makes no recommendation until the Kansas Judicial Council has presented its report and

recommendations, including a bill draft if one is proposed.

Treatment of Mentally Ill Inmates; Adequacy of Correctional Facilities for Mentally Ill Inmates.

The Committee recommends the Legislature retain an expert to evaluate the adequacy of mental

health services and facilities for inmates, and request proposals for collaborative evaluation of the

adequacy of the mental health system in general. The Committee also recognizes that, although

significantly reduced in capacity and scope by budget reductions during the past four years,

KDOC maintains some core program interventions (primarily sex offender treatment, therapeutic

community-substance abuse treatment, and vocational and other education programs), which

provide positive opportunities for offenders to prepare for successful release and re-entry.

Sentencing Policies; Increased Sentences for Certain Offenders; Review of Criminal Sentencing.

The Committee recommends no action, instead expressing confidence in the Kansas Sentencing

Commission, which, when its findings are complete, will be the proper voice to speak to the

Kansas Legislature on these topics.

Statewide Policy to Address Methamphetamine Abuse. The Committee recommends the

Legislature fund: (1) the enforcement activities of the Kansas Bureau of Investigation (KBI),

which, until April 2004 are funded by federal grants ($750,000 annually); and (2) the prevention

activities of the Kansas Methamphetamine Prevention Project (KMPP), the federal funding of

which was unexpectedly eliminated in October 2003. The Committee also recommends

introduction of a bill requiring wholesalers or distributors of ephedrine and pseudoephedrine to

Joint Committee on Economic Development

Agritourism Limited Liability. The Committee makes the following recommendations regarding

this topic:

!The Committee recommends that the Kansas Insurance Commissioner open a dialog with the

Kansas insurance industry about the lack of liability insurance for farmers and ranchers who

are developing an agritourism enterprise and report back to the appropriate standing

committees during the 2004 Session. In addition, the Commissioner is asked to encourage

Kansas insurance companies to assist in providing coverage.

!The Committee wishes to acknowledge Senator Schmidt’s proposed bill regarding limiting

liability in agritourism. At this time, the Committee recommends that all of the interested

parties come together to propose a cooperative bill early in the 2004 Session that addresses

their differences. If there is no new legislation with significant consensus and support

introduced by this group, the Committee recommends that the language from 2003 SB 134 as

presented to the Governor be reintroduced as the basis for discussion for agritourism during

the 2004 Session. In addition, any agritourism bill sponsor is asked to consider including both

entities and individuals in the definition of operator.

Healthcare and the Business Community. The Committee acknowledges that health care costs

continue to be a major concern for all Kansas business.

Kansas Economy and Future Business Developments in Kansas. The Committee makes the

following recommendations regarding this topic:

!The Committee is requesting a follow-up report from the Federal Reserve Bank of Kansas City

on the economic condition of the state and asks that this report be given to the appropriate

committees during the 2004 Legislative Session.

!The Committee is encouraged by the new leadership of Kansas, Inc. and its vision and goals

for the agency.

!The Committee strongly recommends that reports from the Life Sciences Initiative and the

Stowers Institute need to be presented to the Senate Ways and Means Committee and the

House Appropriations Committee.

!The Committee suggests that there needs to be a consistent emphasis in our schools on science

and math and this emphasis needs to start during a child’s early years. The Committee hopes

this emphasis coupled with new opportunities in employment will slow or stop the “brain

drain” from Kansas.

Rural Economic Development Initiatives. The Committee makes the following recommendations

regarding this topic:

!The Committee recognizes that entrepreneurship is the key to rural economic development

and will require the passage of legislation during the 2004 Legislative Session. However, at

this time, the Committee does not propose to submit any legislation with regard to

entrepreneurship.

!The Committee has begun the groundwork with Kansas Technology Enterprise Corporation

(KTEC) to facilitate the development of ‘farmaceutical’ ventures which include the growth and

processing of genetically engineered crops to create components, proteins in particular, for

use in the manufacturing of drugs. At this time, no progress has been reported to the

Committee.

! The Committee supports and encourages the expansion of the Enterprise Facilitation Initiative

at the Department of Commerce.

Tourism in Kansas. The Committee makes the following observations regarding this topic:

!The Committee noted that the boxing industry could be one vehicle to promote tourism in

Kansas and to generate revenues for the state.

!The Committee is very encouraged by Scott Allegrucci and his staff in the Travel and Tourism

Division at the Department of Commerce on their approach to promoting tourism in Kansas.

!The Committee recognizes the importance of product development and marketing, and that

in Kansas, the funding for these endeavors has fallen short. In the future, the Committee

believes the state must make a significant financial investment in tourism. The Committee

hopes that information and assistance from the Federal Reserve Bank of Kansas City can help

identify the state’s return on this investment.

University Research and Development. The Committee acknowledges that the implementation

of 2002 HB 2690 is currently on schedule and under budget for the construction of research

facilities at Kansas State University, University of Kansas Medical Center, and Wichita State

University. Furthermore, the Committee, with great interest, will continue to follow the progress

of the University Research and Development Act created by HB 2690.

Virtual Tax Increment Financing District. The Committee has no conclusions or recommenda-

tions concerning the Virtual Tax Increment Financing Districts.

Workforce Development Coordination. The Committee makes the following recommendations

regarding this topic:

!The Committee wishes to commend and encourage the continued collaboration and success

of the Kansas Technical Training Initiative (KTTI) in Wichita. KTTI is working with the City

of Wichita and Sedgwick County which provided start-up funding to KTTI to retrain laid-off

workers in the airframe program.

!The Committee wishes to commend the Departments of Commerce and Revenue for their

cooperative efforts on economic development issues as this cooperation is an essential element

for a positive business climate.

Joint Committee on Information Technology

Legislative Computing. The Committee directs the Legislative Branch CITO to include enterprise

security within the Long-Range Strategic Plan revision that currently is being developed. The

xii

Committee also recommends a number of changes in the proposed policy statements for the

legislative information technology policy and procedures update.

Project Reviews During 2004 Session. The Committee recommends that the House Appropria-

tions Committee and Senate Ways and Means Committee monitor approved projects that have had

changes in end date, plan cost, or plan scope that either recasts or redefines the information

technology developments. Several other projects should be monitored because of costs. The

Committee also recommends a number of other planned or proposed projects should be reviewed

by the House Appropriations Committee and Senate Ways and Means Committee during the 2004

Session.

Joint Committee on Legislative Budget

Board of Indigents’ Defense Services Funding. The Committee makes the following recommenda-

tions regarding this topic:

!The Legislative Budget Committee recommends that the salary of public defenders be increased

so that it is reasonably equivalent to that of attorneys in other state agencies. In the

Committee’s opinion, the salary inequity is illogical given the public defender caseload and the

difficulty of the work involved. However, the Committee also recognizes the state’s current

budget situation and recommends that the salaries be increased incrementally over a time

period of not more than five years.

!On the topic of a new public defender office in the 14th Judicial District, the Committee

believes that it would provide better representation for the agency’s clients as well as being

more cost effective for the state. However, the Committee expresses concern over the cost of

establishing a new office and recommends that any state funds be contingent upon the county

furnishing available office space. The Committee also suggests that the agency study the

possibility of establishing a satellite office of the Chanute public defender office rather than a

stand-alone office.

!The Committee acknowledges the need to increase the hourly rate for assigned counsel, but

also notes that funding currently is not available. The Committee recognizes that, should

attorneys continue to withdraw from assigned counsel panels, the establishment of more public

defender offices might be required even though that may not be the most cost effective delivery

of services.

!During the Committee’s discussion, several suggestions were made by the Executive Director

of the Board of Indigents’ Defense Services which the Committee believes have great merit for

further study. The Committee would like the House Appropriations Public Safety Budget

Committee and the Senate Ways and Means Judicial Subcommittee to review all of the

Executive Director’s suggestions particularly the ideas of hiring an additional Assistant Director

to audit applications for indigency and establishing a free-standing group similar to the Kansas

Bureau of Investigation to provide expert testimony for DNA testing and other forensic studies.

Capital Punishment. The Committee makes no specific recommendations regarding this topic.

Community College Operating Grant. The Committee supports the efforts taken by the Board of

Regents, the Regents institutions, the community colleges, and the technical colleges to move

xiii

toward a performance-based funding plan for increases in state funding. Legislation passed

during the 2002 Legislative Session authorized the Board of Regents to review and approve

institutional improvement plans and to use those plans to implement a performance agreement

with each institution. Each performance agreement is to include specific performance measures

and, beginning in FY 2006, any new state funds will be based upon compliance with those

measures. New state funds, whether actually received by the institution or not, would be factored

into the base in subsequent years for calculating any state funding increases.

The Committee also expresses concern about funding streams for technical colleges in light of

changes in the governance structure. The Committee notes that the Legislative Educational

Planning Committee studied the topic during the 2003 Interim and recommended the

introduction of legislation which provides authority for technical colleges to make separate mill

levies for adult basic education and operating expenditures.

Community Developmental Disability Organization (CDDO) Redesign. The Committee

recommends the introduction of a bill that would do the following:

!Eliminate the Community Service Provider (CSP) functions of Community Developmental

Disability Organizations (CDDOs);

!Allow CDDOs that are currently providing CSP-type services to continue to do so until June

30, 2006;

!Allow for "bonus" state grant payments to CDDOs that discontinue the provision of CSP-type

services prior to the June 30, 2006 cut-off date;

!Define functions for which the CDDOs are responsible: client eligibility; tier determination;

annual review and quality control of services. (These functions may be provided directly by

the CDDOs or may be contracted.);

!Limit the number of CDDOs by requiring a minimum population base of 150,000 people;

!Authorize a pilot program for peer review of quality control;

!Require SRS to establish rules and regulations regarding CDDOs; and

!Authorize SRS to establish a single case management system for all waivers.

In addition, the Committee directs that SRS report back on the following issues to the appropriate

legislative committees during the 2004 Session: the appropriate population size for the CDDO

service areas; a definition of case management for CDDOs; and a mechanism for funding that

would allow counties to target funds allocated through county mill levies for CDDOs (and federal

matching funds) to be expended at the counties' CSP of choice.

Long-Range Revenue Structure Planning Group (2003 SR 1842). The Committee recommends

that the 2004 Session of the Legislature develop a plan to include the allocation of State General

Fund moneys used to pay for KPERS pensions for school personnel as a part of the school finance

formula to be reflected in the base state aid per pupil. The Committee believes that the issue of

long-range planning deserves an ongoing review. Therefore, the Committee recommends that the

Legislative Coordinating Council approve, for the 2004 Interim, the creation of the Long-Range

Revenue Structure Planning Group as outlined in 2003 SR 1842.

Review the Current Status of the State Budget, Both Revenues and Expenditures. After

conducting its usual monitoring of the state budget, the Committee makes no specific

recommendations on this topic.

xiv

Legislative Educational Planning Committee

The Legislative Educational Planning Committee recommends 11 bills for introduction during the

2004 Session. One bill would allow flexibility for school districts that are in the process of

consolidating, while retaining current deadlines that provide a financial incentive for districts

that consolidate prior to July 1, 2004. Under the proposal, districts that have initiated the process,

but do not complete it until July 1, 2005, still would qualify for the incentive, but for a reduced

period of time. Legislation is recommended that would increase funding for Smart Start Kansas,

from approximately $3.0 million to $10.0 million, by increasing the transfer of tobacco revenues

from the Kansas Endowment for Youth Fund to the Children’s Initiatives Fund. Legislation

concerning Learning Quest is recommended for introduction to increase the amount of the

income tax deduction for account owners from $2,000 to $4,000 for individual taxpayers and from

$4,000 to $8,000 for married couples filing jointly and to do other things recommended by the

State Treasurer. Legislation patterned after 2003 HB 2145, which would give undocumented

immigrants resident status for in-state tuition purposes, is recommended, with provisions

intended to eliminate some of the unintended consequences of the original bill. (Introduction of

this legislation is endorsed by the State Board of Regents.) Seven bills are recommended for

introduction at the request of the State Board of Regents. They would authorize technical

colleges to make mill levies for operating expenditures and adult basic education (two bills);

credit interest earned on the General Fees Fund and certain other special revenue funds back to

the fund that generates the earnings and not to the State General Fund; authorize the State Board

of Regents to charge a fee for activities related to approving private degree granting institutions

and repeal the registration requirement pertaining to out-of-state schools that offer, in Kansas,

fewer than 30 hours leading to a degree (two bills); authorize Kansas State University to sell land

to the K-State Foundation for the purpose of constructing a hotel to serve as an on-campus

laboratory for the hotel and restaurant management program; and authorize expenditures from

the General Fees Fund for capital improvements as well as the current uses of salaries and wages

and other operating expenditures.

Joint Committee on Pensions, Investments, and Benefits

KPERS Long-Term Funding Study Topic Assigned by LCC. The Committee recommends the

following items be included in a bill to be introduced for consideration by the 2004 Legislature:

!Changing the actuarial cost method for all three plans – regular KPERS, KP&F, and Judges.

!Modifying the asset smoothing method.

!Reamortizing the unfunded actuarial liability if and when deemed prudent by the KPERS

Board of Trustee.

!Modifying the statutory contribution caps for local employers.

!Separating the state and school group into two groups for actuarial purposes in calculating

individual contribution rates for the state group and for the school group.

Regarding a long-range funding plan, the Committee regrets that a comprehensive package was

not developed during the 2003 Interim. The Committee believes that HB 2014 from the 2003

Session was one step in solving the KPERS long-term funding issue. Additional steps must be

taken, including the disposition of recommendations regarding issuance of $500 million in bonds

and introduction of a new bill modifying actuarial methods and KPERS groups. Depending upon

the disposition of these two recommendations, further steps will be required in developing a

comprehensive plan during the 2004 Interim.

Carry Over Bills. In regard to carry over legislation that is already assigned to legislative

committees for the 2004 Session, the Committee reviewed a number of bills: SB 60, HB 2127, HB

2225, HB 2012, and HB 2124. The Committee takes no further action on these bills, with the

exception of HB 2012 which it recommended for introduction last year. The Committee reiterates

its support of HB 2012.

Confirmation Recommendation. Pursuant to KSA 46-2201, the Committee interviewed Doug

Wolff, a gubernatorial nominee to the KPERS Board of Trustees, and recommends the nomination

favorably when considered by the Senate Ways and Means Committee during the 2004 Session.

Death and Disability. Regarding death and disability funding, the Committee plans to monitor

this issue as additional information is received from KPERS, including a study due in early 2004

about changes in program administration.

KPERS Bill Requests. The Committee recommends two bills be introduced for changes requested

by the KPERS Board of Trustees:

!Modifying the statutory 5.0 percent limitation on alternative investments.

!Allowing decisions on real estate investments without the requirement that the KPERS Board

of Trustees must specifically approve or disapprove each transaction.

Statutory Study and Recommendation. The Committee recommends favorably to the State

Finance Council the issuance of $500 million in pension obligation bonds authorized by Section

16 of Chapter 155, 2003 Session Laws of Kansas. This recommendation fulfills the provision of

Section 16(f) of Chapter 155 that “No bonds shall be issued pursuant to this section prior to the

review and recommendation to the State Finance Council of such issuance by the Joint Committee

on Pensions, Investments and Benefits.”

Working After Retirement. Concerning statutory restrictions and a salary cap of $15,000 for

KPERS members who return to work for the same participating employer after retirement, the

Committee recommends introduction of a bill to exempt public school teachers and nurses at state

institutions from the current law if returning to hard-to-fill positions.

Select Joint Committee on School Finance

The Legislative Coordinating Council created the Select Joint Committee on School Finance to

conduct a comprehensive review of K-12 education finance during the next two years. The

Committee is to make recommendation on potential improvements to the current formula or

develop a new formula that would strengthen K-12 education; however, at this time, the

Committee wishes to report on the progress it has made but does not make any recommendations.

xvi

Joint Committee on State-Tribal Relations

The Joint Committee on State-Tribal Relations make the following summary of conclusions and

recommendations.

!Regarding the tribal law enforcement issue, the Joint Committee recommends that the House

Committee on Federal and State Affairs continue to work 2003 House Sub. for SB 9.

!The Joint Committee, with the approval of the Legislative Coordinating Council, has sent a

letter to the members of the Kansas Congressional Delegation seeking their support in

establishing a Congressional Inquiry or GAO Audit into certain actions of the U.S. Department

of Interior which resulted in the Wyandotte Tribe of Oklahoma operating a gaming casino in

downtown Kansas City, Kansas.

!The Joint Committee will continue to monitor the controversy over the South Lawrence

Trafficway and its possible impact on the Baker Wetlands and Haskell Indian Nations

University.

!The Joint Committee will continue to monitor the status of tribal-related litigation. The Joint

Committee has requested expenditure information relative to these tribal cases.

Workers Compensation Fund Oversight Committee

Annual Report. The Workers Compensation Fund Oversight Committee did not conduct meetings

during the 2003 Interim.

Health Insurance Issues Working Group

!Regarding HRAs, since no statutory changes are required for the marketing and sale of the

product, the Working Group has no recommendation for legislative action. However, the

Group recommends that the Department of Administration, the State Employee Health Care

Commission, and the Kansas Public Employees Retirement System explore further the many

features of HRAs, both for health insurance purposes as well as for retirement benefits for

state employees.

!Concerning the purchase of insurance by small employers, the Working Group encourages the

Business Health Partnership to continue exploring ways to structure policies and benefits in

order to make health care coverage available to their employees.

!The Working Group recommends that no further action be taken on Association Health Plan

legislation, unless it can be demonstrated by proponents that such plans would have no

negative impact on the existing small group marketplace.

!On the issues of smoking and obesity, the Working Group recommends that the interested

parties continue their collaborative efforts on the development of statewide programs that will

have positive impacts on the two health issues. Especially, the Working Group commends the

Department of Health and Environment for its work in the area of chronic diseases and the

Kansas Sunflower Foundation for its investment in programs and studies aimed at addressing

the health concerns associated with both smoking and obesity. The Legislature should be

xvii

informed of the results of the collaborations and the findings of studies and programs

conducted by both the private and public sectors. Particularly, the Group recommends that

the interested parties explore methods for financing programs, including the possibility of

raising the necessary program funds through the issuance of bonds that would be redeemed

at those time intervals when the greatest return on the original investments is received.

!Community health care centers can make health care both available and affordable for many

Kansans. The Working Group recommends that the Department of Health and Environment,

the Kansas Association for the Medically Underserved, the Sunflower Foundation, the United

Methodist Ministries, and the Kansas Health Institute continue to explore ways of assisting

local communities in becoming eligible for consideration for federal funding for additional

centers. The Working Group encourages the stakeholders to participate in the informational

and training meetings that are planned for early in 2004 and work toward a plan that can be

brought to the Legislature for consideration in the 2004 Session.

!Long-term care insurance has some potential for reducing the state’s Medicaid expenditures

for nursing home care, albeit over an extended period of time. To remove any impediments

to the purchase of such insurance, and to remove confusion that might exist in the

marketplace, the Working Group recommends that the Insurance Commissioner modify

existing rules and regulations to require that potential purchasers of the insurance be

provided a Kansas specific shoppers guide.

Further, the Group recommends that the Department of Social and Rehabilitation Services and

the Legislature review existing Medicaid program laws to assure that the law serves to encourage

Kansans to purchase long-term care insurance rather than serving to encourage reliance upon the

state for the future payment of long-term care. Additionally, the Group recommends that the tax

committees of the Legislature explore tax incentives that would include a deduction for premium

payments made for long-term care insurance, as well as other tax incentives that might be offered

to encourage the purchase of long-term care insurance.

!Educating consumers about health care costs and their role in generating those costs need to

be continued. Health insurers, health plans and governmental agencies are encouraged to

continue their efforts with their subscribers and clients and with the public at large in

informing consumers of the cost of health care and of the most appropriate usage of that care.

!The Health Insurance Issues Working Group recognizes the critical role health data play in

making public policy, and realizes that Kansas policymakers are at a significant disadvantage

because of the lack of usable data and personnel to process existing data into useful

information. The Group recommends that the Kansas Data Governing Board review its role

in order to be more current and more proactive in assisting policymakers in the health care

arena. That review should include an assessment of the current laws that create the Board,

establish the method of data collection, and provide the funding for the Board’s collection

activities. The goal of the review should be to identify the types of data to be collected and the

barriers to the collection of that data and its conversion to useful information, The Department

should report the results of its review along with its recommendations for change, including

a fiscal note identifying the cost of the proposed changes.

!The Working Group requests that the Director of the Governor’s Office of Health Planning and

Financing keep the Legislature informed of that office’s activities through reports to the

appropriate standing committees during the 2004 Session. Included in that report should be

xviii

an update on the implementation of the Maine program.

!In the course of its studies, the Working Group was reminded of legislation enacted some time

ago that would assist in providing health care coverage for children of state employees who

met all the qualifications for coverage under the HealthWave program, but were excluded

solely because of state employment. The Working Group reviewed the report on that

legislation required by the law and recommends that it be shared with the appropriate

standing committees during the 2004 Session.

!The Working Group was informed that Kansas’ ranking among the states for immunization of

children has slipped considerably. One reason for that slippage, perhaps, is the manner in

which many Kansas children receive those immunization. Since many immunizations are

provided through local health departments, there is a greater likelihood that they are not

reported. The Working Group recommends that the Department of Health and Environment

and local health departments review where immunizations are provided and how those can

be included in the count of Kansas children who have received age appropriate immuniza-

tions. The review should include changes in federal law that appear to make could include

revisiting the idea of a mandatory state register. Upon the completion of the agency review,

a report should be made to the appropriate standing committees of the Legislature during the

2004 Session.

Finally, the Working Group learned at its last meeting that the federal government has enhanced

enforcement of the immunization programs it funds. As a consequence, there may fewer federal

dollars available for immunizations that are generally provided through local health departments.

The Group anticipates that the Department of Health and Environment will keep the appropriate

committees of the Legislature apprised of the consequences of the federal action.

Long-Term Care Services Task Force

The Task Force reaffirms the six broad goals and the policy directions and strategies adopted in

its first year of existence. In addition, the Task Force makes the following recommendations:

Change From Case Management to Care Management. The Task Force encourages the shift from

case management to care management. By using a system of care management, especially for

persons suffering from chronic diseases like asthma and diabetes, better quality of care at a lower

cost can be achieved. Medical care management moves away from the concept of capitated

managed care guided by clerks and program benefit limitations to an understanding that a trained

person, where necessary will interact with the medical professionals to arrange the proper and

appropriate care to address psycho-social, physical, and mental needs of the client - in short, to

treat the whole person, not just their disease.

Civil Monetary Penalty Funds. The Task Force encourages the development of grants to access

civil monetary penalty funds for quality improvement and educational purposes at various

locations in the state for all long-term health care providers, and specifically those who have

recognized problems. The Task Force recommends programs like those offered through GERTI,

which provide comprehensive training to long-term care workers and have experienced, to date,

demonstrable success.

xix

Foreign Pharmaceuticals. The Task Force requests the House Health and Human Services

Committee review the quality and cost of foreign pharmaceuticals.

Insurance. The Task Force recommends continued review of insurance risk pools for nursing

facilities, in recognition of the rising cost of insuring nursing facilities. The Task Force members

are concerned that the rising cost of insurance for facilities leaves some providers with only two

choices—close their doors or operate without insurance. It has been estimated as high as 25.0

percent of nursing facilities in Kansas go without insurance each year. In addition, the Task

Force requests the House and Senate Insurance Committees review the inclusion of health care

workers in the state health insurance plan.

Inspections. The Task Force recommends that the Department on Aging and Bureau of Health

Facilities increase the length between surveys for facilities that perform better to not more often

than the allowable fifteen months. Instead of an inspection every twelve months, surveys of the

good performing homes should be extended to the maximum allowable time between inspections

and poorly performing homes be surveyed more frequently thus giving the average of every 12

months for federal law. In addition, the Task Force recommends a legislative resolution to

request the federal government review the inspection standards.

Overview of Long-Term Care Services and Responsibilities. The Task Force requests that the

Department of Health and Environment, Department on Aging, and Department on Social and

Rehabilitation Services, for those areas that are referred to as long term care, provide a report

outlining the functions under state and federal control, to give the Task Force better direction in

affecting change. The Task Force requests reporting of the information to the Legislature no later

than February 1, 2004.

Provider Rates. The Task Force encourages the Kansas Department on Aging to examine the rate

setting process to see if there is a need to adjust the reimbursement rates earlier than originally

intended. The 2003 Legislature changed the rate setting methodology for nursing facilities by

setting FY 2001 as the base year for rate setting initially, adjusted by data collected in ensuing

years.

Re-Entry of Older Persons Into the Workforce. The Task Force recommends that the Department

of Human Resources work to address the unique needs of older persons re-entering the workforce

under the Workforce Investment Act (WIA). The Task Force recommends that specific funds be

set aside to address these needs.

Vaccinations. The Task Force recommends the introduction of legislation to require

vaccinations for influenza and pneumonia for all nursing facility residents, with an exception for

those who are allergic to the shots.

Waivers.

!The Task Force encourages a resolution to the federal government to attempt to affect change

in the mandates regarding home and community based services (HCBS) waivers and the

pursuit of HCBS waivers as an entitlement, like nursing facilities. The Task Force also

encourages the Department on Aging to request various types of waivers, to better meet the

needs of Kansans accessing long-term care.

!The Task Force also recommends the continuation of the proviso that requires funds follow

consumers as they move from nursing facilities into the community.

!The Task Force encourages the pursuit of grants through the New Freedom Initiative - the

President’s program to: increase access to assistive and universally designed technologies,

expand educational opportunities, promote home ownership, integrate Americans with

disabilities into the workforce, expand transportation options and promote full access to

community life.

Workforce Issues in Long-Term Care.

!The Task Force recommends the study of workforce issues across the state. According to the

Kansas Association of Homes and Services for the Aging, the biggest concern for providers is

workforce. In order to address the workforce issues, as well as to provide a better level of care

for long term care residents, the Task Force recommends the creation of a demonstration site,

at a facility with demonstrated success in implementing culture change, funded by the Civil

Monetary Penalty (CMP) fund.

!In addition, the Task Force encourages the use of technology to provide educational

opportunities for facilities not located in urban centers. The location of subsequent

demonstration sites can greatly aid in this matter.

!The Task Force recommends that SRS pursue grant opportunities through the Centers for

Medicare and Medicaid and elsewhere that target workforce issues in long-term care.

!The Task Force also recommends that nursing school accreditation include a long-term care

module and encourages the nursing associations to pursue this inclusion.

!The Task Force requests the House Health and Human services committee introduce

legislation to update the Administrators-in-Training (AIT) program for adult care homes.

SPECIAL COMMITTEES

Report of the

Special Committee on Agriculture

to the

2004 Kansas Legislature

CHAIRPERSON: Representative Dan Johnson

VICE-CHAIRPERSON: Senator Derek Schmidt

RANKING MINORITY MEMBER: Representative Daniel Thimesch

OTHER MEMBERS: Senators Christine Downey, Tim Huelskamp, and Mark Taddiken;

Representatives Mary Compton, Barbara Craft, Joann Freeborn, James Miller, and Jerry

Williams

STUDY TOPICS

Consolidation of Food Safety Functions

December 2003

1-3

Kansas Legislative Research Department 2003 Agriculture

Special Committee on Agriculture

CONSOLIDATION OF FOOD SAFETY FUNCTIONS

CONCLUSIONS AND RECOMMENDATIONS

The following general recommendations were made by the Special Committee on Agriculture.

!Divide food safety inspections functions into the three areas recommended by Legislative

Post Audit—dairy inspections; food processing inspections; and retail sales inspections.

!The issue of some areas being inspected too many times and some not being inspected at all

needs to be addressed.

!Juice processing facilities should be inspected just as milk processing facilities.

!Conflicts between industry and regulators should be addressed by having a mediator.

!Reorganization and transfer of programs should be a year or more away so that needed

changes can be made.

!Assuming that the transfer of programs is made to the Department of Agriculture,

communication with the Bureau of Epidemiology and Disease Prevention is imperative.

!The agency name should be changed to the Department of Agriculture and Food Safety.

!The Legislature should make certain that all food processing plants are completely inspected

(some are no longer fully inspected due to a statutory change in 2002).

The members of the Special Committee on Agriculture recommend that legislation be

introduced, in the Senate first, with the following components:

!The bill would transfer food safety programs from the Kansas Department of Health and

Environment (KDHE) to a newly-named Department of Agriculture and Food Safety.

!The bill would formally create a working group composed of the Secretary of Health and

Environment; the Secretary of Agriculture; industry officials; Kansas State University

officials; Legislative representatives; the Livestock Commissioner; Federal Food and Drug

Administration officials; Food Safety Inspection Service (USDA) officials; representatives of

the Kansas Restaurant and Hospitality Association; representatives of the Kansas Public

Health Association; local health departments; and others as deemed necessary by the

Secretaries of Health and Environment and Agriculture. The working group would review

a variety of issues relating to food safety and report to the Legislature by February 1, 2005.

!The third component of the bill would make necessary statutory changes to bring all "food

processing plants" back under state licensing and inspection. This action would correct 2002

legislative action.

!The final major component of the bill would require communication between the newly-

named Department of Agriculture and Food Safety and the Bureau of Epidemiology and

Disease Prevention in KDHE with regard to food safety issues. The Committee believes this

ongoing communication is imperative.

Proposed Legislation: The Committee recommends the introduction of one bill on this topic.

1-4

Kansas Legislative Research Department 2003 Agriculture

BACKGROUND

The formal charge to the Special Commit-

tee on Agriculture was to:

Review and study the possibility of con-

solidation of the food safety functions of

the Department of Health and Environ-

ment and the Department of Agriculture.

The study was to include the possibility

of improving food safety (particularly in

light of homeland security concerns) as

well as the elimination of any duplica-

tion of services. (A Legislative Post Audit

study has been authorized. The Special

Agriculture Committee will meet follow-

ing receipt of the audit).

This study was requested by Senator

Derek Schmidt, the Chairperson of the Sen-

ate Agriculture Committee. The issue of

possible consolidation of food safety func-

tions among agencies of the state was raised

in Senate Agriculture Committee during the

2003 Session when hearings were held on

2003 SB 124. The Senate Committee on

Agriculture did remove the provisions of the

bill which had proposed to transfer food

safety programs from the Department of

Education (DOE) to the Department of Agri-

culture (KDA). Provisions remaining in-

cluded those proposing to transfer food

safety programs from the Kansas Department

of Health and Environment (KDHE) to KDA.

The Senate Agriculture Committee did vote

to ask for an interim study on the issue. In

addition, the Chairperson of the Committee

asked the Legislative Division of Post Audit

to study the feasibility of consolidating food

safety programs at the state level.

The Special Committee on Agriculture

did not meet until Post Audit had completed

its study.

Post Audit Report

Based upon the request of the Chairper-

son of the Senate Agriculture Committee and

the action of the Legislative Post Audit Com-

mittee, staff of Post Audit developed a scope

statement for the audit it was to conduct.

The scope statement reiterates the fact

that three different State agencies provide

food service inspection programs in Kan-

sas—the Departments of Health and Environ-

ment, Education, and Agriculture. The

Department of Health and Environment

(KDHE) inspects restaurants, grocery stores,

licensed childcare facilities, health facilities,

school kitchens, and other local agencies.

The Department of Education has the School

Food Service Program, which administers

school food programs across the state. The

KDA inspects meat and poultry processing

plants, dairy operations (including counter

freezer operations), and eggs to ensure they

are properly graded and stored at appropriate

temperatures. The KDA also checks labeling

and commercial net weights on food prod-

ucts.

Also included in the scope statement is

an observation that legislators have ques-

tioned whether these food safety programs

could be performed in a more cost effective

manner if they were the responsibility of a

single agency. The scope statement also

indicates that similar concerns have been

raised in several other states and at the

federal level in recent years, especially since

the events of September 11, 2001. In addi-

tion, the scope statement restates the fact

that 2003 SB 124 was introduced in an effort

to conserve scarce resources and improve

food safety. The bill, in its original form,

would have combined the programs from

KDHE and DOE into one at KDA. The pri-

mary focus of the audit request was to con-

sider the potential merger of the food safety

programs of KDHE with those of KDA.

The Post Audit performance audit of this

topic proposed to answer the following

question:

Could food service inspection programs

in Kansas be consolidated to streamline

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Kansas Legislative Research Department 2003 Agriculture

operations, save money, and improve

food safety?

To answer this question, staff of Post

Audit looked at the statutory requirements

imposed on KDA and KDHE to inspect food

services. As part of its analysis, Post Audit

staff considered such things as the types of

businesses or facilities each agency inspects,

whether some of those same businesses or

facilities are inspected by both agencies, how

similar the inspection protocols are for each

type of inspection, how many inspectors are

involved in each type of inspection, how

long each type of inspection takes, and

whether drive time, staffing, and administra-

tive costs could be reduced by combining

some inspections or by cross-training staff.

In addition, Post Audit staff worked with

agency officials to try to develop reasonable

estimates of the additional costs of merging

the programs, such as the extent and cost of

cross-training that would be required. Staff

of Post Audit also looked at what steps other

states have taken to consolidate their food

service inspection processes, and through

interviews with officials from those states,

attempted to determine how well consoli-

dated inspections have worked. Further,

Post Audit interviewed or surveyed Kansas

inspectors and agency officials to get their

opinions about the potential advantages and

disadvantages of combining inspection

functions. Finally, Post Audit indicated it

would look at the relationship between

Kansas food safety agencies and federal

programs performing similar functions, and

review recent studies recommending consoli-

dation of food safety programs at the federal

level.

After completing is review, the staff of

Post Audit developed the following recom-

mendations for Kansas legislators to con-

sider. The following is an excerpt from the

Post Audit Report.

!To ensure that Kansas’ food safety in-

spection resources are used in the most

efficient manner, the Legislature should

pass Senate Bill 124 or a bill similar to it,

transferring responsibility for all food

safety-related inspections into a single

agency, whether that agency is the De-

partment of Agriculture or the Kansas

Department of Health and Environment

(KDHE).

!If a decision is made to place all pro-

grams within the Department of Agricul-

ture, that Department should establish a

system for regularly communicating with

KDHE’s Bureau of Epidemiology and

Disease Prevention to ensure that this

Bureau has the information it needs to

assist with food-borne illness outbreak

investigations.

!To better promote food safety within the

State’s available resources, the food

safety inspection program should become

risk-based, whether or not it is combined

into a single agency. To accomplish this,

the agencies responsible for food safety-

related inspections should convene a task

force of representatives from the Depart-

ments of Agriculture, Animal Health,

Health and Environment, Kansas State

University, private industry, and federal

agencies. This task force should work

together to develop comprehensive in-

spection frequencies that are based on

food safety health risks, and should de-

velop and propose the regulatory and

statutory changes needed to accomplish

those frequencies. In determining these

frequencies, the task force should de-

velop a hierarchy of health risks posed

by food-related businesses, regardless of

which regulatory agency or program

currently is responsible for regulating

those businesses, and should restructure

inspection frequencies and staff inspec-

tion duties as needed to implement those

frequencies. In addition, the compliance

history of businesses should be used as a

factor in determining inspection frequen-

cies.

!If the State’s food-safety inspection pro-

grams are not combined in one agency,

the Departments of Agriculture and

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Kansas Legislative Research Department 2003 Agriculture

Health and Environment should do the

following:

"develop and implement plans on how

they will communicate and coordi-

nate information with each other.

Such plans should include strategies

on routinely sharing records to help

identify food-related businesses that

should be regulated. In addition, the

plans should include steps that each

agency will take to coordinate their

efforts when both have jurisdictional

authority in a situation.

"enter into a Memorandum of Under-

standing or seek legislation as needed

to realign inspection duties so that

responsibilities within each broad

functional area — dairy inspections,

food processing inspections, and

retail establishment inspections —

are not split among two different

agencies. To accomplish this, the

following actions should be taken:

-transfer responsibility and resources

for inspecting juice processing/bottl-

ing plant inspections from KDHE to

the Department of Agriculture;

-transfer responsibility and resources

for inspecting food processing plants

and food warehouses from KDHE to

the Department of Agriculture;

-transfer responsibility and resources

for inspecting eggs and dairy prod-

ucts in grocery stores from the De-

partment of Agriculture to KDHE.

"to eliminate the need for two or more

food safety inspectors to visit one

facility, inspection staff should be

cross-trained and should be assigned

to perform all the regular inspections

for the facilities they are assigned to

cover.

"to promote better food safety and

ensure that legislative intent is fol-

lowed, KDHE should work with the

Department of Agriculture to make

certain that adequate and complete

inspections are conducted at the 42

food manufacturers both agencies

used to inspect—but that KDHE quit

inspecting—after the 2002 Legislature

changed the licensing laws to elimi-

nate duplicate licensing fees. The

Department of Agriculture still in-

spects these same food manufactur-

ers, but only those areas that involve

meat processing. It is our understand-

ing that the Legislature intended for

these facilities to be inspected to the

same degree they were before the

licensing change.

!To ensure they have the information they

need to manage the Food Protection

Program properly, KDHE officials should

develop an efficient system for extracting

this information from the agency’s licens-

ing and enforcement databases. This is a

repeat recommendation from the April

2002 performance audit, Regulation of

Food Service Establishments: Determining

Whether the Department of Health and

Environment is Providing Sufficient Regu-

latory Oversight. The Food Protection

Program continues to rely on inefficient

methods—for example hand-count-

ing—to gather some of the data it needs

to manage the Program.

COMMITTEE ACTIVITIES

The Special Committee on Agriculture

was granted one day to consider the issue of

consolidating food safety programs from

KDHE and KDA. The Committee began its

consideration by hearing a background on

the issue from staff. Staff also reviewed the

contents of 2003 SB 124 since not all mem-

bers of the interim Committee had been

present for the hearings on the bill during

the 2003 Legislative Session.

The Committee also heard a thorough

review of the Legislative Post Audit Report

1-7

Kansas Legislative Research Department 2003 Agriculture

by a staff member of Legislative Post Audit.

This conferee noted that there were several

factors which suggest that Kansas' current

food safety system needs to be improved.

Inefficiencies outlined for the members of

the Committee included:

!Inspectors from more than one agency or

program inspect the same business;

!Inspection territories currently overlap

even when inspectors aren't going to the

same business; and

!Some types of establishments are in-

spected more often than seems necessary

causing inefficient use of inspection staff.

Post Audit staff also noted that coordina-

tion can be improved in situations where

regulatory authority overlaps:

!KDHE and KDA do not routinely share

records;

!Overlapping regulator authority can

delay response times; and

!Many inspectors say coordination should

be improved.

The members of the Committee learned

that according to the findings by Post Audit,

Kansas food safety inspection requirements

are sometimes inconsistent. Examples in-

cluded:

!Some high-risk establishments are not

required to be inspected regularly;

!Kansas laws require similar businesses to

be regulated differently; and

!A 2002 change to the licensing laws has

resulted in portions of several large food

manufacturers being uninspected.

The Committee members heard from Post

Audit that a single agency housing all pro-

grams could provide the incentive to regulate

similar food businesses and processes more

consistently and that communication should

improve because information could be

shared more easily. It was noted that Kansas

could realize cost savings and improvement

in food safety if inspections were combined

and changed to a risk-based approach. In

addition, it was suggested that inspection

activities could be grouped into three func-

tional areas: dairy inspection, food process-

ing inspection and retail sales inspections.

Under this scenario, inspectors assigned to

each group would be cross-trained to handle

all types of inspections within that group.

Also appearing before the Committee was

the Director of the Bureau of Consumer

Health, KDHE, who gave a review of food

safety programs administered by the agency.

The members of the Committee heard about

the risk-assessment codes used by KDHE in

its various inspections across the state. The

conferee noted that the risk-assessment

codes that KDHE are using are not regulatory

codes, only internal guidelines. The Com-

mittee learned that interaction among USDA,

KDA and Animal Health Department occurs

mainly in regard to bio-terrorism. The mem-

bers of the Committee heard that the agency

is looking at how it can do a better job in the

future and that food safety and security are

both being addressed in the inspection sys-

tem.

In response to a Committee inquiry about

inspections conducted at schools, the mem-

bers of the Committee were told in a commu-

nication from the agency after the Committee

meeting that schools are licensed food ser-

vice establishments and are under the regu-

latory authority of KDHE. Of the 1,454

schools licensed, 908 are full-service kitch-

ens and 946 are satellite sites. The corre-

spondence indicated that there were 1,305

inspections conducted in fiscal year 2002

and 1,699 in fiscal year 2003.

The KDHE conferee stated that the

agency differs on some of the recommenda-

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Kansas Legislative Research Department 2003 Agriculture

tions made by the Post Audit Committee. In

addition, the Committee was told that the

Governor's Office has not taken a position or

stand on the issue of consolidation of food

safety programs.

The Secretary and Assistant Secretary of

Agriculture reviewed food safety programs

administered by the KDA. The Committee

learned that KDA is working on applying

regulations consistently across the State.

The Secretary also indicated that there may

be a problem with the issue of grouping all

proposed inspections, since it might jeopar-

dize some Federal funds. The Secretary told

the Committee on the issue of cross-training

of inspectors, that it would be possible.

A representative of the US Food and Drug

Administration (USFDA) testified that the

agency can help states with their food safety

programs. The conferee noted that the

USFDA does not have a position on the issue

from which department the Kansas programs

should be operated.

Representatives of the Kansas Farm

Bureau, the Kansas Public Health Associa-

tion (KPHA), the Kansas Restaurant and

Hospitality Association, and the Kansas Food

Dealers appeared before the Committee.

The Executive Director of the Kansas

Public Health Association (KPHA), testified

in opposition to the consolidation of food

safety inspections from KDHE to KDA be-

cause members of the organization thought it

would be a conflict of interest and that food

safety is a core public health function.

A representative of the Kansas Restaurant

and Hospitality Association stated that mem-

bers of the Association believed it was inap-

propriate to advise who should be the indus-

try regulator and that the organization does

not have any position on the transfer of

programs from one department to another.

The Executive Director of the Kansas Food

Dealers Association testified that members of

the Association would appreciate anything

that could be done that would lower the cost

to the membership and to the State for in-

spections.

CONCLUSIONS AND RECOMMENDATIONS

The following general recommendations

were made by the Committee.

!Divide food safety inspections functions

into the three areas recommended by

Legislative Post Audit—dairy inspec-

tions; food processing inspections; and

retail sales inspections.

!The issue of some areas being inspected

too many times and some not being in-

spected at all needs to be addressed (this

also was raised as an issue in the report

from Legislative Post Audit).

!The pasteurized juice issue should be

addressed, and juice processing facilities

should be inspected just as milk process-

ing facilities.

!Conflicts between industry and regula-

tors should be addressed by having a

mediator.

!Reorganization and transfer of programs

should be a year or more away so that

needed changes can be made.

!Assuming that the transfer of programs is

made to the Department of Agriculture, it

is extremely important that communica-

tion be kept open with the KDHE and

especially the Bureau of Epidemiology

and Disease Prevention within KDHE.

!The agency name should be changed to

the Department of Agriculture and Food

Safety.

!The Legislature should make certain that

all food processing plants are completely

inspected (some are no longer fully in-

spected due to a statutory change in 2002

which redefined "food processing plant").

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Kansas Legislative Research Department 2003 Agriculture

The members of the Special Committee

on Agriculture recommend that legislation

be introduced with the following compo-

nents:

!The bill would transfer food safety pro-

grams from KDHE to a newly-named

Department of Agriculture and Food

Safety;

!The bill would formally create a working

group composed of the following:

"Secretary of Health and Environment;

"Secretary of Agriculture;

"Industry officials;

"Kansas State University officials;

"Legislative representatives;

"Livestock Commissioner;

"Federal Food and Drug Administra-

tion officials;

"Food Safety Inspection Service

(USDA) officials;

"Kansas Restaurant and Hospitality

Association;

"Kansas Public Health Association;

"Local health departments;

"Others as deemed necessary by the

Secretaries of Health and Environ-

ment and Agriculture.

The following is a list of items which the

working group would review during its

meetings:

!Proposing necessary statutory changes;

!Insuring agency cooperation;

!Developing a risk-based assessment sys-

tem;

!Identifying changes needed;

!Recommending action on the issue of

bio-terrorism in food security;

!Making recommendations for a mediator

between regulators and those being regu-

lated;

!Reporting to Legislature by February 1,

2005; and

!Sunsetting the working group on June 30,

2005.

The third component of the bill would

make necessary statutory changes to bring all

"food processing plants" back under state

licensing and inspection. This action would

correct the 2002 legislative action.

The final major component of the bill

would require communication between the

newly named Department of Agriculture and

Food Safety and the Bureau of Epidemiology

and Disease Prevention in KDHE with regard

to food safety issues. The Committee be-

lieves this ongoing communication is imper-

ative.

The Committee recommends that the new

bill be assigned to the Senate first.

SPECIAL COMMITTEES

Reports of the

Special Committee on

Appropriations/Ways and Means

to the

2004 Kansas Legislature

CHAIRPERSON: Senator Stephen Morris

VICE-CHAIRPERSON: Representative Melvin Neufeld

RANKING MINORITY MEMBER: Senator Christine Downey

OTHER MEMBERS: Senators Bill Bunten, David Jackson, and Jean Schodorf; Representa-

tives Jerry Henry, Andrew Howell, Steve Huebert, Thomas Klein, Jo Ann Pottorff, Sharon

Schwartz, and Joe Shriver

STUDY TOPICS

Consolidation or Closure of a Mental Health or Developmental Disability Institution

Funding of the Animal Health Department

Medicaid Reimbursement Rates-Home and Community Based Waiver for the Frail

Elderly and People with Physical Disabilities

Medical Transportation Delivery System

December 2003

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Kansas Legislative Research Department 2003 Appropriations/Ways and Means

Special Committee on

Appropriations/Ways and Means

CONSOLIDATION OR CLOSURE OF A MENTAL HEALTH

OR DEVELOPMENTAL DISABILITY INSTITUTION

CONCLUSIONS AND RECOMMENDATIONS

The Special Committee on Appropriations/Ways and Means recommends Larned and

Osawatomie State Hospitals remain open and that the 2004 Legislature review bed capacity

and staffing levels at these institutions to ensure that the needs of the mental health

community are being met. In regard to Rainbow Mental Health Facility, the Committee

recommends that the discussion remain open to allow for possible opportunities to privatize

or otherwise utilize the facility in the future.

The Committee also recommends that the Department of Social and Rehabilitation Services

create a task force that includes parents with children in mental retardation facilities,

developmental disability advocates, and community providers to recommend alternative usage

of editing intermediate care facilities for the mentally retarded (ICF/MR) and state develop-

mental disability institutions and report to the 2004 Legislature by March 15, 2004.

Proposed Legislation: None

BACKGROUND

The Legislative Coordinating Council

charged the Committee with reviewing the

consolidation or closure of a Mental Health

or Developmental Disability institution and

the impact on the community in which the

institution is located.

COMMITTEE ACTIVITIES

Staff presented history of the state hospi-

tals, including how they are financed.

The Committee discussed the continuing

decline in the Title XIX Fund and Center for

Medicare and Medicaid Services (CMS)

deferred claim made by the Kansas Depart-

ment of Social and Rehabilitation Services

(SRS) for education services totaling $11.1

million. SRS indicated that following about

two years of researching allowable costs for

services at the state hospitals and reviewing

regulations, the agency's best judgement is

that there are some costs of services that are

actually associated with education expenses

at the state hospitals that should qualify for

federal reimbursement. SRS looked back

three or four years to identify those resources

in regard to the state mental health hospitals.

SRS submitted a claim for current costs and

for several prior years. As is often the case

with the federal Medicaid agency, exploring

additional ways to draw down federal funds

is typically a long process. It was a large

new claim and CMS deferred the claim when

SRS submitted it for the first time, asking

SRS for additional documentation. SRS has

been told informally that CMS does not

intend to approve the funding. Once SRS

receives a formal disallowance from the

federal government, it will then pursue an

appeals process because SRS feels that there

is some merit to the claim. SRS indicated

that it is trying to be aggressive in seeking

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Kansas Legislative Research Department 2003 Appropriations/Ways and Means

appropriate federal funds. The actual disal-

lowance could come in October or November

2003, but the actual appeal process could

take several months to a year. The FY 2006

budget may be impacted by a shortfall in the

Title XIX funds at the hospitals.

SRS testified as to whether state develop-

mental disability (DD) hospital bed capacity

is being effectively and efficiently utilized

and whether consolidation or closure of

certain facilities or programs should be

considered. SRS noted it is important, as the

Committee approaches issues to do with

closure and consolidation, to keep in mind

the philosophy of serving persons with

developmental disabilities that is contained

in the Kansas Developmental Disability

Reform Act. Kansas has significantly in-

creased the number of persons with DD

served in community settings. Several other

states have demonstrated that, provided

sufficient resources, all persons with DD can

be successfully supported in the community.

In evaluating the issues surrounding hospital

closure or consolidation, and with the expe-

rience of other states, strategies have been

developed to assist states to decrease reliance

on institutional care. They include: 1.

Building emergency response systems to

address the reason people are initially insti-

tutionalized; and 2. Developing consumer

driven service systems that can meet the

needs of persons with more severe or com-

plex needs.

The capacity of community-based agen-

cies to provide adequate services to those in

need was addressed. According to SRS,

experience indicates that when community

providers receive additional funding, they

can quickly grow to meet the needs of those

wanting services. In today’s environment,

SRS has identified the following specific

challenges that need to be addressed if com-

munity-based services are asked to grow at

the pace they did in the past. These chal-

lenges are:

!Difficulties in recruiting, hiring, and

retaining staff willing to work with per-

sons with severe and complex needs,

including persons with challenging be-

haviors;

!Securing adequate, appropriate, afford-

able housing;

!Addressing the lack of adequate transpor-

tation in many communities; and

!The lack of effective technical support to

community providers.

Family choice, considerations for closure

or consolidation, state developmental dis-

ability hospital capacity, and developmental

disabilities financing are also issues.

SRS noted the importance of parental

choice, especially in light of possible down-

sizing of the state hospitals. While it has

been a significant issue for the Legislature in

the last several years, there have not been a

lot of individuals moving from the hospitals

into the community because there are not

many individuals whose family members or

guardians are making that choice.

The Superintendent of the Kansas Neuro-

logical Institute (KNI) explained that the

manner in which the hospital provides

support and services to people with develop-

mental disabilities has changed significantly

over the past ten years. As a state, the focus

is on a person-centered approach, which is a

change in thinking. This approach led to

changes in the way services and supports

were provided in both the institutions and

community settings.

Conferrees listed the following issues that

need to be addressed for Kansas to succeed

in closing another state DD hospital:

!Funding for Persons with Extraordinary

Needs;

!"Entitlement" Access to Funding;

!Choice and the Placement Process; and

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Kansas Legislative Research Department 2003 Appropriations/Ways and Means

!Services for Persons with Severe Behav-

ioral/Medical Needs.

Some conferees suggested that guarantees

of long-term financial planning to family

members and consumers are necessary in the

discussion of hospital closure. In addition,

it was suggested that any efforts to shift or

otherwise alter the workload of the system

should be carefully and rationally planned,

for the sake of the persons to be served and

for the stability of the community systems

that will be required to serve the new service

demographics resulting from any major

policy or budget shifts.

Several conferees supporting closure

explained it would benefit individuals who

have developmental disabilities and who

currently reside in a state hospital and would

benefit their home communities. Based on

the study of the closure of the Winfield State

Hospital and Training Center in the 1990's

and other research, it was noted that the

desired outcomes of future hospital closure

include:

!Greater independence for those with

developmental disabilities;

!Guaranteed placement in the individual’s

least restrictive environment;

!Better quality of life for the individual;

and

!Approximately $26.0 million per year in

savings could be used to dramatically

reduce current waiting lists.

Issues that conferees noted need to be

addressed include local capacity, provision

of a safety net, and addressing the sexual

predator treatment unit.

Some conferees pointed out that the

appropriate reason to close institutions is not

for cost savings, but because people with

developmental disabilities can and do suc-

ceed in community based settings. They

noted that challenges to consider include the

developmental disabilities funding system,

entitlements, waiting lists and under-served

individuals, and closure of the state hospi-

tals. They believe that community services

are ready as long as there is adequate fund-

ing, supports, and flexibility.

Some discussion followed regarding the

demographics of people in developmental

disability institutions and the reasons that

they are in the institution. Some conferee

raised concerns regarding labels like "sexual

predator" and "sexual deviant" being placed

on persons with cognitive disabilities to

justify their placement in an institution.

Opponents of closure of developmental

disability institutions argued that there are

medically fragile people who live at KNI who

cannot function without the services pro-

vided there. These conferees noted the

primary concern of parents, guardians, and

employees is that the focus should not be on

dollar signs, but on how many lives might be

lost if consumers are forced from their homes

into community agencies that can not pro-

vide the care they need to survive. They

noted that some residents of the hospitals

need constant supervision and care and

cannot yet function safely in the community.

Other conferees noted that closing any

one of these facilities would not only do a

great disservice to those who need the ser-

vices the most, but also would have a nega-

tive impact on the employees and the com-

munities. Relocation would be devastating

and debilitating to some clients.

SRS operates three state hospitals for

mental illness: Larned State Hospital,

Osawatomie State Hospital, and Rainbow

Mental Health Facility. The agency noted the

importance of community capacity including

affordable, stable housing, community sup-

port and crisis stabilization, and loss of

private acute in-patient care. During the

2003 Legislative Session, SRS was asked by

both the House Social Services Budget Com-

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Kansas Legislative Research Department 2003 Appropriations/Ways and Means

mittee and the Senate Ways and Means

Committee to convene a group of stake-

holders from a variety of perspectives in an

attempt to reach a consensus regarding the

role of the state hospitals. SRS has begun

this process by convening the Project Steer-

ing Committee on The Future of State Mental

Health Hospitals. The Project Steering Com-

mittee is scheduled to meet three more

times. At its November 17, 2003, meeting,

the Project Steering Committee hopes to

discuss a final draft of its report and a report

is expected before the Legislature convenes

in January 2004.

A number of conferees supported the

Project Steering Committee on The Future of

State Mental Health Hospitals and explained

that the type of client that is referred to state

hospitals is different than a number of years

ago. They are not clients with simple prob-

lems but with severe and persistent mental

illness along with other problems such as

substance abuse problems, medical prob-

lems, criminal history or activity, or develop-

mental disabilities, or other behaviors that

are difficult to manage in the community.

Some conferees pointed out that the

needs of adults and children need to be

approached as separate issues and noted that

state hospitals function as a critically impor-

tant safety net for a small number of consum-

ers of the public mental health system who

require inpatient care and it does cause a

great deal of uneasiness when further down-

sizing or closure is discussed.

The Superintendent of the Osawatomie

State Hospital explained the desired out-

comes from improving treatment delivery:

allow individuals to live in the least restric-

tive environment possible; enhance quality

of patient care and patient safety; increase

active treatment; fit lengths of stay to meet

the treatment needs of the patients; and meet

expectations of the community. There is an

ongoing evaluation of the following: lengths

of stay, 30-day readmission rate, incidents of

seclusion and restraint, patient and staff

injuries, patient satisfaction surveys, and

stakeholder acceptance.

Closure opponents urged legislators not

to consider making any changes in the state

psychiatric hospitals until the findings and

recommendations of the SRS Project Steer-

ing Committee on The Future of State Mental

Health Hospitals are available. They argued

that in many areas of the state, commu-

nity-based supports are inadequate to main-

tain consumers after discharge from the state

hospitals. These services include transi-

tional and permanent housing, income sup-

ports, educational opportunities, and treat-

ment for co-occurring disorders.

Opponents of mental health hospital

closure asked for more money for the hospi-

tals to enable them to operate at an optimum

level–providing adequate staff, medications

and state of the art care in order to give

patients time to heal and be released back

into their respective communities with

resources in place to enhance and encourage

this process. In addition, they pointed out

that treatment in or near their home commu-

nities was far more effective. They recom-

mended giving serious consideration to the

recommendations that come from the Project

Steering Committee. In addition, they noted

the need for strong community supports.

Some conferees felt that the mental

health system in Kansas was very good, and

should not be changed. One conferee noted

that without hospitals for long-term treat-

ment, mental health consumers must un-

dergo a series of repeated short-term hospi-

talizations, which are often ineffective.

He noted that stabilization is a very impor-

tant part of a patient’s stay in a hospital that

he felt cannot be provided by community

mental health clinics.

Some conferees noted that the need for

services is potentially lifelong, that every

piece of the system is essential, and access to

services needs to be increased, not de-

creased.

One conferee pointed out that focusing

2-7

Kansas Legislative Research Department 2003 Appropriations/Ways and Means

on closing hospitals or reducing psychiatric

beds is the wrong place to start. The state

must not reduce or reorganize the psychiat-

ric inpatient care system without a compre-

hensive review of the current system, and

the development, with significant stake-

holder input, of a consensus plan and provi-

sion for additional community services.

Developing a plan requires at least two ele-

ments: obtaining and analyzing service

utilization data on the present system and

establishing a vision for the kind of hospitals

to develop and their role in the statewide

system.

CONCLUSIONS AND RECOMMENDATIONS

The Committee recommends Larned and

Osawatomie State Hospitals remain open and

that the 2004 Legislature review bed capacity

and staffing levels at these institutions to

ensure that the needs of the mental health

community are being met. In regard to

Rainbow Mental Health Facility, the Com-

mittee recommends that the discussion

remain open to allow for possible opportuni-

ties to privatize or otherwise utilize the

facility in the future.

The Committee also recommends that the

Department of Social and Rehabilitation

Services create a task force that includes

parents with children in mental retardation

facilities, developmental disability advo-

cates, and community providers to recom-

mend alternative usage of editing intermedi-

ate care facilities for the mentally retarded

(ICF/MR) and state developmental disability

institutions and report to the 2004 Legisla-

ture by March 15, 2004.

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Kansas Legislative Research Department 2003 Appropriations/Ways and Means

Special Committee on

Appropriations/Ways and Means

FUNDING OF THE ANIMAL HEALTH DEPARTMENT

CONCLUSIONS AND RECOMMENDATIONS

After review of the topic, the Committee recommends that representatives from each industry

work with the agency to develop a fee proposal that would be acceptable to all interested

parties. The Committee encourages the respective industries to present their proposal to the

Legislature by the start of the 2004 Legislative Session. The Committee notes that this issue

has not been resolved, and that those involved in the budgetary process for this agency need

to continue to be aware of this issue.

The Committee further recommends that the agency develop a policy manual to aid in

consistent inspections throughout the state and that the agency needs to focus on targeting

inspections on problem areas.

Proposed Legislation: None

BACKGROUND

The Legislative Coordinating Council

directed the Special Committee on Appropri-

ations and Ways and Means to review the

funding structure of the Animal Health

Department, including a review of agency

fees and State General Fund financing. Three

bills related to the agency’s fees were intro-

duced during the 2003 Legislative Session.

According to the agency, current fee revenue

will become insufficient to meet current

expenditure levels within the next two fiscal

years.

COMMITTEE ACTIVITIES

The committee heard testimony from

representatives of both the livestock industry

and the pet animal industry. The Livestock

Commissioner provided information on the

mission of the agency and the current reve-

nues and expenditure levels of the disease

control function. Representatives of the

Kansas Livestock Association, the Kansas

Pork Association, and the National Beef

Packing Company provided information on

the funding of the disease control program of

the agency. The Kansas Livestock Associa-

tion supports a fee schedule that meets the

following objectives:

!Broad-base and include all regulated

species

!Set at a level that would not impose a

burden on producers

!Target as few collection points as

possible

!Not impose economic sanctions that

might result in competitive disadvan-

tages with other states

!Not create burdensome and costly

paperwork for private entities

!Efficient for the state to administer.

The Director of the Animal Facility In-

spection program of the Animal Health

Department provided information on funding

the provision of Pet Animal Act. Several

conceptual suggestions were reported includ-

2-9

Kansas Legislative Research Department 2003 Appropriations/Ways and Means

ing raising current fee by a percentage

amount; imposing a tonnage fee on pet food

produced or sold in Kansas; mandating that

all dogs, cats, and ferrets in the state be

vaccinated for rabies and placing a surcharge

on the vaccination fee; imposing an “animal

welfare fee” on “luxury pet items”; introduce

an animal friendly license place; start a

Puppy Checkoff; and start an animal welfare

lottery ticket. The Department also provided

historical information on the Kansas Pet

Animal Act. Representatives of the pet ani-

mal industry also presented testimony to the

Committee. Several producers presented

testimony in support of the agency and in

support of increasing fees in order to fund

the Department. Producers also presented

spoken and written testimony against raising

fees, particularly 2003 SB 257. Former State

Representative Ginger Barr also presented

written testimony regarding the program’s

history. Former Representative Barr was the

main sponsor of the bill which created this

program in the late 1980's. The agency also

showed two videos as examples of kennels

where the agency was required to seize the

animals from the kennels.

At a later meeting, the agency followed

up a Committee request by showing a video

of several kennels who consistently meet all

of the state inspection requirements.

CONCLUSIONS AND RECOMMENDATIONS

After review of the topic, the Committee

recommends that representatives from each

industry work with the agency to develop a

fee proposal that would be acceptable to all

interested parties. The Committee encour-

ages the respective industries to present their

proposal to the Legislature by the start of the

2004 Legislative Session. The Committee

notes that this issue has not been resolved,

and that those involved in the budgetary

process for this agency need to continue to

be aware of this issue.

The Committee further recommends that

the agency develop a policy manual to aid in

consistent inspections throughout the state

and that the agency needs to focus on target-

ing inspections on problem areas.

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Kansas Legislative Research Department 2003 Appropriations/Ways and Means

Special Committee on

Appropriations/Ways and Means

MEDICAID REIMBURSEMENT RATES-HOME AND COMMUNITY BASED

WAIVER FOR THE FRAIL ELDERLY AND PEOPLE WITH PHYSICAL DISABILITIES

CONCLUSIONS AND RECOMMENDATIONS

The Special Committee on Appropriations/Ways and Means recommends that the Department

of Social and Rehabilitation Services (SRS) and the Department on Aging (DOA) explore the

feasibility, including the initial cost to become the employer of record. The Committee has

concerns about the State becoming liable for items for which payroll agents now have

responsibility for such as workers’ compensation, unemployment and other liability. The

agencies also should provide more detailed information regarding the reimbursement

differences for individuals on the HCBS/PD waiver. The departments should use FY 2003 as

a base, look at the total amount of money being paid for HCBS/PD and FE waiver services, and

identify the amounts that were paid to gather a true average cost per hourly basis. The

Committee suggests that SRS look at the wide range of services provided by payroll agents in

the State since it seems to vary significantly. In addition, the Committee recommends

reviewing the Independent Living Centers and the for-profit organizations in regard to services

they provide, including administrative costs.

The Committee also recommends that SRS look at other states and consult with the Center for

Medicaid and Medicare Services (CMS) to see what is being done in regard to the cash and

counseling model and how that might apply to Kansas. The Committee recommends that SRS

come back with a report to the 2004 Legislature with an overview of the program.

Proposed Legislation: None

BACKGROUND

The Legislative Coordinating Council

charged the Committee with the study of

medicaid reimbursement rates for the home

and community-based waivers, particularly

the Physically Disabled (PD) and Frail El-

derly (FE) waivers.

COMMITTEE ACTIVITIES

The Committee reviewed the 100-hour

Performance Audit Report on the compensa-

tion of payroll agents for Home and

Community-Based Waiver Programs. The

100-hour performance audit was done to

determine whether there are less costly

options for processing payments to those

who provide services under the Home and

Community-Based Waiver Programs. The

audit focused on the Home and Community

Based Physical Disability Waiver (HCBS/PD)

and the waiver for the Frail Elderly

(HCBS/FE). According to the report, approx-

imately 80 percent of consumers who receive

services from the HCBS/PD waiver choose to

self-direct their attendants. The Center for

Medicare and Medicaid Services (CMS) gives

states the authority to provide services

through HCBS waivers and does not allow

states to reimburse a consumer directly for

services they receive. Payroll agents are used

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Kansas Legislative Research Department 2003 Appropriations/Ways and Means

and enrolled as Medicaid providers to allow

individuals to maintain control of the re-

cruiting, training and managing of their

attendants in Kansas. The Department of

Social and Rehabilitation Services (SRS) is

following up on the recommendations made

in the report and continues to research what

other states are doing regarding payroll agent

services as part of its continual evaluation

process of the system.

The Kansas Department on Aging, which

is responsible for management of the Home

and Community Based Services Frail Elderly

(HCBS/FE) waiver program, noted that ap-

proximately 30 percent of HCBS/FE clients

choose to self-direct their care and that the

Department believes the payroll agent system

is the most appropriate method to process

claims, pay attendants and taxes, and remain

responsible for worker’s compensation,

unemployment and liability insurance pay-

ments. However, the Department is research-

ing the feasibility of competitively bidding

the payroll agent process.

Several conferees spoke in opposition to

the idea of a competitive bidding process for

payroll agents, and suggested instead that the

Committee look at limiting administrative

charges, and pursue an extensive audit

reviewing all waiver programs and other

state systems.

Some conferees expressed concern about

the conclusions drawn from an audit with

such a limited scope, given the complexity of

Medicaid. They also noted that while the

developmental disability waiver has been in

existence for ten years, the reimbursement

rate has gone up only 49 cents. It was also

pointed out that InterHab filed a suit regard-

ing rate reimbursement in October.

Some conferees questioned the appropri-

ateness of comparing centers for independ-

ent living (CILs) to home health care agen-

cies, noting that the CILs also provide voca-

tional services, educational advocacy, sign-

language interpreters and independent living

skills training. In addition, payroll process-

ing by the CILs includes quality assurance,

resource coordination and service delivery,

as well as processing time sheets and dis-

bursing checks. The Topeka Independent

Living Resource Center pointed out that it

had not charged the maximum rate for ser-

vices as a payroll agent to leave more fund-

ing for direct care services.

A number of conferees noted the rate

disparity between self-directed and non-self

directed care—a payment rate of $11.96 per

hour for a self-directed personal care atten-

dant or $12.72-$14.05 per hour for a non-self

directed care attendant for the frail elderly

waiver. For the physically disabled waiver,

the self-directed rate is $11.94 per hour and

the non-self directed rate is $12.50 per hour.

Several conferees noted that the primary

challenges observed in the “self directed”

care model are tied to recruitment and reten-

tion of personal care attendants and ex-

pressed concern regarding the inadequate

fiscal support for the Independent Living

Counselor services. The conferees also

suggested a systematic review of HCBS

services to consider how these contracts are

structured.

Some conferees noted that the audit

consisted of three Independent Living Cen-

ters and two Home Health Agencies and did

not address the fundamental difference

between the two entities: that most Inde-

pendent Living Centers are founded and

chartered as Non-Profit Organizations, and

can receive beneficial tax treatment not

available for-Profit home health agencies.

Assisted Healthcare indicated that its higher

costs related to time and effort invested

personnel to insure staff retention.

The Committee was presented with a

review of the United States Tenth Circuit

Court of Appeals decision in Fisher v.

Oklahoma and the impact of the case on

Kansas HCBS Waivers. SRS does not believe

that the decision will have an immediate

impact on their service delivery system. The

District Court judge has set the Fisher case

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Kansas Legislative Research Department 2003 Appropriations/Ways and Means

for a scheduling conference in late Novem-

ber 2003. SRS offered to update the Legisla-

ture as needed on the situation.

CONCLUSIONS AND RECOMMENDATIONS

The Special Committee on Appropria-

tions/Ways and Means recommends that SRS

and DOA explore the feasibility, including

the initial cost to become the employer of

record. The Committee has concerns about

the State becoming liable for items for which

payroll agents now have responsibility for

such as workers’ compensation, unemploy-

ment and other liability. The agencies also

should provide more detailed information

regarding the reimbursement differences for

individuals on the HCBS/PD waiver. The

departments should use FY 2003 as a base,

look at the total amount of money being paid

for HCBS/PD and FE waiver services, and

identify the amounts that were paid to gather

a true average cost per hourly basis. The

Committee suggests that SRS look at the

wide range of services provided by payroll

agents in the State since it seems to vary

significantly. In addition, the Committee

recommends reviewing the Independent

Living Centers and the for-profit organiza-

tions in regard to services they provide,

including administrative costs.

The Committee also recommends that

SRS look at other states and consult with the

Center for Medicaid and Medicare Services

(CMS) to see what is being done in regard to

the cash and counseling model and how that

might apply to Kansas. The Committee

recommends that SRS come back with a

report to the 2004 Legislature with an over-

view of the program.

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Kansas Legislative Research Department 2003 Appropriations/Ways and Means

Special Committee on

Appropriations/Ways and Means

MEDICAL TRANSPORTATION DELIVERY SYSTEM

CONCLUSIONS AND RECOMMENDATIONS

The Special Committee on Appropriations/Ways and Means believes that it is important to

address the issue of the medical transportation delivery system in the best way possible to

avoid negatively impacting Medicaid recipients. To that end, the Committee recommends that

the Department of Social and Rehabilitation Services (SRS) meet with Assisted Healthcare and

other transportation providers and consider the suggestions noted by the representatives of the

transportation service providers. The Committee recommends that SRS report its findings to

the 2004 Legislature, and include conclusions as to whether the provider suggestions can be

implemented.

The Committee also recommends that SRS explore the availability of other federal funds,

community funds, or funding under the Americans with Disabilities Act, and whether there

is any incentive to use those funds.

Proposed Legislation: None

BACKGROUND

The Legislative Coordinating Council

charged the Committee with the study of the

medical transportation delivery system and

reimbursement rates in Medicaid for possible

savings or efficiencies.

COMMITTEE ACTIVITIES

The Legislative Division of Post Audit

presented its report, Medicaid: Assessing the

Cost-Effectiveness of Current Procedures for

Transporting Medicaid Consumers to the

Services They Need.

The report indicates that during FY 2002,

Kansas spent $6.3 million to provide non-

emergency and medical transportation to

Medicaid consumers, up from $4.6 million

that Kansas spent in FY 2000. Most of the

$6.3 million ($5.2 million or 83 percent) was

used to transport consumers living in John-

son, Sedgwick, Shawnee, and Wyandotte

counties. About 3,800 more consumers used

Medicaid-paid transportation services in

2002 than in 2000.

According to the report, in an attempt to

control costs, SRS recently made changes in

how it reimburses commercial transportation

providers. SRS lowered the reimbursement

rate from $20 to $10 for all Medicaid-funded

transportation effective January 1, 2003. In

response to complaints from providers that

the reimbursement rates were too low, SRS

created the two base-rate levels for ambula-

tory and non-ambulatory consumers.

The following two questions were ad-

dressed in the audit:

!Are There Cost-Effective Alternatives to

the Current System of Transporting

Medicaid Consumers?

!Do Requirements That SRS Has Recently

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Kansas Legislative Research Department 2003 Appropriations/Ways and Means

Imposed on Commercial Providers Who

Transport Medicaid Consumers Dupli-

cate Requirements Imposed by the Corpo-

ration Commission?

The audit report detail includes several

recommendations for ensuring that non-

emergency transportation services are pro-

vided only to Medicaid consumers needing

transportation to medical services.

Legislative Post Audit identified several

fundamental problems with the structure of

the Medicaid transportation program that

can prevent the most cost-effective use of

available moneys. Some of these problems

include:

!There is a disincentive to use lower-cost

methods of transportation;

!Providers have an inherent financial

conflict of interest in screening passen-

gers and trips;

!Claims are processed with few controls;

and

!The new prior authorization system is

not an effective gate-keeping tool, and is

labor intensive for both providers and the

State’s fiscal agent.

Legislative Post Audit identified several

options that Kansas could consider in trying

to make its Medicaid transportation program

more cost-effective:

!Consider hiring a “broker” to handle the

details of administering the program;

!Continue the current state-administered

program, but adopt changes to try to

make it more cost-effective.

The report notes that some of SRS’ new

requirements for commercial providers of

non-emergency medical transportation dupli-

cate information the Kansas Corporation

Commission (KCC) requires commercial

transporters to file. Only 3 of the 106 com-

mercial transportation providers SRS uses

are certified by the KCC and are faced with

these duplicate requirements. SRS also

requires transportation providers to get

Kansas Bureau of Investigation background

checks for each of its drivers, but does not

require them to submit the results to SRS.

Legislative Post Audit indicated that it

should be possible to quantify how much

could be saved if it were decided to limit, for

example, Medicaid transportation only to

providers that are outside the metropolitan

areas. Post Audit was confident that it found

the significant structural problems with the

Medicaid transportation system from the

findings of the 100-hour audit.

SRS testified regarding transportation in

the Kansas Medical Assistance Program.

Under Title XIX of the Social Security Act,

state Medicaid programs are required to

cover certain medical and administrative

services. Transportation costs have in-

creased substantially over the past five years.

As part of the Governor’s allotment in FY

2003, the non-emergency transportation base

rate was reduced from $20 to $10. In re-

sponse to complaints from providers, benefi-

ciaries’ needs, and a need to control costs,

SRS developed and implemented the current

two-tiered base rate in March of 2003.

SRS explained that its staff is continuing

to make improvements in the Transportation

Program and researching the possibility of

moving from the optional medical services to

an administrative services method of reim-

bursement.

In response to the recommendation a rate

change for trips used to transport multiple

Medicaid customers, SRS noted that follow-

ing the October 16, 2003 implementation of

the new medical management information

system (MMIS), SRS would reduce the rates

for trips used to transport multiple Medicaid

beneficiaries. At the current time there is a

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Kansas Legislative Research Department 2003 Appropriations/Ways and Means

freeze on policies because the system's work

is difficult to do and SRS will not be able to

implement new policy until close to the

spring of 2004.

Another Chance, Inc. (ACI) explained

the organization's medical transportation

procedure. Foster parents provide transpor-

tation using private vehicles and when foster

parents are unable to provide transportation,

it is provided by the ACI case manager or the

executive director using private vehicles. In

addition, the administrative billing costs

incurred per claim were explained. ACI’s

procedure was adopted after foster parents

attempted to do their own filing, but found

the process was too complicated and too

confusing to be workable. Foster parents

then requested that ACI do their billing for

them and ACI adopted and implemented its

procedure at their request.

Assisted Healthcare, a Topeka, Kansas,

based home health agency with offices in

Topeka, Lawrence, and Overland Park, ad-

dressed the costs associated with providing

commercial non-emergency medical trans-

portation for Medicaid recipients in Kansas.

According to its testimony, Assisted

Healthcare cannot afford to sustain Medicaid

transportation under the current reimburse-

ment rates. Reimbursement rates need to be

evaluated and increased to better reflect true

costs of providing transportation services.

Assisted Healthcare's testimony detailed

the following suggestions for improving the

cost-effectiveness of the Non-Emergency

Medical Transportation program:

!Reduce fraud and abuse;

!Increase state’s responsibility;

!Increase provider responsibility;

!Increase physician responsibility;

!Eliminate costly and unnecessary prior

authorization system;

!Utilize a variety of modes of transporta-

tion and payment systems;

!Qualify consumers based on their ability

to provide their own transportation;

!Qualify transportation providers based

on their qualifications;

!Reimburse transportation providers

based on their qualifications and service

provided;

!Improve the transportation provider

manual;

!Utilize technology;

!Compare Medicaid transportation billing

with Medicaid physician billing; and

!Create standardized forms and proce-

dures.

ABC Taxi presented an overview of the

organization and services provided. ABC

Taxi addressed the SRS Non-Emergency

Medical Transport regarding cost structure,

price risk assumed by the provider, and

suggested the following improvements:

!Restore cost structure to adequate level;

!Revise cost structure;

!re-qualification of providers;

!Client eligibility standards;

!Provider participation in setting policy

and procedures; and

!Stability to program.

The Association of Community Mental

Health Centers of Kansas, Inc. noted that the

Community Mental Health Centers are con-

cerned that Medicaid consumers get to the

appointments they need to help them main-

tain their independence in the community.

History shows that if consumers of physical

health and/or mental health services cannot

get the services they need in a timely man-

ner, their condition worsens and the point of

entry into the health care system is at the

most costly point—the emergency room.

CONCLUSIONS AND RECOMMENDATIONS

The Special Committee on Appropria-

tions/Ways and Means believes that it is

important to address the issue of the medical

transportation delivery system in the best

way possible and not negatively impact

Medicaid recipients. To that end, the Com-

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Kansas Legislative Research Department 2003 Appropriations/Ways and Means

mittee recommends that SRS meet with

Assisted Healthcare and other transportation

providers and consider the suggestions noted

by the representatives of the transportation

service providers. The Committee recom-

mends that SRS report its findings to the

2004 Legislature, and include conclusions as

to whether the provider suggestions can be

implemented.

The Committee also recommends that

SRS explore the availability of other federal

funds, community funds, or funding under

the Americans with Disabilities Act, and

whether there is any incentive to use those

funds.

SPECIAL COMMITTEES

Reports of the

Special Committee on Assessment

and Taxation

to the

2004 Kansas Legislature

CHAIRPERSON: Senator David Corbin

VICE-CHAIRPERSON: Representative John Edmonds

RANKING MINORITY MEMBER: Senator Janis Lee

OTHER MEMBERS: Senators Mark Buhler, Stan Clark, and Les Donovan; Representatives

Steve Brunk, Paul Davis, Tom Holland, David Huff, Bruce Larkin, Don Myers, and Arlen

Siegfreid

STUDY TOPICS

Corporation Franchise Taxes

Estate Taxes

Job Retention Policy

Local Sales Tax Uniformity

Monitor Streamlined Sales Tax Implementation

Motor Vehicle Sales Taxes

Property Tax on Damaged Property

Property Tax Exemptions for Senior-Care Facilities

Property Tax Income and Expense Information

Severance Tax Administration

Transportation of Cigarettes

Use Tax on Computer Software Customization Services

December 2003

3-3

Kansas Legislative Research Department 2003 Taxation

Special Committee on

Assessment and Taxation

CORPORATION FRANCHISE TAXES

CONCLUSIONS AND RECOMMENDATIONS

The Committee finds that the corporate franchise tax rate increases in the 2002 law were

particularly burdensome for small Kansas businesses and therefore recommends the

introduction of legislation to return the rate and structure of the tax to the pre-2002 provisions.

The Committee also recommends the introduction of legislation that would move the net-worth

portion of the tax to the Department of Revenue while simultaneously retaining a small annual

filing fee with the Secretary of State.

Proposed Legislation: The Committee recommends the introduction of two bills on this

topic.

BACKGROUND

During the 2003 Legislature, the House

Taxation Committee reviewed a number of

potential policy changes associated with

corporation franchise taxes, including

changes in the rate of the tax; changes in the

maximum liability threshold; and the possi-

bility that the administrative responsibility

for much of the tax would be relocated from

the Secretary of State to the Department of

Revenue. A conference committee report

defeated on the House floor on the last night

of the 2003 Session also would have sought

to change several components of the tax.

The renewed interest in franchise tax

provisions was brought about in part by an

omnibus tax bill enacted late in the 2002

Session that increased the rate of the tax and

doubled the maximum liability. The Legisla-

tive Coordinating Council therefore charged

the Special Committee with studying various

administrative and enforcement issues re-

garding the franchise tax, including whether

the tax should continue to be collected by

the Secretary of State; and with reviewing

different proposals regarding rate changes

and other suggestions by Kansas businesses.

Rate Increases—2002 SB 39

An omnibus tax bill enacted late in 2002

sought to effectively double the amount of

revenues received under the corporation

franchise taxes. (The proposal was originally

recommended by Governor Graves.) Prior

law had imposed a tax of $1 per $1,000 of

shareholder equity on corporations up to a

maximum of $2,500. Under the new law, the

tax was increased to $2 per $1,000 of share-

holder equity up to a maximum of $5,000.

The FY 2003 revenue estimate for franchise

taxes was increased by $18 million based

upon the new law—from $17.7 million to

$35.7 million.

The FY 2003 franchise tax estimate was

subsequently reduced by the Consensus

group in November from $35.7 million to $28

million. That number in April was increased

to $33 million by the Consensus group.

Final FY 2003 receipts were approximately

$31.1 million. The current consensus esti-

mate for FY 2004, likely to be revised on

November 3, is $35 million.

3-4

Kansas Legislative Research Department 2003 Taxation

2003 Session and Potential

Rate Decreases

SB 38, which would have restored the

rate to $1 per $1,000 of shareholder equity

was approved by the Senate on February 12.

After initially being referred to the House

Judiciary Committee, the bill was withdrawn

and subsequently referred to the House

Taxation Committee, where it remains. The

subject of the potential rate decreases was

discussed frequently by the taxation confer-

ence committee at the conclusion of the 2003

Session.

A conference committee report (HB 2287)

which contained a number of taxation provi-

sions, including a proposal to restore the

corporation franchise rate to $1 in combina-

tion with increasing the maximum amount of

liability to $8,000, was defeated on the

House floor in the waning hours of the ses-

sion.

Other issues discussed during delibera-

tions in the House Taxation Committee

included a proposal to eliminate both parent

and subsidiaries corporations' having to pay

the tax; and a proposal to change the "zero-

rate" part of the current law's computation.

Restructuring the Franchise Tax

Another concept discussed in the House

Taxation Committee involved a proposal that

would move much of the responsibility for

collection of the current franchise tax liabil-

ity from the Secretary of State's office to the

Department of Revenue, where confidential-

ity restrictions and audit capabilities exist.

HB 2454 was subsequently introduced and

remains in the House Taxation Committee.

COMMITTEE ACTIVITIES

At the October meeting, the Committee

received a staff briefing and testimony from

the Secretary of State's office. Melissa

Wangemann, Deputy Assistant Secretary of

State, said that the Secretary of State sup-

ported the concept of HB 2454 in moving an

occupation tax to the Department of Revenue

while retaining a flat filing fee with the

Secretary of State. She pointed out that most

states with a tax based on net worth do

require the state's taxing agency (in lieu of

the filing officer) to collect the tax.

Other conferees included the Kansas

Chamber of Commerce and Industry, whose

representative encouraged the Committee to

endorse a rate reduction without a cap in-

crease; and National Federation of Independ-

ent Business, whose representative encour-

aged the Committee to endorse a rate reduc-

tion and avoid a cap increase if at all possi-

ble.

CONCLUSIONS AND RECOMMENDATIONS

The Committee finds that the rate in-

creases in the 2002 law were particularly

burdensome for small Kansas businesses and

therefore recommends the introduction of

legislation to return the rate of the tax (as

well as the minimum and maximum liability

amounts) to the pre-2002 provisions. Enact-

ment of the legislation would accomplish

this recommendation.

The Committee also finds that adminis-

tration and enforcement of a tax based on net

worth more appropriately belongs with the

Department of Revenue than the Secretary of

State. The Committee recommends the

introduction of legislation that would move

the net-worth portion of the tax to the De-

partment of Revenue while simultaneously

retaining a small annual filing fee with the

Secretary of State. The rate structure in this

proposed legislation also is recommended to

return to the pre-2002 provisions. Enactment

of the legislation would accomplish these

recommendations.

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Kansas Legislative Research Department 2003 Taxation

Special Committee on

Assessment and Taxation

ESTATE TAXES

CONCLUSIONS AND RECOMMENDATIONS

The Committee makes no recommendations regarding this topic.

Proposed Legislation: None

BACKGROUND

During the 2003 Legislature, the Senate

Assessment and Taxation Committee re-

viewed a proposal by the Kansas Judicial

Council regarding a stand-alone estate tax

that would no longer have tied the Kansas

tax to the federal estate tax.

In the wake of this proposal and a num-

ber of other estate and succession tax provi-

sions enacted in 2002 and 2003, the Legisla-

tive Coordinating Council charged the Spe-

cial Committee with analyzing the current

law and making any recommendations

deemed appropriate to the 2004 Legislature.

Provisions of 2003 HB 2005

One section of 2003 HB 2005 repeals

retroactive to its date of enactment the suc-

cession tax enacted in 2002 and provides for

refunds of any such taxes which have al-

ready been paid. The succession tax was

imposed on the privilege of succeeding to the

ownership of property by someone who is

not a spouse, sibling, lineal ancestor, or

lineal descendant of the decedent.

Additional provisions of the bill provide

a number of amendments to the Kansas

Estate Tax Act designed to improve adminis-

tration and enforcement. Specific defini-

tions are provided for “decedent,”

“distributee,” and “tax situs,” and persons

spending more than six months of a calendar

year immediately preceding their death in

the state are defined as a “resident dece-

dent.”

New language clarifies who is responsi-

ble for filing estate tax returns with the

Department of Revenue. Closing letters

provided by the Department are to be

deemed applicable only with respect to

assets reported in returns which have been

filed.

Kansas estate tax returns are required to

be filed on or before the date federal estate

tax returns are required to be filed, except

that the extensions may be provided upon a

showing of good cause. Failure to timely file

a return or pay any estate tax liability due

under the act will result in a penalty assess-

ment of one percent of the unpaid balance of

the tax due for each month, up to 24 percent,

plus interest as prescribed by subsection (a)

of KSA 79-2968 from the date the tax was

due until paid. If the Director of Taxation

were to determine that underpayment of tax

was due to a failure to have made a reason-

able attempt to comply with the act, an

additional 25 percent penalty of the unpaid

balance of the tax would be levied. Failure

to file a return or the filing of an incorrect or

insufficient return will trigger a provision

requiring the Director of Taxation to estimate

the value of the taxable estate and assess a 50

percent penalty thereon, plus interest. Any

3-6

Kansas Legislative Research Department 2003 Taxation

personal representative acting with fraudu-

lent intent is subject to a penalty of 100

percent of the tax due, plus interest. Per-

sonal representatives intentionally signing

fraudulent returns are deemed guilty of a

felony and subject to imprisonment of up to

five years.

Additional provisions authorize under

certain circumstances the filing of tax liens

and provide for the issuance of tax warrants.

Finally, the Kansas estate tax exemption

filing threshold is conformed to the federal

threshold, effective for estates of decedents

dying on and after January 1, 2007. The

following table shows the current federal and

Kansas filing thresholds for decedents dying

in a given calendar year:

Kansas Federal

2003 $700,000 $1,000,000

2004 $850,000 $1,500,000

2005 $950,000 $1,500,000

2006 $1,000,000 $2,000,000

2007 $2,000,000 $2,000,000

2008 $2,000,000 $2,000,000

2009 $3,500,000 $3,500,000

2010 tax repealed tax repealed

2011 $1,000,000 $1,000,000

COMMITTEE ACTIVITIES

At the September meeting, the Commit-

tee received testimony from the Department

of Revenue indicating that because of 2001

changes in the federal estate tax and subse-

quent 2003 changes to the Kansas tax, it was

no longer considered practical or advisable

to continue direct conformity with federal

law.

As such, an administrative interpretation

was made—effective for estates of decedents

dying on and after May 22, 2003 -- that Kan-

sas has totally decoupled from current fed-

eral law and relies instead solely on the

federal law in effect on December 31, 1997.

The Department therefore has developed a

procedure under which federal form 706 as

it existed in 1997 is being made available to

Kansas tax practitioners.

CONCLUSIONS AND RECOMMENDATIONS

The Committee makes no recommenda-

tions regarding this topic.

3-7

Kansas Legislative Research Department 2003 Taxation

Special Committee on

Assessment and Taxation

JOB RETENTION POLICY

CONCLUSIONS AND RECOMMENDATIONS

The Committee finds that allowing certain tax credits to be transferrable would assist small

businesses in helping retain low-income workers and recommends the introduction of

legislation that would allow the transferability of credits for employer health insurance

contributions.

Proposed Legislation: The Committee recommends the introduction of one bill on this topic.

BACKGROUND

Senator Dave Jackson requested that an

interim study be conducted on state tax

policy as it relates to small businesses and

the extent to which additional incentives

could be provided to encourage such busi-

nesses to retain certain low-income workers.

The Legislative Coordinating Council

charged the Special Committee with study-

ing the development of a job-retention policy

for persons from lower-income working

families by rewarding small businesses

through tax strategies aimed at making it

possible for small businesses to hire and

retain such persons.

COMMITTEE ACTIVITIES

At the October meeting, Senator Jackson

submitted testimony reiterating his support

for the concept of allowing income tax cred-

its for certain small businesses who retain

low-income workers. Specifically, he called

for the introduction of legislation that would

provide a state credit that would dovetail

with the federal Work Opportunity Tax

Credit. He also submitted information on a

number of tax credits available in other

states and asked for the introduction of

legislation that would make two existing

small business tax credits (for child day care

assistance and for employer health insurance

contributions) transferrable to other taxpay-

ers.

CONCLUSIONS AND RECOMMENDATIONS

The Committee agrees that allowing

certain tax credits to be transferrable could

assist small businesses in helping retain low-

income workers. The Committee therefore

recommends the introduction of a bill that

would allow the transferability of credits for

employer health insurance contributions.

3-8

Kansas Legislative Research Department 2003 Taxation

Special Committee on

Assessment and Taxation

LOCAL SALES TAX UNIFORMITY

CONCLUSIONS AND RECOMMENDATIONS

The Committee recommends a two-fold approach to providing additional "breathing room" in

order to assure that uniformity is restored to the local sales tax law on a permanent basis. The

Committee recommends legislation which would reduce the number of classes in the local

sales tax law to two by effectively extending additional sales tax authority to a number of cities.

The Committee further recommends introduction and placement on the November 2004 ballot

of a proposed constitutional amendment that would expand to ten the number of classes the

Legislature may utilize for the purpose of limiting or prohibiting taxation by cities.

Proposed Legislation: The Committee recommends the introduction of one bill and one

concurrent resolution on this topic.

BACKGROUND

The Legislature in 2003 enacted HB 2005,

a bill that made a number of changes to state

and local sales tax laws necessary to bring

Kansas into conformity with the uniformity

and simplification requirements set forth in

the multi-state Streamlined Sales and Use

Tax Agreement. A number of requirements

of that agreement relate to local sales taxa-

tion, including a mandate that local sales

taxes be administered by the state (section

301); a mandate that the local sales tax base

be the same as the state base by 2006, subject

to a few limited exceptions (section 302); a

mandate that a local taxing jurisdiction have

only one rate and that a local use tax rate be

the same as the local sales tax rate (section

308); and a mandate that rate and taxing

jurisdiction boundary changes only take

place on the first day of a calendar quarter

after retailers have been given a minimum of

60 days' notice (section 305).

A 1996 Kansas Court of Appeals decision,

Home Builders Ass'n v. City of Overland Park,

held that a statute located within the local

sales tax act was nonuniform in its applica-

tion and that municipalities were therefore

authorized to charter out of a separate prohi-

bition within the act on local excise taxation.

(Article 12, Section 5 of the Kansas Constitu-

tion grants cities powers to determine their

local affairs with respect to taxation and

other issues but also grants the Legislature

the power to uniformly limit or prohibit

taxation by cities and to establish up to four

classes of cities for that purpose.) Within the

last two years, four cities have relied upon

Home Builders as well as guidance from the

Attorney General to approve charter ordi-

nances and raise their local sales tax rates

above the maximum authorized by state law.

The strong possibility now exists that a

city could subsequently decide to charter out

of other provisions of the local sales tax

statutes requiring state administration; bar-

ring multiple rates within a single jurisdic-

tion; requiring an identical tax base with the

state; or stipulating when rates and bound-

aries may change. Any such charter ordi-

nance by a single city could conceivably

cause the entire State of Kansas to be out of

substantial compliance with the Agreement.

3-9

Kansas Legislative Research Department 2003 Taxation

The Legislative Coordinating Council

therefore asked the Special Committee to

evaluate the current status of local sales tax

statutes with respect to uniformity and home

rule power of cities and to determine

whether uniformity should be assured or

reestablished in the wake of multi-state

streamlined sales tax simplification efforts.

COMMITTEE ACTIVITIES

At the September meeting, staff briefed

the Special Committee on city home rule

power, as well as local sales tax uniformity

history and some of the relevant case law.

The Department of Revenue outlined the

concern about the lack of uniformity pursu-

ant to the Home Builders case and the extent

to which the problem imperils Kansas' par-

ticipation in the Agreement.

The Department also observed that even

if the uniformity problem outlined in the

Home Builders case could be fixed statutorily

and the number of classes could be reduced

to four the Legislature would then be faced

with not allowing any special taxation provi-

sions for cities at any time in the future (or

the uniformity problem would have re-

turned). The Department's testimony noted

that the current local sales tax laws are

extremely complicated and that “creative

practitioners can no doubt develop addi-

tional arguments as to why the local sales tax

laws may be nonuniform.” The testimony

further observed that if the number of classes

could be reduced to one or two, “this would

leave some breathing room.”

The Chairman said that the uniformity

problem was an extremely important issue

relative to the Agreement and noted that

cities had been the beneficiaries of the local

use tax which was imposed as part of the

Kansas streamlined sales tax legislation; and

that they would be expected to benefit in the

future to the extent that the state begins

collecting local, as well as state, taxes on

sales from remote vendors who are not cur-

rently required to remit the tax.

CONCLUSIONS AND RECOMMENDATIONS

The Committee notes that the people of

Kansas, in 1960, had explicitly granted the

Legislature the power to uniformly limit or

prohibit taxation by cities and to establish up

to four classes of cities for that purpose.

(Local sales taxes subsequently were not

authorized by the Legislature until the early

1970s.) The 1996 court decision indicating

that the Legislature had inadvertently ex-

ceeded that number of classes effectively

granted cities the power to charter out of

many of the provisions in the local sales tax

law, including mandatory elections, caps on

the maximum allowable rates, and require-

ments that the local tax base generally be the

same as the state tax base.

This concern over lack of state control

over city sales taxes is magnified further by

the fact that the lack of uniformity in the

local sales tax statutes could imperil Kansas'

participation in the multi-state streamlined

sales tax effort - participation that is ex-

pected to greatly benefit cities in addition to

the state.

Because of the complexity of the local

sales tax provisions and the likelihood that

additional arguments could be made in court

with respect to the lack of uniformity; and

because of the propensity of cities to request

additional local sales tax authority from the

Legislature, the Committee recommends a

two-fold approach to providing additional

"breathing room" in order to assure that

uniformity is restored on a permanent basis.

The Committee recommends legislation

which would redefine the existing classes in

the local sales tax law to create only two

classes by effectively extending additional

sales tax authority to a number of cities.

Enactment of this legislation would accom-

plish this recommendation. The Committee

further recommends introduction and place-

ment on the November, 2004, ballot a pro-

posed constitutional amendment that would

expand to ten the number of classes the

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Kansas Legislative Research Department 2003 Taxation

Legislature may utilize for the purpose of

limiting or prohibiting taxation by cities.

Adoption of a concurrent resolution would

accomplish this recommendation.

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Kansas Legislative Research Department 2003 Taxation

Special Committee on

Assessment and Taxation

MONITOR STREAMLINED SALES TAX IMPLEMENTATION

CONCLUSIONS AND RECOMMENDATIONS

The Committee recommends the introduction of legislation that would provide a tax credit to

help offset software costs for certain small businesses associated with implementing the state’s

new destination-based sales tax sourcing provisions. The Department of Revenue is requested

to formulate several different options and fiscal impact estimates in terms of structuring a tax

credit for small businesses. The options are to be presented to the standing taxation

committees in January, and those committees should decide upon the final composition of the

legislation.

Proposed Legislation: The Committee recommends the introduction of one bill on this topic.

BACKGROUND

The Legislature in 2003 enacted HB 2005,

a bill that made a number of changes to state

and local sales tax laws necessary to bring

Kansas into conformity with the uniformity

and simplification requirements set forth in

the multi-state Streamlined Sales and Use

Tax Agreement. Included among the major

streamlined provisions were changes in

sourcing rules; provisions establishing uni-

form state and local sales tax bases; and

enactment of a number of definitions re-

quired by the multi-state agreement.

Prior Kansas law generally used an

"origin-based" sourcing rule, applying the

local sales tax in effect at the retailer's busi-

ness location. The Agreement required a

change to a "destination-based" sourcing rule

to determine the applicable local sales or use

tax. Sales remain "sourced" to the retailer's

location for buyers taking possession of

merchandise on site, but sales of shipped

merchandise are sourced to the buyer’s

location for local sales or use tax purposes.

The Department of Revenue notified

retailers in a mass mailing in mid-June re-

garding the change in sourcing rules, which

took effect July 1. But in response to a num-

ber of complaints from delivery-based busi-

nesses about a lack of lead time and imple-

mentation costs, Governor Sebelius and

legislative leaders held a press conference in

early July to announce that the Department

of Revenue was going to be sensitive to

administrative and implementation issues

being faced by retailers and would be allow-

ing a period of up to six months before full

compliance could be expected.

The Legislative Coordinating Council

also assigned the topic to the Special Com-

mittee and asked that the implementation of

all changes in Kansas sales tax laws relative

to the streamlined sales tax provisions be

monitored. The Committee also was asked to

monitor streamlined sales tax activities in

other states and any Congressional action.

Finally, the Committee was charged with

recommending any trailer legislation deemed

necessary to the 2004 Legislature.

During August, Speaker Mays conducted

a series of eight meetings across the state

soliciting input from retailers about the new

sourcing rules.

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Kansas Legislative Research Department 2003 Taxation

The Governor, in September, subse-

quently sent a second letter to retailers an-

nouncing that she was extending indefinitely

the "period of relaxed enforcement" in order

to grant the merchants additional time to

come into compliance with the new sourcing

provisions.

Later in September, Senators Vratil and

Schmidt announced that they were preparing

to pre-file, for introduction, a bill that would

more formally delay the sourcing changes

until July 1, 2004, but also would contain a

grandfather provision allowing retailers who

have already switched to destination-sour-

cing to be considered still in compliance

with the law in the meantime.

COMMITTEE ACTIVITIES

At the September meeting, Secretary of

Revenue Joan Wagnon briefed the Committee

on the efforts the Department of Revenue had

undertaken to assist businesses in making

the transition to the new sourcing law. She

also provided an update on the status of

streamlined sales tax legislation in other

states. Streamlined Sales Tax Project Co-

Chair Scott Peterson of South Dakota also

appeared before the Committee, outlining the

history of the multi-state effort and discuss-

ing some of the political problems which had

been encountered by other states seeking to

join the Agreement. A certified public ac-

countant appeared and demonstrated how

QuickBooks software could be modified to

help track and report sales under the new

destination sourcing rules. He said that a

single-user version could be purchased for

about $300 and that a five-user version could

be purchased for about $700. A vendor from

BT Solutions subsequently demonstrated a

pocket PC "Sales Tax Tracker" which cost

$780 for the machine and the software and

would necessitate an annual charge of $310

for upgraded software as sales tax rates are

changed. Jim Bartle of the Department of

Revenue explained the Department's inter-

pretation of the new sourcing provisions as

they relate to sales of goods delivered from

retailers located inside the STAR bond dis-

trict in Wyandotte County.

At the October meeting, Mike Worswick,

Wolfe's Camera Shop; Lew Ebert, Kansas

Chamber of Commerce and Industry; and

Ken Daniel, National Federation of Inde-

pendent Business; all appeared in opposition

to destination sourcing but all indicated that

they generally supported the state's efforts to

collect sales taxes on sales from remote

retailers. Secretary Wagnon noted that

federal legislation had been introduced that

would allow the states who are in compli-

ance with the Agreement to compel remote

retailers to collect taxes. She said that the

Department was continuing to help busi-

nesses across the state develop software

solutions for the new sourcing rules and

explained that she had briefed a multi-state

meeting in Chicago in late September on

some of the problems that Kansas had been

experiencing. Bruce Johnson, Utah Tax

Commissioner and Streamlined Sales Tax

Project Co-Chair said that the controversy in

Kansas over the summer and fall was being

watched closely by other states. He said that

Kansas was being looked to as a leader by

other states in the multi-state streamlined

effort and added that it would be a serious

national setback for the Agreement if Kansas

were to retreat from compliance.

At the November meeting, Secretary

Wagnon said that the number of phone calls

the Department had been receiving from

businesses had been declining and that she

thought a number of retailers were continu-

ing to come into compliance with the new

sourcing provisions. She also said the De-

partment was in the final stages of negotia-

tions with bidders on the development of an

address-based system for assigning taxing

jurisdictions, with the system expected to

include a downloadable electronic database

that will match a street address to the correct

taxing jurisdiction and rate.

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Kansas Legislative Research Department 2003 Taxation

CONCLUSIONS AND RECOMMENDATIONS

The Committee recommends the intro-

duction of legislation that would provide a

tax credit to help offset software costs for

certain small businesses associated with

implementing the state’s new destination-

based sales tax sourcing provisions. The

Department of Revenue is requested to for-

mulate several different options and fiscal

impact estimates in terms of structuring a tax

credit for small businesses. The options are

to be presented to the standing taxation

committees in January, and those committees

should decide upon the final composition of

the legislation.

Among the parameters given to the De-

partment for developing the credits were a

restriction on the maximum credit amount of

$500; a requirement that the credits may

only be claimed for expenses borne in 2003

or 2004 (but not both); and a requirement

that the credits only be made available to

"small" businesses in an effort to minimize

the impact on the State General Fund.

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Kansas Legislative Research Department 2003 Taxation

Special Committee on

Assessment and Taxation

MOTOR VEHICLE SALES TAXES

CONCLUSIONS AND RECOMMENDATIONS

The Committee recommends that the Department of Revenue prepare legislation for

introduction in January that would statutorily codify the linkage between motor vehicle license

renewal and sales tax compliance; and would provide clear statutory guidance with respect to

when the amounts reported for certain private sales are deemed to be questionable and should

be replaced by a proxy estimate of the vehicle’s value.

Proposed Legislation: None

BACKGROUND

Legislative Post Audit 03-09, released in

April, reviewed sales tax collections on

motor vehicles and the Department of Reve-

nue’s procedures for ensuring that correct

amounts of sales and compensating use taxes

are paid.

One recommendation of that audit was to

ask for an interim study on the issue of

whether collection of motor vehicle sales

taxes should be moved from vehicle dealers

to county treasurers. The Legislative Coordi-

nating Council recommended that the Spe-

cial Committee review the audit in general,

as well as the issue of situs (point of collec-

tion), and make any recommendations

deemed appropriate to the 2004 Legislature.

COMMITTEE ACTIVITIES

Staff from Legislative Post Audit re-

viewed the audit with the Committee at the

September meeting. The audit recom-

mended that the Department of Revenue take

steps to strengthen its current review, collec-

tion, and enforcement procedures with

respect to motor vehicle sales taxes.

Small dealer sales tax compliance was

identified as a particular problem, with 514

dealers having delinquent accounts totaling

over $7 million.

Secretary of Revenue Joan Wagnon re-

sponded by noting that the Department has

taken a number of steps to improve enforce-

ment in the wake of the audits findings,

including linking dealers' license renewals to

sales tax compliance. Since March, the

Department had revoked nine dealers' li-

censes as a result of sales tax delinquencies

and had renewed the licenses of a number of

others only after "satisfactory arrangements"

had been made to resolve the delinquencies.

The licensure provisions and other enforce-

ment measures had reduced the number of

delinquent accounts to 302 by September.

The audit also suggested that one way of

eliminating the problem would be to change

the law to provide for collection by county

treasurers in lieu of the vehicle dealers. But

Secretary Wagnon observed that since the

law also provides for the issuance of 30-day

temporary tags by dealers, moving collection

of sales taxes to the counties likely could

cause a one-month deceleration (estimated to

be $14.5 million) of motor vehicle sales tax

receipts.

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Kansas Legislative Research Department 2003 Taxation

The audit recommended that the Depart-

ment direct county treasurers to enforce its

existing regulation on determining the fair

market value of privately sold vehicles. But

Secretary Wagnon said that she believed that

the current regulation (KAR 92-19-30) put

too much responsibility on county treasurers

and their staffs and said the regulation

should be changed, preferably based upon

some sort of statutory guidance.

The Coffey County Treasurer also testi-

fied and said that her office would likely not

require any additional resources even if the

law were amended to change the situs of

motor vehicle transactions to county treasur-

ers' offices.

CONCLUSIONS AND RECOMMENDATIONS

The Committee applauds the efforts of

the Department of Revenue to improve en-

forcement on sales tax delinquencies by

vehicle dealers, especially the administrative

initiative linking license renewal to sales tax

compliance. The Committee also wishes to

express its concern about the apparent wide-

spread fraud which may be occurring in

private transactions involving vehicle sales

to the extent that the amount of such sales is

intentionally under-reported.

The Committee therefore recommends

that the Department of Revenue prepare

legislation for introduction in January that

would statutorily codify the linkage between

license renewal and sales tax compliance;

and would provide clear statutory guidance

with respect to when the amounts reported

for certain private sales are deemed to be

questionable and should be replaced by a

proxy estimate of the vehicle’s value.

3-16

Kansas Legislative Research Department 2003 Taxation

Special Committee on

Assessment and Taxation

PROPERTY TAX ON DAMAGED PROPERTY

CONCLUSIONS AND RECOMMENDATIONS

The Committee makes no recommendations regarding this topic.

Proposed Legislation: None

BACKGROUND

During the first part of May, 2003, devas-

tating tornados and thunderstorms on several

occasions caused extensive damage to prop-

erty in a number of counties, especially

Wyandotte and Crawford. A number of

legislators encouraged the introduction of

legislation that would provide some form of

property tax relief for certain residential

property damaged by tornados and other

natural disasters during the spring and sum-

mer.

In response to those concerns, the Legis-

lative Coordinating Council directed the

Special Committee to review the issue and

study the appropriateness of allowing prop-

erty tax valuation adjustments for such

property.

Under current Kansas law, tax bills sent

out in the fall are based on the valuation of

property as of the previous January 1. The

Kansas Legislature in the past has consid-

ered, but not approved various proposals that

would allow for valuations to be adjusted

when tornados or other disasters damage

property after January 1, but before August

15.

COMMITTEE ACTIVITIES

At the September meeting, the Commit-

tee received testimony from Representative

Margaret Long, who encouraged the intro-

duction of legislation designed to provide

some sort of property tax relief for storm-

damaged property. She said that Missouri

and Oklahoma law apparently provides for

such relief and said that it seemed unfair for

people to have to pay tax bills in December

for property which was destroyed in the

spring. She also asked that consideration be

given to make any such legislation retroac-

tive to the damage of May, 2003.

Other proponents included the

Leavenworth Road Association and the

Crawford County Appraiser. Mark Beck,

PVD Director, subsequently outlined a num-

ber of policy issues that the Committee

would have to address if it sought to intro-

duce legislation on the topic.

CONCLUSIONS AND RECOMMENDATIONS

The Committee makes no recommenda-

tions regarding this topic.

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Kansas Legislative Research Department 2003 Taxation

Special Committee on

Assessment and Taxation

PROPERTY TAX EXEMPTIONS FOR SENIOR-CARE FACILITIES

CONCLUSIONS AND RECOMMENDATIONS

The Committee makes no recommendations regarding this topic.

Proposed Legislation: None

BACKGROUND

During the 2002 interim, the Special

Committee on Assessment and Taxation

conducted an interim study on the subject

matter of 2002 SB 479, which would have

repealed a property tax exemption in KSA

79-201b, Fifth, applicable to certain property

owned by not-for-profit organizations and

used as housing for elderly persons.

The statute was last amended in 1999 to

provide that any property used in a manner

consistent with federal Internal Revenue

Ruling 72-124 would be deemed to be operat-

ing at the lowest feasible cost and therefore

would qualify for the Kansas property tax

exemption. A number of conferees appeared

during the 2002 interim hearings to explain

that the 1999 change had caused a growing

percentage of the tax base to be removed

from the tax rolls in their communities.

The working group meetings ended with

the introduction of 2003 SB 161, which

would have repealed the exemption begin-

ning in tax year 2006. Following extensive

public hearings on SB 161 in the Senate

Assessment and Taxation Committee, the bill

was amended to provide that the overall

exemption not be repealed, but narrowed.

Under the current version of the bill, the

property tax exemption for independent

living units owned by not-for-profit senior

care facilities would no longer be applicable

to detached living units not located on the

same contiguous property as the main cam-

puses beginning in tax year 2004.

The bill would further clarify that prop-

erty used as a residential housing facility

could not qualify for a separate exemption

applicable to certain property owned by not-

for-profit community service organizations

that provide humanitarian services.

The bill passed the Senate on a vote of

27-12 and currently has been referred to the

House Taxation Committee.

The Legislative Coordinating Council

again asked the Special Committee to review

the legislation and associated issues and

make whatever recommendations deemed

appropriate to the 2004 Legislature.

COMMITTEE ACTIVITIES

At the September meeting, staff briefed

the Special Committee on the recent history

of the issue embodied in the 2002 and 2003

legislation and the 2002 interim study.

Senator Corbin said that the issue was ex-

tremely controversial and that the House was

welcome to use SB 161 as a starting point for

discussion and return to the issue surround-

ing the broader property tax exemption.

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Kansas Legislative Research Department 2003 Taxation

CONCLUSIONS AND RECOMMENDATIONS

The Committee makes no recommenda-

tions regarding this topic.

3-19

Kansas Legislative Research Department 2003 Taxation

Special Committee on

Assessment and Taxation

PROPERTY TAX INCOME AND EXPENSE INFORMATION

CONCLUSIONS AND RECOMMENDATIONS

The Committee makes no recommendations regarding this topic.

Proposed Legislation: None

BACKGROUND

Because of a concern over the accuracy of

the valuation for property tax purposes of

commercial property, the Division of Legisla-

tive Post Audit completed Audit 03-01,

entitled Valuing Commercial Buildings for

Property Tax Purposes: Determining

Whether Current Procedures Ensure Accu-

rate Appraisals at Fair Market Value. One

bill that was introduced as a result of that

audit, SB 99, would provide for assessed

valuation penalties under circumstances

when property owners had failed to provide

to county appraisers requested income and

expense information. Any such penalties

imposed could subsequently be abated by

the State Board of Tax Appeals (SBOTA)

upon the finding of "excusable neglect."

Similar penalties already exist in the law

when taxpayers fail to timely file personal

property renditions. The Senate Assessment

and Taxation Committee held a hearing on

SB 99 during the 2003 Session but did not

advance the legislation.

The Legislative Coordinating Council

charged the Special Committee with review-

ing again the recommendations of the audit

and considering the policy implications of

SB 99 and making any recommendations

deemed appropriate to the 2004 Legislature.

COMMITTEE ACTIVITIES

At the October meeting, staff from Post

Audit outlined the findings with respect to

the valuation of commercial property. One

of the conclusions was that county apprais-

ers needed better access to income and

expense information in order improve the

accuracy of valuation for commercial real

property. Although a 1994 informal opinion

of the Attorney General noted that the Direc-

tor of Property Valuation likely has the

power to compel property owners to provide

the information to county appraisers, state

law does contain any specific enforcement

mechanisms. SB 99 was introduced in an

effort to further encourage owners to provide

the requested information by providing

assessed valuation penalties similar to those

already in place in the personal property tax

law. The Topeka Chamber of Commerce

submitted written testimony in opposition to

SB 99, saying that appraisers had other tools

at their disposal to value property; that the

penalties outlined in the bill would be "arbi-

trary and punitive;" and that abatement

hearings could cause a significant backlog

for SBOTA.

CONCLUSIONS AND RECOMMENDATIONS

The Committee makes no recommenda-

tions regarding this topic.

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Kansas Legislative Research Department 2003 Taxation

Special Committee on

Assessment and Taxation

SEVERANCE TAX ADMINISTRATION

CONCLUSIONS AND RECOMMENDATIONS

The Committee requests that the President of the Senate withdraw SB 267 from the Senate

Assessment and Taxation Committee and refer it to the Senate Utilities Committee. The

Committee further suggests that the Senate Utilities Committee consider introducing a

substitute bill based upon the most recent set of amendments suggested by the proponents.

Proposed Legislation: None

BACKGROUND

During the 2003 session, the Senate

Assessment and Taxation Committee held a

public hearing on SB 267, a bill relating to

"percent-of-proceeds" contracts relative to the

purchase of natural gas and the implications

for severance tax receipts.

Under the bill, percent of proceeds gas

purchase agreements would be defined as

agreements "to purchase natural gas or com-

ponents of the gas, wherein the amount to be

paid by the first purchaser for the gas or

components of the gas, is a percentage of the

actual or theoretical proceeds received by

the first purchaser upon resale of the gas or

components of the gas."

The bill would prohibit persons from

entering into such contracts to purchase or

sell gas if the terms of the agreement are

such that the lessor's royalty due on the gas

would be less than the amount of royalty due

based on the amount and quality of the gas

as produced and measured at the wellhead.

The bill also would prohibit contracts

wherein the terms of the agreement are such

that the severance tax owed would be less

than the amount of severance tax due on the

volume of the gas as produced and measured

at the wellhead.

Legislators interested in the issue also

met with Department of Revenue officials

over the summer to discuss the extent to

which the department could use data from

the State Corporation Commission to help

conduct natural gas severance tax audits.

The LCC therefore asked the Special

Committee to study various severance tax

administrative issues, including data sharing

among state agencies and the policy implica-

tions of SB 267 relating to the percent-of-

proceeds purchase contracts.

COMMITTEE ACTIVITIES

At the October meeting, the Department

of Revenue briefed the Committee on how

the severance tax applies to natural gas.

Technically, the tax rate of 8 percent applies

to the gross value of gas, but a property tax

credit of 3.67 percent reduces the effective

rate to 4.33 percent. Producers, defined

broadly to include owners, royalty owners,

lessees, and operators, bear the tax burden.

"Gross value" of gas is defined as the value or

sale price of the gas at the wellhead, includ-

ing any by-products contained within the

gas. The first purchaser of the gas is re-

quired to remit the severance tax. Operators

3-21

Kansas Legislative Research Department 2003 Taxation

of the lease or production unit also may elect

to remit the tax.

The Department also expressed concern

over one section of SB 267 that could void a

certain percent of proceeds contracts and

noted that authority already exists pursuant

to KSA 79-4216 to determine gas value if "the

relationship between the buyer and seller is

such that the consideration paid ... is not

indicative of the true value or market price."

Philip Knighton testified on behalf of

Cecil O'Brate of Palmer Manufacturing in

support of SB 267, offering a number of

amendments to the original bill. A number

of opponents to the original bill testified,

including Jack Glaves and David Hughes of

Duke Energy Field Services; Ed Cross of

KIOGA; David Bleakley of Colt Pipeline; Ron

Hein of Pioneer Natural Resources; and

Wayne Woolfey of Woolfey Petroleum.

At the conclusion of the public hearing,

Senator Corbin said that the issues in con-

tention appeared to be more regulatory in

nature than tax-related and said that he

anticipated the Special Committee in No-

vember would recommend that the issue be

referred to the Senate Utilities Committee.

CONCLUSIONS AND RECOMMENDATIONS

The Committee finds that many of the

issues raised by the proponents of SB 267 are

regulatory in nature and only indirectly

related to taxation. The Committee therefore

requests that the President of the Senate

withdraw SB 267 from the Senate Assess-

ment and Taxation Committee and refer it to

the Senate Utilities Committee. The Com-

mittee further suggests that the Senate Utili-

ties Committee consider introducing a sub-

stitute bill based upon the most recent set of

amendments suggested by the proponents.

3-22

Kansas Legislative Research Department 2003 Taxation

Special Committee on

Assessment and Taxation

TRANSPORTATION OF CIGARETTES

CONCLUSIONS AND RECOMMENDATIONS

The Committee encourages the working group formed by the Department of Revenue to

continue to work during December in an effort to build a consensus as to what provisions

should be included in a substitute bill for HB 2422, which should be ready for introduction in

January of 2004.

Proposed Legislation: None

BACKGROUND

During the 2003 Session, the House

Taxation Committee held a public hearing on

HB 2422, a bill that would prohibit transpor-

tation of cigarettes under certain circum-

stances and review the illegal sale of stolen,

counterfeit, untaxed and under-taxed ciga-

rettes. Though that Committee did not act

on the bill, it did recommend to the Legisla-

tive Coordinating Council (LCC) that the

issue be studied during the interim.

The LCC subsequently asked the Special

Committee to review the legislation and

make whatever recommendations deemed

appropriate to the 2004 Legislature.

COMMITTEE ACTIVITIES

At the October meeting, the Department

of Revenue briefed the Committee on the

current state and federal laws regarding the

transportation, taxation and sale of ciga-

rettes. Direct sale of cigarettes over the

Internet does violate state law to the extent

that no tax stamps have been purchased for

those cigarettes. The sale or possession of

unstamped cigarettes is a misdemeanor,

subject to a fine of up to $1,000, and both the

retailer and purchaser are subject to punish-

ment. The Department of Revenue also is

authorized statutorily to seize cigarettes as

contraband if a possessor in Kansas has 20 or

more packages without Kansas tax stamps

affixed to them. Moreover, KSA 79-3221

makes it illegal for any person to possess

more than 200 cigarettes "without the re-

quired tax indicia being affixed. . . ." An-

other section of that statute provides that it is

unlawful to sell cigarettes without having a

license for such sale. Under the federal

Jenkins Act (15 U.S.C. Section 375-378), any

person who sells and ships cigarettes across

state lines (other than a licensed distributor)

is required to report the sale to the buyer's

state tax administrator. But violations of the

federal law are misdemeanors and are not

considered a high priority for the federal

government, according the Department of

Revenue.

The Department suggested removing

from the bill language authorizing the trans-

portation into the state of 800 cigarettes or

less by persons other than common carriers;

and language authorizing the Director of

Taxation to impose civil fines of up to $5,000

per violation on common or contract carriers.

The Department also suggested that Kansas

follow New York's lead in providing a list to

shippers of known companies that sell ciga-

rettes over the Internet.

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Kansas Legislative Research Department 2003 Taxation

Gwendolyn Cargnel of the Tobacco Free

Kansas Coalition appeared in support of the

bill and said that the proliferation of

websites selling tobacco products had made

it easier for minors to acquire cigarettes.

Representatives of Phillip Morris said that

they were generally supportive of the bill but

that additional provisions contained in

model legislation they supported could help

strengthen the state's efforts to fight contra-

band cigarettes, including requiring retailers

to report large transactions; prohibiting the

sale or possession of counterfeit cigarettes by

manufacturers, distributors, and retailers;

and requiring sellers to obtain in advance

valid identification verifying the age of

purchasers.

Tom Whitaker, Kansas Motor Carriers

Association, testified in opposition to HB

2422, saying that its provisions would affect

the timeliness of the carriers' service and

would create a substantial burden of addi-

tional labor and costs for carriers. He also

observed that the provisions of the bill do

not apply to one of the carriers' major com-

petitors, the United States Postal Service.

Ron Hein, representing RJ Reynolds,

said that he had been working with

Representative Huff, who supported HB

2422, in attempting to gain his support for

model legislation regarding the transporta-

tion and taxation issues that would better

address the concerns of all parties involved.

He also said that he had amended the sug-

gested model legislation somewhat since the

original public hearing in March to meet

some of the concerns raised by shippers.

CONCLUSIONS AND RECOMMENDATIONS

The Committee applauds the Depart-

ment of Revenue for having formed a work-

ing group with a number of interested parties

in the legislation. The Committee encour-

ages the working group to continue to work

during December in an effort to build a

consensus as to which of the suggested

provisions should be included in the bill. At

the outset of the 2004 Session in January, the

working group should make its recommenda-

tion for introduction of a substitute bill to

the House Taxation Committee.

3-24

Kansas Legislative Research Department 2003 Taxation

Special Committee on

Assessment and Taxation

USE TAX ON COMPUTER SOFTWARE CUSTOMIZATION SERVICES

CONCLUSIONS AND RECOMMENDATIONS

The Committee recommends that the 2004 Legislature strongly consider repealing the sales tax

on computer software customization services and restoring the exemption that existed prior to

2002.

The Committee also believes that current lack of a use tax places Kansas-based businesses

performing computer software customization services at a substantial competitive disadvan-

tage. If the 2004 Legislature does not repeal the sales tax on such services, the Committee

recommends the enactment of a use tax to help protect Kansas businesses against competition

from outside the state.

Proposed Legislation: The Committee recommends the introduction of one bill on this topic.

BACKGROUND

The Legislature in 2002 repealed a sales

tax exemption on computer software custom-

ization services, making such sales subject to

state and local sales taxation. Kansas com-

pensating use tax statutes, which generally

dovetail with sales tax imposition statutes,

provide that the use tax may be imposed on

tangible personal property. But since the

services associated with customization of

computer software are not taxable as tangible

personal property, such services are not

subject to the use tax.

The Legislative Coordinating Council

therefore charged the Special Committee

with determining whether Kansas-based

businesses providing computer software

customization services are being placed at a

competitive disadvantage relative to similar

businesses in other states. The Committee is

further charged with recommending whether

such a use tax should be imposed, assuming

the sales tax on such services is to be re-

tained.

COMMITTEE ACTIVITIES

At the September meeting, the Depart-

ment of Revenue appeared and said that

Kansas-based businesses performing com-

puter software customization services were

in fact being placed at a competitive disad-

vantage relative to out-of-state competitors

because of the lack of the use tax imposition.

Also at the September meeting, representa-

tives of Kansas Chamber of Commerce and

Industry and Sprint appeared and said that

the sales tax imposition on computer soft-

ware customization services had been hurt-

ing both big and small Kansas businesses.

CONCLUSIONS AND RECOMMENDATIONS

The Committee recommends that the

2004 Legislature strongly consider repealing

the sales tax on computer software customiz-

ation services and restoring the exemption

that existed prior to 2002.

The Committee also believes that current

lack of a use tax places Kansas-based busi-

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Kansas Legislative Research Department 2003 Taxation

nesses performing computer software cus-

tomization services at a substantial competi-

tive disadvantage. If the 2004 Legislature

does not repeal the sales tax on such ser-

vices, the Committee recommends the enact-

ment of a use tax to help protect Kansas

businesses against competition from outside

the state. Enactment of the legislation would

accomplish this recommendation.

SPECIAL COMMITTEES

Report of the

Special Committee on Insurance

to the

2004 Kansas Legislature

CHAIRPERSON: Senator Ruth Teichman

VICE-CHAIRPERSON: Representative Patricia Barbieri-Lightner

OTHER MEMBERS: Senators David Adkins, Mark Buhler, and Paul Feleciano, Jr.;

Representatives Mike Burgess, Stan Dreher, Eber Phelps, Scott Schwab, Bonnie Sharp; and

Judy Showalter

STUDY TOPICS

General Review of All Mandated Insurance Coverage

December 2003

Kansas Legislative Research Department 2003 Insurance

Special Committee on Insurance

GENERAL REVIEW OF ALL MANDATED INSURANCE COVERAGE

CONCLUSIONS AND RECOMMENDATIONS

The Committee reviewed current statutory mandates and sees no need for change at this time. The

Committee held hearings on proposals from the 2003 Session to mandate coverage for contraceptives,

clinical cancer trials, and common therapies utilized in early intervention of developmental

disabilities. The Committee: recommends that the Legislature not enact proposed legislation

mandating coverage for contraceptives; has no recommendation regarding proposed legislation

mandating coverage for clinical cancer trials; and makes no recommendation regarding mandating

coverage for common therapies utilized in early intervention of developmental disabilities. The

Committee has no recommendation on the proposed hair prostheses mandate.

Proposed Legislation: None

BACKGROUND

The Special Committee on Insurance was

charged to review all state mandated health

insurance coverage in order to meet the

statutory requirement for a periodic review

of such mandates (KSA 40-2249a).

Additionally, the Committee held hearings

on certain bills carried over from the 2003

Session dealing with mandated coverages for

contraceptives, cancer clinical trials, and

hair prostheses. Also added to the study was

mandated coverage for common therapies

utilized in early intervention and treatment

of developmental disabilities.

COMMITTEE ACTIVITIES

Review of existing mandates

At the outset of the interim study, staff

reviewed with the Committee the existing

mandates in Kansas law. It was noted that

since the early 1970s, the Kansas Legislature

has added new statutes to insurance law

which mandate that certain health care

providers be paid for services rendered

(provider mandates), and pay for certain

prescribed types of coverage or benefit

(benefit mandates). Most recently, laws have

been enacted to guarantee that some right or

protection be extended to the patient (patient

protection mandates). The latter category

may not be considered as a legislative

mandate in the same sense as provider and

benefit mandates.

Periodically, the Legislature has reviewed

these mandates, although more individually

as amendments have been proposed to them

than reviewing all of them at one time. The

provider mandates have been in place for the

longest periods of time and have not been,

for the most part, the focus of legislative

review. Perhaps the mandate that most often

attracted legislative attention has been the

alcoholism, drug abuse, and mental illness

mandate. Over the years, legislative interim

studies have been conducted and proposals

made to modify this mandate with the latest

change carving out mental health “parity” for

certain brain diseases. In addition to the

mental health mandate, the Legislature has

considered several proposed mandates and

enacted statutes to address some of the

proposals.

Kansas Legislative Research Department 2003 Insurance

1998 Interim Study. In the 1998 Session,

mandated coverage for prostate cancer

screening and diabetes education were

enacted. Several additional bills proposing

new mandates, however, were introduced

during the 1997-98 biennium but assigned to

a study committee in the 1998 interim.

In its final report to the 1999

Legislature, the Committee recommended:

that coverage for reconstructive breast

surgery and coverage for certain oral dental

procedures be mandated by the 1999

Legislature; that the point of service issue

should be studied further, perhaps by the

House Committee on Insurance early in the

1999 Session; and that no action be taken to

mandate coverage for durable medical

equipment or to provide parity for mental

illness conditions. Other proposed

mandates—maternity benefits, infertility

treatments, and certain patient

protections—also were not recommended.

Finally, the Committee recommended that

any new mandate enacted after the effective

date of any enactment of the 1999 Legislature

be applied first to state employees under the

state employee benefit plan before being

applied to the public health insurance

marketplace.

The Cost of Mandates. Throughout

the course of the 1998 study, proponents

offered estimates as to the cost of their

special mandate. For the most part, the

estimates were based on other states'

experiences or professional association

judgments and expectations of costs. The

Committee believed that decisions on

proposed mandates should be based on the

best information available. In that regard, the

Kansas Department of Health and

Environment, statistical agent for the Kansas

Insurance Department, queried data in the

Kansas Health Insurance Information System

(KHIIS). The actuary for KHIIS was asked to

prepare an impact statement on premiums for

the mandates before the Committee. Since

each mandate was supported by a bill, the

provisions of the bills were used by the actuary

to determine the impact.

Breast Reconstruction (HB 2297). Based

upon the Kansas mastectomy rate of 3.5 per

10,000 women aged 20-65, the total premium

impact on premiums in Kansas would be

$900,000 (0.3 percent or 50 cents per year).

Mental Health Parity (HB 2138). Dependent

upon whether or not long-term care was

excluded, the additional premium cost would

be $13 million to $32.5 million (1.0+2.5

percent increase per year).

(The Committee did receive testimony

summarizing various studies done on the cost

of mental health parity which reflect actual

cost savings associated with treatment. That

is, the expected value of benefits from

treatment does normally exceed the expected

costs.)

Durable Medical Equipment (SB 509). With

the current definition of durable medical

equipment and assuming payments over

$1,000 are already made for half the cases, the

impact on premiums would be $5,525,000 for

the state. Expanding the definition, while

making the same assumption of current

payments over $1,000, the impact on

premiums could be up to $150 million (0.85

percent up to 12 percent increase per year).

Point of Service (SB 331). Assuming 40

percent of the plans would be affected,

premium costs in Kansas would increase by

$76.5 million (about 15 percent increase per

year).

Infertility Treatment (SB 663). Premium

costs for families in the 20-40 age group would

increase $6,280,000 (about 1 percent per year).

Oral Surgery (HB 2800). The impact of this

mandate is too small to be measured. There is

no information available from the database.

Kansas Legislative Research Department 2003 Insurance

Finally, the interim Committee was

made aware throughout the course of its

deliberations on health insurance mandates

that each had a separate cost associated with

it and, collectively, the total cost of mandates

was much greater than the sum of the

individual requirements. This awareness of

cost was heightened by the testimony of

numerous employers who paid a substantial

portion of health care costs through premium

payments.

State Health Care Benefits Program.

Since the state, too, was an employer and

payer of substantial dollars in health

insurance premiums, the Committee

concluded and recommended a bill that

would make new mandates applicable only

to the state employee benefit plan. After a

sufficient trial period, the state could

determine the financial impact the mandate

had, as well as the benefit derived from the

mandate. With cost and benefit data in hand,

the state could then decide whether the

mandate should be continued for state

employees and extended to other persons in

the health insurance marketplace. The trial

plan for mandates would begin with any

mandate enacted after the effective date of

the bill.

As enacted by the 1999 Legislature,

the bill directs the State Employee Health

Care Commission to report to the President of

the Senate and to the Speaker of the House of

Representatives indicating the impact a new

mandate has had on the state health care

benefits program, including data on the

utilization and costs of the mandated

coverage. The law contained no provision for

applying the mandate to others in the public

marketplace. This law, KSA 40-2249a, also

called for the Legislature to periodically

review all health insurance coverages

mandated by state law.

Provider Mandates. The first mandates

enacted in Kansas were on behalf of health

care providers and are referred to as provider

mandates. In 1973, optometrists, dentists,

chiropractors, and podiatrists sought and

secured legislation directing insurers to pay

for services they performed, if those same

services would be paid for by an insurer if

performed by a practitioner of the healing arts

(medical doctors (MDs) and doctors of

osteopathy (DOs)). In the following year,

psychologists successfully petitioned for

reimbursement for their services on the same

basis. In that same year, the Legislature

extended the scope of mandates to all policies

renewed or issued in this state by or for an

individual who resides or is employed in this

state (extraterritoriality). Social workers

sought and obtained their mandate in 1982.

Advanced registered nurse practitioners were

recognized for reimbursement in 1990.

Pharmacists, in a 1994 mandate, gained

inclusion in the emerging pharmacy network

approach to providing pharmacy services to

insured persons.

Benefit Mandate. The first benefit mandate

was passed by the Legislature in 1974, with

enactment of a bill to require coverage for

newborn children. That mandate has been

amended over the years to include adopted

children and immunizations, as well as a

mandatory offer of coverage for the expenses of

a birth mother in an adoptive situation. In

1977, the Legislature took its first foray into

coverage for alcoholism, drug abuse, and

nervous and mental conditions. The new law

enacted that year required insurers to make an

affirmative offer of such coverage which could

only be rejected in writing. This mandate, too,

has been broadened over the years, first to

become a mandated benefit and then a benefit

with minimum dollar amounts of coverage

specified in the law.

Mammograms and pap smears were the next

benefits to be mandated, as cancer patients and

various cancer interest groups appealed for

Kansas Legislative Research Department 2003 Insurance

mandatory coverage by health insurers. The

year was 1988. In 1998, male cancer patients

and the cancer interest groups sought and

received “reciprocity” for coverage of prostate

cancer. Finally, after repeated attempts over

the course of more than a decade, supporters

of coverage for diabetes were successful in

securing coverage for certain items of

equipment used in the treatment of the

disease, as well as for educational costs

associated with self-management training.

Provider Mandates Year Benefit Mandates Year

Optometrists 1973 Newborn and Adopted Children 1974

Dentists 1973 Alcoholism 1977

Chiropractors 1973 Drug Abuse 1977

Podiatrists 1973 Nervous and Mental Conditions 1977

Psychologists 1974 Mammograms and Pap Smears 1988

Social Workers 1982 Immunizations 1995

Advanced Registered Nurse Practitioners 1990 Maternity Stays 1996

Pharmacists 1994 Prostate Screening 1998

Diabetes Supplies and Education 1998

Reconstructive Breast Surgery 1998

Dental Care in a Medical Facility 1999

Off-Label Use of Prescription Drugs 1999

Osteoporosis Diagnosis, Treatment,

and Management

2001

Mental Health Parity for Certain

Brain Conditions

2001

Kansas and Other States Actions

The Kansas Legislature has enacted

eight provider mandates and 14 mandates to

provide certain benefits or to cover certain

conditions. In contrast, Maryland has more

than 45 mandates and Florida has in place

more than 30 mandates. Minnesota,

California, Connecticut, and Arkansas each

have more than 25 mandates on their statute

books. Using the number of mandates as a

basis for comparison, Kansas is closer to its

neighbors which have enacted mandates

numbering in the mid to higher teens. The

mandates Kansas has adopted also

correspond with what most other states have

enacted, as indicated in the following table:

Provider Mandate States* Benefit Mandate States*

Chiropractors 44 Alcohol Treatment 44

Dentists 36 Drug Abuse 32

Optometrists 38 Mammograms 50

Psychologists 42 Mental Health 36

Nurse Practitioners 26 Maternity Stays 51

Podiatrists 31 ProKSAe Screening 26

Social Workers 26 Diabetes 47

Emergency Services 43

Breast Reconstruction 51

Hair Prostheses (Wigs) 5

Contraceptives 20

Dental Care 23

Bone Density (Osteoporosis) 11

Clinical Trials 15

*Data taken from “State Mandated Benefits and Providers,” Blue Cross and Blue Shield

Association, December 2001.

Kansas Legislative Research Department 2003 Insurance

Prior to the Legislature’s

consideration of any bill that mandates

health insurance coverage for specific

services or diseases, or for certain providers

of services, the person or organization

making the proposal is required by statute to

present an impact report to the legislative

committee assigned the proposal which

assesses both the social and financial effects

of the proposed mandated coverage.

Having reviewed the statutory

mandates, the Committee heard the

comments of those most affected, the

insurance industry, the business community,

and consumers of the health care required to

b e provided. Conferees for the industry

included representatives of Blue Cross and

Blue Shield of Kansas, and Coventry Health

Care. Written comments were received from

a representative of the Health Insurance

Association of America and from the state

director of the National Federation of

Independent Business.

Generally, insurance industry

representatives discussed the negative effects

on small employers. They pointed out that

this group is especially affected by increased

costs associated with every mandate.

Increasing costs drive employers out of the

health insurance marketplace, thereby

dropping health insurance coverage for their

employees. Further, they noted that state

mandates only affect a fraction of all Kansans

as governmental coverage and self-insured

groups are exempt from the mandates. A

final comment from the industry reminded

the Committee that there is a very fine line

between what is medical necessity and what

care is provided to improve quality of life.

Mandates move today’s insurance products

further and further away from the original

concept of insurance, they said.

Consumers provided coverage under the

mandates, specifically those receiving

benefits for cancer and mental health

conditions, were represented by the

American Cancer Society, the Kansas Mental

Health Coalition, NAMI Kansas, Keys For

Networking, and the Association of

Community Mental Health Centers of Kansas.

Those advocating for continued coverage

for cancer screenings and breast

reconstruction stressed that existing

mandates provide preventive screenings.

The screenings have increased survival rates

for patients, improved the patient’s quality of

life, and affected in a positive way health

care costs by decreasing treatment needs.

The conferees urging continued

mandatory coverage for mental health

conditions noted that, instead of considering

repeal of mandates pertaining to mental

health, Kansas still has not established parity

between physical health care and mental

health care. They agreed that recent

legislation mandating coverage for certain

organic brain conditions has improved

private insurance coverage for those

conditions. However, they suggested that

insuring mental illness in an equal manner as

physical illness will bring the state one step

closer to reducing the stigma associated with

mental illness. The end result will be to

encourage appropriate and effective

treatment.

Conclusions and Recommendations.

After reviewing the existing mandates and

hearing those opposed to mandates and those

in support of them, it was the consensus of

the Committee that there is no need for

changing existing mandates at this time. The

Committee does recommend that as new

mandates are proposed in the future, those

proposing the mandates should be required

to meet the current law requiring impact

studies to be completed and presented to the

Legislature before consideration is given to

the issue.

Kansas Legislative Research Department 2003 Insurance

Coverage for Contraceptives

Proponents for insurance coverage for

prescription contraceptives included

representatives of the Kansas State Nurses

Association, the Kansas Public Health

Association, The League of Women Voters,

and the Kansas Foundation of Business and

Professional Women. Written testimony was

provided by a representative of the Kansas

section of the American College of

Obstetricians and Gynecologists.

Representative Paul Davis, sponsor of

legislation to mandate coverage for

contraceptives, discussed the need for

contraceptive fairness and parity for women.

He added that the cost data provided

demonstrated that any premium increase

collected as a result of the mandate would be

minimal (one percent or less) as most

insurance companies, already provide the

coverage. He pointed out, as did other

conferees, that the use of contraceptives can

have a positive impact on the health of

women and on the cost of insurance paid for

by employers. The representative speaking

for the Kansas League of Women Voters

quoted a study showing that an unintended

pregnancy may cost an employer 15 to 17

percent more than providing coverage for

contraceptives.

The actuary for the Center for Health and

Environmental Statistics of the Kansas

Department of Health and Environment

reported that, based upon a review of Kansas

specific insurance data, the cost of a mandate

for contraceptive coverage would be an

average premium increase roughly equal to .6

percent.

The Executive Director of the Kansas

Catholic Conference spoke against a

mandate. He said the Legislature should not

mandate coverage for contraceptives and

other devices when many Kansans do not

have basic health care coverage. He added

that those opposed to the use of

contraceptives should not be required to pay

for such coverage or to provide such coverage

for employees.

Insurance industry opponents argued

that, while one percent seems like a small

increase in premiums, it converts to $22

million in increased premiums. Also,

opponents saw no need for the legislation

since proponents admitted that nearly all

companies doing business in Kansas already

provide the coverage.

Conclusions and Recommendations.

Some members of the Committee thought

that the proponents had met all the

legislative requirements for consideration of

their issue, and, therefore, at the least, the

appropriate standing committees of the

Legislature should continue consideration of

the issue. The majority of the Committee,

however, concluded and recommended that

the Legislature in the 2004 Session take no

action to mandate coverage for contraceptive.

Cancer Clinical Trials

The Leukemia and Lymphoma Society of

Kansas, the American Cancer Society, an

oncologist, and private citizens spoke as

proponents for a health insurance mandate to

require insurers to pay for routine costs

associated with clinical trials. They noted

that, while the sponsors of the trial are

responsible for many of the costs associated

with the trial, sponsors do not pay for other

costs associated with the care of the patient;

specifically, those costs that would ordinarily

be incurred in the treatment of the disease

whether or not the patient was involved in a

trial. Proponents noted that Medicare pays

such costs and the private insurance

companies should be required to pay as well.

One citizen spoke of his family’s ordeal in

attempting to get not one but two insurance

companies to pay those routine costs. He

admitted that in the end, and after several

confrontations with the companies, the

insurers did pay for much of the care for

which they otherwise would have paid.

Kansas Legislative Research Department 2003 Insurance

However, he stressed that those payments

did not cover many other out-of-pocket

expenses.

Again, insurance industry representatives

pointed out that in the instance cited,

insurance companies did pay for the routine

and medically necessary costs associated

with the clinical trial. They contended that

no need had been demonstrated for the

proposed mandate.

Conclusions and Recommendations.

After reviewing the testimony, the

Committee was evenly divided over whether

or not action should be taken by the 2004

Legislature to mandate coverage for cancer

clinical trials. Therefore, the Committee has

no recommendation on this topic.

Common Therapies Utilized in Early

Intervention of Developmental

Disabilities

Representatives of the Coordinating

Council on Early Childhood Developmental

Disabilities proposed that insurance

companies be required to pay for those

common therapies that can be utilized in

early intervention and treatment of person,

especially young children, with

developmental disabilities. Proponents

explained that parents of children with

disabilities are reluctant to use available

insurance coverage early in treatment for fear

of exhausting coverage long before the need

for coverage is ended. Insurers, they said,

should exempt early intervention diagnosis

and treatment from a lifetime cap placed on

a health policy or plan.

Additionally, proponents said health

plans require providers to be accredited by

their companies in order to get reimbursed

for their services. The cost of the

accreditation discourages many providers

from being accredited and, therefore, families

have to pay the costs of therapy.

Insurance industry representatives spoke

strongly against the proposed mandate. They

noted that all insurers have benefit caps on

coverage. The proponents suggestion that the

cap be removed would be unique to the

industry. Further, opponents said no

evidence had been presented to show that the

coverage is not already being provided. The

testimony of the proponents, the opponents

pointed out, clearly indicated that parents

were reluctant to use coverage available to

them and providers were apparently

unwilling to be accredited so that they could

be paid insurers for their services.

Conclusions and Recommendations.

After discussion, the Committee

recommended that no consideration be given

on the proposed mandate until such time as

the proponents provide specific information

about what they are asking to be enacted.

Hair Prostheses

The Special Committee scheduled a

hearing on the hair prostheses bill carried

over from the 2003 Session. However, the

scheduled conferee cancelled the

presentation and the Committee withdrew

any further considerations of the topic.

CONCLUSIONS AND RECOMMENDATIONS

The Special Committee makes no

recommendation on this topic.

SPECIAL COMMITTEES

Reports of the

Special Committee on Judiciary

to the

2004 Kansas Legislature

CHAIRPERSON: Senator John Vratil

VICE-CHAIRPERSON: Representative Mike O’Neal

RANKING MINORITY MEMBER: Representative Greta Goodwin

OTHER MEMBERS: Senators David Adkins, Barbara Allen, and Derek Schmidt;

Representatives Donald Betts, Marti Crow, Jeff Jack, Peggy Long-Mast, Bill Mason, Rick

Rehorn, and Daniel Williams

STUDY TOPICS

Allocation of Judicial Resources

Judicial Docket Fees

Kansas Surety Recovery Agents Act

Kansas Uniform Securities Act

Review of Kansas Liquor Control Act

December 2003

5-3

Kansas Legislative Research Department 2003 Judiciary

Special Committee on Judiciary

ALLOCATION OF JUDICIAL RESOURCES

CONCLUSIONS AND RECOMMENDATIONS

The Committee believes the Judicial Branch must be adequately funded and the Legislature

must provide more money for the Judicial Branch to meet its constitutional responsibilities.

The majority of the Committee recommends legislation to allow the “one judge per county”

requirement to be met by a part-time district magistrate judge or district judges.

Proposed Legislation: The Committee recommends one bill on this topic.

BACKGROUND

The Special Committee on Judiciary was

assigned Topic No. 3—Allocation of Judicial

Resources. The study calls for a review of

Sub. for HB 2307 which deals with the allo-

cation of judicial resources, including grant-

ing the Supreme Court the ability to elimi-

nate or reassign district magistrate judge

positions and eliminate a district a district

court judge position and replace the position

with one or more district magistrate posi-

tions.

Representative Tom Sloan introduced HB

2307 which was assigned to House Judiciary

Committee. The bill would repeal KSA 20-

301b which requires one judge in each

county. KSA 20-345 is amended to provide

that the Supreme Court will determine if a

district magistrate judge position is unneces-

sary due to the ability of the remaining

judges in the judicial district to assume the

workload of the district. Current law allows

the Supreme Court to make such a decision

upon the death, resignation, retirement or

removal of a district magistrate only if such

county has two or more district magistrates

or a district court judge. The amendments

would have further provided for when the

judge’s term would expire and would have

allowed counties where district magistrates

are eliminated or reassigned to retain the

position and pay the salary.

KSA 20-329 would have been revised to

give the Chief Judge of the district court the

ability to assign cases filed in the district

court to any county within the judicial dis-

trict.

KSA 20-348 would have been amended to

provide that if a county has district magis-

trate position eliminated, the county remains

responsible for all expenses incurred as that

county’s share of the operations of the dis-

trict court within the judicial district, as

determined by the Chief Judge.

The original bill contained 94 sections,

however many of the sections were amended

to reflect the policy concerning venue in the

judicial district and jury lists. There was

also an amendment to provide that district

magistrates would be selected/retained by

the electors of the judicial district, not the

county.

The House Judiciary Committee passed

out a substitute bill. Substitute for HB 2307

would have allowed the Supreme Court to

determine if a district magistrate judge posi-

tion was unnecessary, due to the yearly

average caseload of the district magistrate

judge being less than 1,200 cases and the

ability of the remaining judges in the judicial

district to assume the workload of the dis-

5-4

Kansas Legislative Research Department 2003 Judiciary

trict. In this version of the bill, venue would

remain in the county and a district magis-

trate judge within the judicial district would

be assigned to the county where the position

was eliminated. If a district magistrate is

assigned to more than one county, the voters

in those counties would vote to retain or

elect, whichever the case may be. The sub-

stitute bill had the same provisions as the

original bill concerning the counties which

have district magistrate position eliminated.

These counties would remain responsible for

a share of the operations of the district court

within the judicial district.

The substitute bill was amended on the

House floor as follows:

!The number of cases was changed from

1,200 to 600.

!Counties where district magistrates are

eliminated or reassigned would be per-

mitted to retain the position and pay the

salary.

!Yearly average caseloads are clarified so

as not to include traffic violations.

!Yearly average caseloads are clarified to

include child in need of care cases, juve-

nile offender cases and probate cases.

!The Supreme Court is authorized to

eliminate a district court judge position,

in order to effectively expedite the busi-

ness of the district court in any judicial

district, and to add a district magistrate

judge position.

The bill, as amended by the House Com-

mittee of the Whole, failed by a vote of 61 to

62 on February 28, 2003. The bill was killed

on Final Action March 5, 2003.

Testimony of Conferees

Conferees included a representative of

the Office of Judicial Administration and the

Legislative Division of Post Audit, a district

judge representing the Kansas District Judges

Association and a district magistrate judge.

The representative of the Office of Judi-

cial Administration noted there were 74

district magistrate judges and 160 district

judges. The case load per district magistrate

judge ranged from 668 to 2,960 including

traffic; whereas the caseload per district

judge ranged from 1,786 to 3,752 also includ-

ing traffic. Four new district judge positions

will be part of the Judicial Branch budget in

the 2005 Session.

The district judge representing the Kan-

sas District Judges Association said the polit-

ical nature of the one judge per county issue

made it an appropriate issue for the Legisla-

tive Branch to decide. He said the court can

only be held accountable for the sound and

efficient management of the courts if it is

given the responsibility of managing its own

resources.

The district magistrate judge opposed the

repeal of the one judge per county statute.

He suggested three possible alternatives:

decrease the number of district judges in

urban areas and increase the number of

magistrates as a money saving device; redraw

judicial district boundaries to align rural

counties with urban counties and develop

inter-district agreements which would allow

magistrate judges to travel to urban counties;

and reinstate inter-district travel and develop

partnerships between the four districts iden-

tified in HB 2307 and the four urban dis-

tricts.

CONCLUSIONS AND RECOMMENDATIONS

The Committee believes that the Judicial

Branch must be adequately funded if it is to

perform its constitutional duty. The Com-

mittee is unanimous in the belief that the

Kansas Judicial System is not adequately

funded and that the Legislature must provide

more money for the Judicial Branch to meet

its constitutional responsibilities. The Com-

mittee further believes, however, that the

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Kansas Legislative Research Department 2003 Judiciary

Judicial Branch can more effectively and

efficiently use existing resources.

The majority of the Committee recom-

mends amending KSA 20-301b to allow the

“one judge per county” requirement to be

met with either a district judge, a district

magistrate judge, or a part-time district judge

or district magistrate judge. KSA 20-338,

which specifies which counties shall have

district magistrate judge positions would be

repealed. KSA 4-202 through 4-232, which

specify the composition of the judicial dis-

tricts and state which counties shall have

district judge positions, would be amended

to delete the language specifying where

district judge positions must be located.

Currently, statutes require that some coun-

ties have both a district judge and a district

magistrate judge position. If a district magis-

trate judge were reallocated from one county

within that district to another district the

“one judge per county” provision could be

met by assigning the district judge position

remaining within the district to the county

from which the district magistrate judge is

taken. This would not mean that the district

judge would have to move to that county.

The provision of KSA 20-334 requiring that

a district judge be a resident of the district

would not be amended to require residency

within any particular county within the

district.

The part-time provision will be treated in

two ways. The first scenario is the same as

in 2003 Substitute for HB 2307, under which

a district magistrate judge from another

county within a judicial district would be

assigned to be the district magistrate judge

for any county from which a district magis-

trate judge position was eliminated. The two

counties would be joined for purposes of

voting to elect or retain the remaining dis-

trict magistrate judge, and that district magis-

trate judge would take care of those cases

filed within both counties that are within the

district magistrate judge’s jurisdiction.

Under the second scenario, a judge’s

position would simply be designated as part-

time and salary and benefits would be ad-

justed accordingly. The specified ramifica-

tions of retirement credit and Judicial Retire-

ment System benefits were not discussed.

The Committee believes that if the Court

considers reassignment of judges that it

should look at the caseload of judges minus

traffic cases. Further, the Court should

consider any other issues it believes have an

impact on the efficient and effective opera-

tion of the Judiciary Committee.

Senators Schmidt and Representative

Mast opposed the Committee recommenda-

tion which would alter the current law re-

garding the one judge per county rule.

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Kansas Legislative Research Department 2003 Judiciary

Special Committee on Judiciary

JUDICIAL DOCKET FEES

CONCLUSIONS AND RECOMMENDATIONS

The Committee recommends a $5.00 docket fee be added for filing garnishment actions; that

sheriffs be allowed to collect and retain at the county level a $10.00 service of process fee, and

that the docket fee increase to fund the Kansas Judicial Council be made permanent.

Proposed Legislation: None

BACKGROUND

The Special Committee on Judiciary was

charged to study current judicial docket fees

and review the need to adjust the current fee

structure or impose new fees.

2003 HB 2293

HB 2293 passed the House in 2003 and is

in the Senate Judiciary Committee. HB 2293

would allow Kansas sheriffs to collect a fee

for service of process in the amount of

$10.00 (and $.50 for each additional person.)

Five dollars of the money will be credited to

the Sheriff’s Service of Process Fee Fund to

be used for expenses incurred in the service

of process. The Board of County Commis-

sioners will provide adequate funding to the

sheriff’s department and funds will not be

used to reduce the amount from the county

general fund.

Five dollars will go to the State Treasurer

to be credited to the District Court Adminis-

tration of Service Process Fee Fund, estab-

lished by the bill, to be used for the expense

involved in collecting the service of process

fee.

Current Statutory Docket Fees

and Distribution

The amount and distribution of docket

fees are set by statute. Attachment A notes

the docket fees currently set by statute,

together with the statutory cite for each.

With some exceptions, docket fees are

collected from the petitioner as each case is

filed. Exceptions are cases filed by cities,

counties, or the State of Kansas. These

include, but are not limited to, criminal

cases, child in need of care cases, and juve-

nile offender cases. KSA 60-2005. Another

exception to the payment of docket fees is a

poverty affidavit, which is authorized by

KSA 60-2001(b).

Some portion of each docket fee stays

local and some is remitted to the State Trea-

surer for distribution as specified by statute.

The sum of $10 is remitted to the County

Treasurer for credit to the County General

Fund from each Chapter 60 docket fee and

Chapter 61 limited actions docket fee. From

each limited actions docket fee, $5 is cred-

ited to the County General Fund. These

amounts are specified in KSA 20-362.

Pursuant to KSA 28-170, $1 is deducted

for the Prosecuting Attorneys’ Training Fund

from each docket fee in criminal cases and

actions pursuant the Kansas Code for Care of

Children, the Kansas Juvenile Justice Code,

the Act for Treatment of Alcoholism, the Act

for Treatment of Drug Abuse, and the Care

and Treatment Act for Mentally Ill Persons.

From the same types of cases, $.50 is de-

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Kansas Legislative Research Department 2003 Judiciary

ducted from the docket fee for the Board of

Indigents Defense Services pursuant to KSA

28-170 and KSA 28-172b.

KSA 20-3129 authorizes a law library fee

of not less than $2 nor more than $10 in all

Chapter 60 cases and not less than $.50 nor

more than $7 in all other cases. That amount

is deducted from the docket fee. From crimi-

nal filings, $9 is deducted from each docket

fee for the Law Enforcement Training Center

Fund.

The balance of docket fees is remitted to

the State Treasurer pursuant to KSA 20-362.

KSA 20-367 provides that the balance remit-

ted to the State Treasurer is to be credited to

the following funds in the specified percent-

ages on and after July 1, 2003, through June

20, 2005.

Distribution of Balance of Docket

Fees Pursuant to KSA 20-367

Access to Justice Fund 5.90%

Juvenile Detention Facilities Fund 3.27

Judicial Branch Education Fund 2.52

Crime Victims Assistance Fund .67

Protection From Abuse Fund 3.22

Judiciary Technology Fund 5.10

Dispute Resolution Fund .41

Kansas Juvenile Delinquency Prevention Trust Fund 1.49

Permanent Families Account in the Family and

Children Investment Fund .25

Trauma Fund 1.77

Judicial Council Fund 1.33

Judicial Branch Nonjudicial Salary Initiative Fund 21.41

Subtotal, Other Funds 47.37

State General Fund Balance,

or 52.66%

Current law amends the percentage splits

on and after June 30, 2005, to reflect the

sunsetting of the Judicial Council Fund,

which was created by the 2003 Legislature.

The current $106 Chapter 60 docket fee is

distributed as noted in the following table.

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Kansas Legislative Research Department 2003 Judiciary

Distribution of Current

$106 Docket Fee

$106.00 Docket Fee (KSA 60-2001)

10.00 County General Fund (KSA 20-362(a))

10.00 Law Library Fund (KSA 20-302(b); KSA 20-3129)

5.07 Access to Justice Fund (KSA 20-166)

2.81 Juvenile Detention Facilities Fund (KSA 79-4803(b))

2.17 Judicial Branch Education Fund (KSA 20-1a11)

.58 Crime Victims Assistance Fund (KSA 74-7334)

2.77 Protection From Abuse Fund (KSA 74-7325)

4.39 Judiciary Technology Fund (KSA 5-517)

.35 Dispute Resolution Fund (KSA 5-517)

1.28 KS Juvenile Delinquency Prevention Trust Fund (KSA 75-7021)

.22 Permanent Families Account in the Family and Children

Investment Fund (KSA 38-1808(d)(1))

1.52 Trauma Fund (KSA 75-5670)

1.14 Judicial Council Fund (L. 2003, Ch. 101, New. Sec. 7)

18.41 Judicial Branch non judicial Salary Initiative Fund (KSA 20-1a14)

45.29 Balance to the State General Fund

In addition to the $106 Chapter 60 docket

fee, a $5 Judicial Branch surcharge is im-

posed pursuant to Supreme Court Order.

Fines, Penalties, and Forfeitures,

and Other Amounts Collected

by the Clerks

In addition to docket fees and fines,

clerks also collect and account for fines paid

in criminal cases as well as civil penalties

and bail forfeitures. Fines, penalties, and

forfeitures are distributed pursuant to KSA

74-7336 as follows: 7.99% to the Crime

Victims Compensation Fund, 1.45% to the

Crime Victims Assistance Fund, 2.01% to the

Community Alcoholism and Intoxication

Programs Fund, and 2.01% to the Depart-

ment of Corrections Alcohol and Drug Abuse

Treatment Fund.

Amounts collected as bail forfeitures are

split, with 40% credited to the County Gen-

eral Fund pursuant to KSA 20-368. Clerks

remit the balance to the State Treasurer, with

one-half of the balance (or 30% of the origi-

nal total) credited to the Indigents’ Defense

Services Fund and one-half of the balance

credited to the State General Fund, pursuant

to KSA 20-350.

Clerks also collect marriage license fees

pursuant to KSA 23-108a. The $50 fee is

remitted to the State Treasurer for credit to

the Protection from Abuse Fund (46%), the

Family and Children Trust Account of the

Family and Children Investment Fund

(17.92%), the Crime Victims Assistance Fund

(20%), and the State General Fund (16.08%).

Interested accrued on amounts paid to

the clerks is remitted to the State Treasurer,

for deposit in the State General Fund pursu-

ant to KSA 20-350.

Testimony of Conferees

Conferees included representatives of the

Office of judicial Administration, the Kansas

District Judges Association, the Kansas

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Kansas Legislative Research Department 2003 Judiciary

Credit Attorneys Association, the Kansas

Sheriffs Association, the Johnson County

Sheriff’s Office, the Sedgwick County Sher-

iff’s Office, and the Kansas Judicial Council.

The representative of the Office of Judi-

cial Administration provided the Committee

background information on the use of docket

fees. The National Center for State Courts is

in the process of collecting information on

court fees in the 50 states.

The representative said it was important

to retain a simplified fee system regarding

the current percentage split system. This

system saves time and money. Every change

in the docket fee system carries with it a

programming cost.

The representative of the Kansas District

Judges Association said court fees cannot be

increased to the point they are a barrier to

access to justice. He said to date, reasonable

fee increases had not denied citizens their

fundamental right of access to the courts.

The representative of the Kansas Credit

Attorneys Association said docket fees

should be retained for use by the judicial

branch but the judicial system should not be

funded solely through fees. He opposed

increased fees for service of process by sher-

iffs.

The sheriffs’ representative supported HB

2293 and said fees should be increased to

help offset service of process costs by sher-

iff’s officers.

The representative of the Kansas Judicial

Council added that a docket fee increase for

funding of the Judicial Council should be

made permanent.

CONCLUSIONS AND RECOMMENDATIONS

The Committee believes that the State

Legislature has a responsibility to adequately

fund the state judicial system and generally

disfavors increasing docket fees because it

believes this has a negative effect on access

to justice.

The Committee recommends that a $5

docket fee be added to the filing of a garnish-

ment action. Currently, there is no docket

fee required for filing a garnishment.

The Committee also believes sheriffs

should be allowed to charge a $10 fee for

serving process. This fee is to be collected

by the sheriff and the entire amount is to be

kept by the county to help offset the costs of

service of process by county sheriffs’ depart-

ments. Amendments to implement these

decisions should be made to 2003 HB 2293.

The Committee also believes that the

temporary docket fee added in 2003 to fund

the Kansas Judicial Council should be made

permanent.

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Kansas Legislative Research Department 2003 Judiciary

Special Committee on Judiciary

KANSAS SURETY RECOVERY AGENTS ACT

CONCLUSIONS AND RECOMMENDATIONS

The Special Committee recommends legislation to require bounty hunters or sureties to notify

local law enforcement before attempting to apprehend a person who has violated terms of the

bail bond and to prevent persons convicted of felonies and certain misdemeanors from acting

as a bounty hunters.

Proposed Legislation: The Committee recommends one bill on this topic.

BACKGROUND

The Special Committee on Judiciary was

assigned to study the topic of the Kansas

Surety Recovery Agents Act. The topic

called for the Committee to review 2003 SB

248 which would create the Kansas Surety

Recovery Agents Act and to review recent

history in Kansas to determine how surety

recovery agents are currently operating.

2003 SB 248

SB 248 was assigned to the Senate Judi-

ciary Committee. The bill would define “a

surety recovery agent” (bounty hunter) as a

person who is not a law enforcement officer

but who apprehends individuals who have

violated a surety or bond agreement. Surety

recovery agents would be required to inform

local law enforcement authorities of their

attempt to apprehend any individuals in the

state. The bill would require the Attorney

General to investigate applicants and deter-

mine whether they meet the statutory re-

quirements for licensure as surety recovery

agents. The Attorney General would be

responsible for approving training programs

and continuing education programs for the

agents. The Attorney General also would be

responsible for disciplining licensed agents

in the event of violations of the Act. How-

ever, the agents would be given the right to

request a hearing in writing within ten days

from the notice date of the proposed disci-

plinary action. The bill would authorize the

Attorney General to assess fees relating to the

licensure of surety recovery agents and

increase the fees annually according to a

formula included in the bill. Violations of

the Act would be considered a nonperson

misdemeanor.

The fiscal note for SB 248 states that the

Attorney General’s Office noted that the

fiscal effect of SB 248 would depend on the

scale of licensing and regulatory operations

required to implement the bill. Depending

on the number of applications for licensing,

additional staff could be needed. However,

the Attorney General’s Office indicated that

it is possible that additional expenditures

incurred could be funded through fees gener-

ated in licensure of the agents.

TESTIMONY OF CONFEREES

Conferees included a representative of

the Kansas Bureau of Investigation and the

Lawrence Police Department. Written testi-

mony was submitted by a bondsman repre-

senting the Kansas Professional Sureties.

The representative of the Lawrence Po-

lice Department reviewed powers and recent

history of recovery agents or “bounty hunt-

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Kansas Legislative Research Department 2003 Judiciary

ers” in Kansas.

The power that bounty hunters claim is

derived from an 1872 United States Supreme

Court decision, Taylor v. Taintor. In short,

when bail is granted, the bail bondsman is

considered as having been given custody of

the defendant. This creates a private, con-

tractual relationship between the bondsman

and the accused and gives authority and

jurisdiction to the bondsman to deliver the

defendant whenever and wherever the defen-

dant is ordered to appear. Whenever the

bondsman chooses to do so, the bondsman

may apprehend the defendant and return the

defendant to custody. Most typically, this

occurs when the accused fails to make a

court appearance. The bondsman may re-

capture and seize the defendant any time,

day or night, without a warrant. A bonds-

man may pursue the defendant into other

states. The bail bondsman may exercise this

authority in person or by an agent (bounty

hunter). The bondsman or his agent may

even break and enter into the defendant’s

home to effect this apprehension.

The conferee stated that the extraordi-

nary, mostly unregulated, power that bonds-

men and bounty hunters can exercise over

defendants, most of whom have yet to be

convicted of a crime, is far more power and

jurisdiction than a trained, certified law

enforcement officer possesses. Yet, bounty

hunters are often untrained, unqualified, and

unrestricted.

The conferee related the following recent

incidents regarding bounty hunters. On an

evening in January, 2001, in Lawrence,

Kansas, four bounty hunters arrived at the

home of an elderly resident and her adult

son. Two of the bounty hunters from Kansas

City enlisted the assistance of two Lawrence

bounty hunters. Their quest was to locate an

individual who had been bonded by a Kan-

sas City bonding agency and who had missed

a court date on a drug-related charge. Be-

lieving that the resident’s son had informa-

tion on the whereabouts of the fugitive, the

bounty hunters used bullying tactics and

misrepresentation to gain access to this

residence. The residence was never listed as

the residence of the fugitive. During the

investigation and subsequent prosecution of

three of these individuals, it was discovered

that one of the bounty hunters from Kansas

City was a federal parolee. The other bounty

hunter from Kansas City was murdered

before this case was complete. It was further

discovered that one of the Lawrence bounty

hunters was also a convicted felon and six

months later he was convicted of aggravated

kidnaping, aggravated burglary, and aggra-

vated robbery and was sentenced to over 20

years in prison on an unrelated Jefferson

County case.

In a highly publicized case which oc-

curred in Kansas City, in June of 2002, three

bounty hunters went to the home of a man

wanted on municipal court warrants. As two

of the bounty hunters handcuffed the indi-

vidual they were seeking, a physical alterca-

tion broke out between the fugitive’s brother

and the third bounty hunter. Witnesses told

police that the bounty hunters hit the men

on their heads with flashlights and that the

fugitive’s brother was placed in a choke hold.

When police arrived on the scene, they

found the fugitive, handcuffed and bleeding

from the head. Police found the brother

unresponsive. The medical examiner ruled

that the brother died from strangulation and

chest compression. The bounty hunter was

found guilty of second degree manslaughter.

The representative of the Kansas Bureau

of Investigation and the Lawrence Police

Department recommended legislation as an

alternative to SB 248. The alternative recom-

mendation would require notice to law

enforcement authorities by sureties or

bounty hunters of intended apprehensions

before attempting apprehensions and would

prohibit anyone from acting as a bounty

hunter who was a convicted felon or who

had been convicted of selected misdemeanor

crimes.

The representative of the Kansas Profes-

sional Sureties, in written testimony, said

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Kansas Legislative Research Department 2003 Judiciary

the alternative proposal already was being

done by his bonding company. Concern was

expressed about insurance requirements

contained in SB 248 but which are not con-

tained in the alternative proposal.

CONCLUSIONS AND RECOMMENDATIONS

The Committee believes the 1872 U.S.

Supreme Court decision which allows

bounty hunters free reign to return persons

who violate surety agreements no longer

reflects the social values of the 21st Century.

The Committee believes bounty hunters

need to have reasonable limits placed on

their powers to apprehend fugitives.

The Committee recommends the alterna-

tive legislation proposed by the representa-

tives of the Kansas Bureau of Investigation

and the Lawrence Police Department. The

Committee believes it will be necessary to

borrow appropriate definitions contained in

SB 248 and add these to the alternative

proposal.

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Kansas Legislative Research Department 2003 Judiciary

Special Committee on Judiciary

KANSAS UNIFORM SECURITIES ACT

CONCLUSIONS AND RECOMMENDATIONS

The Committee concluded the Uniform Securities Act contains provisions that are, except for

the variable annuity issue, noncontroversial. The Committee suggests the Legislature pass the

Act without variable annuities included in the definition of security, but with the agreed upon

proposed amendments included in HB 2347. Also recommended that the Insurance

Commissioner and the Securities Commissioner cooperate to formulate substantial suitable

standards for the purchase of variable annuities and that there be cooperation regarding the

prosecution of criminal acts. Lastly, the Committee recommends that the Legislature should

continue to observe the situation to determine proper functioning.

Proposed Legislation: None

BACKGROUND

The Committee studied the possibility of

enacting a new Kansas Uniform Securities

Act to reflect changes in state and federal

securities laws. Further, the study focused

on the proposed changes in 2003 HB 2347,

which basically updates the provisions in the

current Kansas Act to track most aspects of

the Uniform Securities Act.

COMMITTEE ACTIVITIES

During the August meeting the Commit-

tee heard from several conferees on this topic

including Michelle Clayton, National Confer-

ence of Commissioners on Uniform State

Laws; Chris Biggs, Kansas Securities Com-

missioner; Rick Fleming, General Counsel,

Kansas Securities Commissioner’s Office;

Sandy Praeger, Kansas Insurance Commis-

sioner; David Brant, former Kansas Securities

Commissioner; Kathy Diehl, Compliance

Officer, Kansas Securities Commissioner’s

Office; Philip Paschang, Greater Kansas City

Chapter of Financial Planners; Larry Magill,

Kansas Association of Insurance Agents;

Amy Lee, Security Benefit Life Insurance

Company; Jim Hall, American Council of Life

Insurers; Don Edman, Kansas Association of

Insurance and Financial Advisors; and Kathy

Olsen, Kansas Bankers Association.

The conferee from the National Confer-

ence of Commissioners on Uniform State

Laws explained the provisions of the Uni-

form Act and indicated two states, Oklahoma

and Missouri, have adopted the Act; but

without variable annuities in the definition

of security. According to the conferee, al-

though federal law includes variable annu-

ities as a security and Uniform Law Commis-

sioners support the inclusion, the Commis-

sioners left it up to each state to determine

whether to include variable annuities.

The Kansas Securities Commissioner’s

general counsel reviewed the proposed

amendments contained in HB 2347 which

were agreed to by the interested parties. He

outlined the most significant changes as

follows:

!change in the exclusion of banks from

the definition of “broker-dealer;”

!exemption for sales to “institutional in-

vestors”;

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Kansas Legislative Research Department 2003 Judiciary

!definition of a security with regard to

treatment of investment contracts, vari-

able annuities, limited liability compa-

nies, and viaticals;

!exemption for fixed income securities;

!loophole for sales from Kansas to out-of-

state investors;

!failure to include broader authority to

reject applicants due to bad character,

financial irresponsibility, etc.; and

!a shorter statute of limitations with re-

gard to civil liability.

He provided additional changes that the

Commissioner would like the Committee to

consider:

!clean up language due to drafting errors;

!amendments to make the penalty provi-

sions in the Uniform Act mirror those

passed in 2003 SB 110; and

!compromise amendments between the

Securities Commissioner, Security Indus-

try Association, and Uniform Law Com-

mission.

The Securities Commissioner urged

passage of HB 2347, with or without variable

annuities included. The Insurance Commis-

sioner addressed the issue of variable annu-

ities and stated that her staff is adequate and

able to handle all variable annuity issues.

Information received from the Compliance

Office in the Securities Commissioners

Office revealed that some individuals, espe-

cially senior citizens, are susceptible to

losing their money in a variable annuity.

According to the former Securities Commis-

sioner, it is important to consider variable

annuities as a security. The conferee repre-

senting the Greater Kansas City Chapter of

Financial Planners expressed support for the

measure including variable annuities in the

bill. Material received from a Topeka attor-

ney urged caution since passage of the bill

would alter not only the current Act but

years of case law.

Concern or opposition to including vari-

able annuities under the definition of secu-

rity was expressed by the conferees repre-

senting the Kansas Association of Insurance

Agents, the American Council of Life Insur-

ers, the Kansas Association of Insurance and

Financial Advisors and Security Benefit Life

Insurance Company. Concern with the

definition of broker/dealer, as proposed in

the bill, was expressed on behalf of the

Kansas Bankers Association.

CONCLUSIONS AND RECOMMENDATIONS

The Committee concluded that the Uni-

form Securities Act contains provisions that

are, except for the variable annuity issue,

noncontroversial. The Committee suggests

the Legislature consider passing the Act

without variable annuities included in the

definition of security, but with the agreed

upon proposed amendments included in HB

2347. It is also recommended that the Insur-

ance Commissioner and the Securities Com-

missioner cooperate to formulate substantial

suitable standards and that there be coopera-

tion regarding the prosecution of criminal

acts. Lastly, the Committee recommends the

Legislature should continue to observe the

situation to determine proper functioning.

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Kansas Legislative Research Department 2003 Judiciary

Special Committee on Judiciary

REVIEW OF KANSAS LIQUOR CONTROL ACT

CONCLUSIONS AND RECOMMENDATIONS

The Committee recommends that the Liquor Control Act and the Cereal Malt Beverage Act be

amended to make the acts uniformly applicable to all cities and counties including preemption

provisions. The Committee recommends legislation to allow local-option Sunday sales of

liquor and cereal malt beverages. The Committee recommends that the Legislature continue

to study the issues of hours of operation for the sale of alcoholic beverages, age limits for

employees, and eliminating the distinction between cereal malt beverage and “strong” beer.

The Committee recommends the repeal of existing statutes relating to advertising of liquor and

the minimum mark-up, as these statutes are unenforceable. Finally, the Committee

recommends legislation to allow the purchase of out-of-state wine by private citizens.

Proposed Legislation: The Committee recommends one bill on this topic.

BACKGROUND

The Legislative Coordinating Council

charged the Special Committee on Judiciary

to conduct a :

“Review of the Liquor Control Act and

the Cereal Malt Beverage Law and the need

for uniformity in these laws. This review

would examine the recent Wyandotte County

District Court ruling that the Kansas Liquor

Control Act was non-uniform, permitting a

number of cities to charter out of the Sunday

sales and holiday sales prohibitions in the

Act.”

Original 2003 SB 2 was a bill by the

Confirmation Oversight Committee which

dealt with terms of certain board members.

The House Federal and State Affairs Commit-

tee amended the bill by substituting a new

bill. The substitute bill was amended on the

House floor and is currently in conference

committee.

The substitute bill would attempt to make

the Kansas Liquor Control Act uniformly

applicable to all cities and counties, which

would prevent them from using their home

rule powers to opt out of the provisions of

the Act. The provisions that are made uni-

form fall into three categories:

!Limitations on licensing of liquor retail-

ers. Current law prohibits licensing of

retailers in cities where the voters voted

against the repeal of prohibition unless

the voters of the city subsequently vote to

allow licensing of retailers within the city.

This creates nonuniformity in the act. The

substitute bill would authorize licensing

of retailers in any city unless, within 60

days after the effective date of the bill, the

governing body adopts an ordinance

prohibiting the licensing or unless the

voters petition and vote to prohibit the

licensing. (See sections 1-3, pages 1-5.)

!Limitations on location of retail liquor

stores and other licensed premises. In

regard to restrictions on location of li-

censed premises, current law distin-

guishes between cities which have zoning

or building ordinances and those which

do not. The substitute bill would elimi-

nated the distinctions. (See section 4,

page 5.)

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Kansas Legislative Research Department 2003 Judiciary

!Restrictions on places of consumption of

alcoholic liquor. Current law contains

several provisions which allow consump-

tion of alcoholic liquor on certain pre-

mises located in certain cities. In the

substitute bill, those provisions are broad-

ened to include those premises in any

city. [See section 7, pages 6 - 9.]

The House Committee of the Whole

amended the substitute bill by adding the

following provisions:

!Sunday sales of alcoholic liquor and

cereal malt beverage. One amendment

would permit Sunday sales of alcoholic

liquor and cereal malt beverage in any

county upon a petition and vote of the

people of the county or upon adoption of

a resolution by the county commission,

subject to protest petition and an election.

[See sections 5, 6 & 7, pages 5 - 6 & 9 - 10.]

!Purchase and shipment of out-of-state

wine. Another amendment would allow

Kansas residents to purchase wine from

other states and have it shipped to Kan-

sas. [See section 9, pages 10 - 11.]

COMMITTEE ACTIVITIES

The Committee received testimony from

the Office of the Kansas Attorney General;

the League of Kansas Municipalities; the

Unified Government of Wyandotte

County/Kansas City, Kansas; the Kansas

Division of Alcoholic Beverage Control; the

Kansas Wine and Spirits Wholesalers Associ-

ation; the Kansas Beer Wholesalers Associa-

tion; the Kansas Association of Beverage

Retailers; the Kansas Licensed Beverage

Association; the Petroleum Marketers and

Convenience Store Association of Kansas;

the Kansas Food Dealers Association and

Retail Grocery Association; and representa-

tives of convenience stores and retail liquor

stores. Committee staff reviewed the major

provisions of the Liquor Control Act and the

Cereal Malt Beverage (CMB) Law. Staff also

reviewed the history of the major changes in

the Kansas liquor laws and the home rule

powers of cities and counties in Kansas.

Staff reviewed the Wyandotte County

District Court decision in State of Kansas v.

The Unified Government of Wyandotte

County/Kansas City, Kansas , in which the

city argued that the Liquor Control Act was

not uniformly applicable to all cities and,

therefore, any or all portions of the law are

subject to charter ordinance. The district

court ruled that, since the Act was not uni-

form in regard to cities, then cities had the

authority under the constitutional Home

Rule Amendment to charter out from the

statutory ban on Sunday sales of liquor.

Since the close of the 2003 Session, a num-

ber of cities and one county have voted to

allow Sunday and holiday sales of liquor.

A Deputy Attorney General informed the

Committee that oral arguments before the

Kansas Supreme Court are scheduled for

December, 2003, and that the Court’s ruling

could come down in the Spring of 2004.

A representative of the Kansas Wine and

Spirits Wholesalers Association stated that

the Liquor Control Act was passed in 1947

with the intent that the state regulate the

manufacture and distribution of alcoholic

beverages in the state, and that the Legisla-

ture intended that the state, not the cities,

would regulate and license those who sell

liquor.

A representative of the League of Kansas

Municipalities stated that the League does

not have an opinion on Sunday sales, but

does support the home rule powers of cities.

The Director of the Division of Alcoholic

Beverage Control reviewed the pertinent

Kansas laws, as well as a list of potential

issues that could arise if cities continue to

use home rule powers with regard to the

liquor laws.

A representative of the Kansas Beer

Wholesalers Association reviewed past

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Kansas Legislative Research Department 2003 Judiciary

legislative efforts to recodify the Kansas

liquor laws, none of which were successful.

The issue of 3.2 percent beer and “strong”

beer also was reviewed. The representative

also expressed opposition to dram shop

legislation.

A representative of the Kansas Association

of Beverage Retailers stated that the Associa-

tion supports Sunday sales and that the issue

at hand is whether the state is going to retain

control of the regulation of alcohol in Kan-

sas. Various regulations which apply to

liquor store retailers were discussed.

A representative of the Kansas Licensed

Beverage Association testified in support of

efforts to make the liquor laws uniform, such

as contained in 2003 House Sub. for SB 2.

A representative of the Petroleum Market-

ers and Convenience Store Association of

Kansas expressed concern about conve-

nience stores along the state’s eastern border

not being competitive because they cannot

sell beer on Sundays.

A representative of convenience stores

supported Sunday sales as long as it was

applied equally to convenience stores and

retail liquor stores.

A representative of the Kansas Food Deal-

ers Association and Retail Grocery Associa-

tion stated that the Legislature should do

what is right for the public and in the pub-

lic’s interest.

COMMITTEE RECOMMENDATIONS

The consensus of Committee members

was that state law regarding alcoholic liquor

and cereal malt beverages should be uni-

formly applicable to all cities and counties.

The changes the Committee is recommend-

ing regarding uniformity are intended for

further clarification and are not to be con-

strued as a reflection that the Committee

believes the current liquor laws are non-

uniform in regard to their applications to

cities.

Staff was instructed to draft legislation to

allow local-option Sunday sales of liquor and

cereal malt beverages and to add Sunday

sales of cereal malt beverage in conve-

nience/grocery stores. The Committee also

included a recommendation for a

pre-emption section in the recommended bill

which would prohibit local units of govern-

ment from loosening or tightening

state-authorized regulation of alcoholic

beverages.

While the Committee discussed holiday

sales, single-strength beer, and eliminating

the category of cereal malt beverages, it did

not reach a consensus and, therefore, does

not make any recommendations on those

issues.

The Committee discussed restricting

credit card sales, abolishing age restrictions

for persons who sell alcoholic beverages,

altering the prohibition regarding consump-

tion of alcoholic liquor and cereal malt

beverages. The Committee does not make

any recommendations in these areas.

The Committee discussed hours of opera-

tion for those that sell cereal malt beverages

and alcoholic liquor, and concludes that

there is little rationality in the currently-

allowed operating hours. The Committee

recommends that the Legislature conduct

further hearings on the issue of hours of

operation for the sale of alcoholic beverages.

The Committee notes that a majority of

its members did not support any changes in

the current law regarding cereal malt bever-

ages and strong beer; but the consensus of

the Committee is that the issue of eliminat-

ing the distinction between cereal malt

beverage and strong beer should be further

studied, along with what impact a change in

the law would have on existing businesses

currently established under the different

state laws governing each type of beer sales

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Kansas Legislative Research Department 2003 Judiciary

and how changing the distinction would

affect those businesses.

The Committee recommends repealing

the statutes relating to advertising, since

there is an Attorney General’s opinion that

these laws are unenforceable. The Commit-

tee also recommends repealing the minimum

mark-up statute, because those provisions

are not being used, nor are they being en-

forced.

The Committee recommends the inclu-

sion of a provision allowing persons to pur-

chase out-of-state wine and have it shipped

to Kansas.

The Committee discussed the issue of

allowing all 3.2 beer taverns to be open on

Sundays. The Committee received no testi-

mony from either proponents or opponents

on this issue and, therefore, recommends

that the existing law remain in place.

SPECIAL COMMITTEES

Report of the

Special Committee on Kansas Security

to the

2004 Kansas Legislature

CO-CHAIRPERSON: Representative Lee Tafanelli

CO-CHAIRPERSON: Senator Jay Scott Emler

RANKING MINORITY MEMBER: Senator Jim Barone

OTHER MEMBERS: Senators Dave Jackson, Nick Jordan, and Lana Oleen; Representa-

tives Sydney Carlin, Mario Goico, Carl Krehbiel, and Joe Shriver

STUDY TOPICS

Terrorism Exercise

December 2003

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Kansas Legislative Research Department 2003 Kansas Security

Special Committee on Kansas Security

TERRORISM EXERCISE

CONCLUSIONS AND RECOMMENDATIONS

The Special Committee on Kansas Security recommends:

!Development of a clarifying definition for the term "first responder" to conform with federal

definitions.

!Creation and maintenance of a state-wide communication system which would provide

interoperability for all state agencies and local units of government which would connect

to the system. (The Committee supports the actions of the Public Safety Communications

Committee chaired by David Lake, Administrator for the Board of Emergency Medical

Services) in its efforts to create such a system.);

!Review and identify Homeland Security funding received by state agencies.

!Creation of an Oversight Committee or the endorsement of the Governor’s Council on

Homeland Security to review and approve the distribution of Homeland Security funding

by state agencies.

!Draft a letter from the Legislative Coordinating Council (LCC) to the Environmental

Protection Agency (EPA) and the Kansas Congressional Delegation to address concerns

relating to state access to vulnerability and threat assessments conducted on community

water systems.

!Encourage the LCC to continue the development of contingency plans for the continuity of

government activities for the Legislative and Judicial Branches.

!Continued review by the LCC of the potential issuance of key-cards to registered lobbyists

in order for them to access the Capitol.

!Introduction of legislation to amend the Kansas Open Meetings Act and the Kansas Open

Records Act to allow the closure of meetings by local units of government when they are

discussing matters of terrorism, emergency response plans, or Homeland Security.

Proposed Legislation: The Committee recommends the introduction of one bill on this topic.

BACKGROUND

The Legislative Coordinating Council

granted the Special Committee on Kansas

Security three meeting days to discuss the

results of the recently completed terrorism

exercise, to review federal terrorism funding

received by the State of Kansas, and to re-

view agricultural and animal terrorism is-

sues.

Additionally, in fulfilling its duties as the

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Kansas Legislative Research Department 2003 Kansas Security

Special Committee on Kansas Security, the

Committee held hearings on:

!The continuity of government;

!The Kansas Open Meetings Act and the

ability of local units of government to

close meetings to discuss security mea-

sures with private organizations; and

!Human health issues affected by an natu-

ral or intentional emergency event.

COMMITTEE ACTIVITIES

The Committee heard testimony from

various agencies relating to the exercises

coordinated and completed to evaluate the

state’s plans, procedures, readiness, and

response to a terrorist event. Further testi-

mony was presented from state agencies

relating to: agricultural and animal safety

security measures currently being imple-

mented; continued threats and vulnerabili-

ties; and federal funding to combat terrorism.

Additional testimony was presented from

representatives of the Overland Park Police

Department, the League of Kansas Munici-

palities, and the Kansas Association of Coun-

ties, who discussed the Open Meetings Act

and its impact on local governments. The

Committee also heard from the Kansas High-

way Patrol on assessments being conducted

with the counties (as mandated by the De-

partment of Homeland Security) to acquire

federal funding. In conducting its meetings

and due to the nature of the information

being discussed, the Committee invoked the

use of Joint Rule 5 of the LCC which allows

for closure of meetings from the public to

discuss matters of security. Therefore, the

testimony and information presented during

those meetings is not documented within

this report.

The following conferees addressed the

aforementioned topics with the Committee.

The Director of Legislative Administra-

tive Services (LAS) gave an update on the

continuity of government activities, which

included three topics: continuity of opera-

tions, Capitol complex security threat levels,

and building evacuation procedures (also in

attendance were the Chief Clerk of the House

of Representatives and the Secretary of the

Senate). The Director of LAS informed the

Committee of the standing Continuity of

Operations Committee and its membership

under the command of the Adjutant General,

and its duty to determine the needs of the

Legislature during an emergency event. The

Director discussed procedures in place to

maintain off-site data storage by Computer

Services and LAS, plans to be implemented

during the Legislative Session, and building

evacuation information.

The Administrator of Adjutant General's

Department, Division of Emergency Manage-

ment (DEM), and the Kansas Department of

Health and Environment's (KDHE) Bio-terror-

ism Program Director provided a review of

the 2002 Prairie Plague Exercise. Testimony

was distributed describing the exercise, a

state map depicting the six Homeland Secu-

rity Regions in Kansas, and the Final Report

on the exercise. The conferees discussed the

length of the event and the number of agen-

cies which participated. These conferees

also stated that the purpose of the exercise

was to gain insight into the reality of a mas-

sive public health crisis from the local per-

spective and to identify new planning and

training priorities for every level of response.

The conferees also provided information on

local emergency plans, the formation and

implementation of those plans, and the

determination process relating to federal

funding being passed to local units of gov-

ernments.

The Assistant Director of the National

Agricultural Biosecurity Center at Kansas

State University (KSU) appeared before the

Committee and reviewed a bio-terrorism

exercise conducted called “High Stakes.”

The Assistant Director explained that

agroterrorism exercises were conducted by

the State of Kansas, in conjunction with the

National Agricultural Biosecurity Center

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Kansas Legislative Research Department 2003 Kansas Security

(NABC) at KSU. The conferee provided

information relating to all those who helped

develop the exercise plans and procedures

which was tested, and informed the members

of the Committee about the objectives, goals,

and overall conclusions derived from the

exercise. The conferee also addressed foot

and mouth disease, and the steps that would

be taken in the event of an outbreak of that

disease.

The Livestock Commissioner of the

Kansas Animal Health Department (KAHD)

presented testimony regarding legislation

passed during previous sessions which

relates to animal security. The Livestock

Commissioner discussed 2002 SB 395 and

2001 Substitute for HB 2468. These bills

provided for emergency declaration process,

the establishment of quarantine areas, and

certain criminal penalties. In addition, the

2001 legislation ultimately prohibited the

feeding of garbage to animals. The conferee

also discussed initiatives being considered

by KAHD which include pre-approved burial

sites for diseased animals and animal identi-

fication. Additionally, the Livestock Com-

missioner discussed the creation of an Emer-

gency Incident Website to be "opened" only

during an emergency and utilized to provide

information to the public. He also discussed

its use for viewing or dissemination of sensi-

tive information for use by KAHD, counties,

or other state agencies. Further, the Live-

stock Commissioner provided information on

foreign animal diseases (FAD), and noted

that efficient control of FAD's was dependent

upon producer cooperation and the rapid

observation and confirmation of a disease by

the Plum Island, New York National Labora-

tory. The Livestock Commissioner reviewed

the state plan for FAD's; explained the pro-

cess of early detection; reviewed the process

of closure of state borders, livestock markets,

and slaughter plants; reviewed the county

response procedures, briefed the members on

the number of personnel necessary to re-

spond to an incident; and discussed a dia-

gram showing a quarantined area depicting

a surveillance zone. The Livestock Commis-

sioner noted that during the "High Stakes"

exercise, communication was the biggest

problem in exercising the state plan since

the cell phones would not work in the Emer-

gency Operation Center (EOC).

The Chief Legal Counsel of the Kansas

Department of Agriculture (KDA) appeared

before the Committee to provide information

on legislation passed relating to agricultural

security. The conferee stated that there were

five statutes that have been adopted in recent

years which impact food security: 2003 SB

31 which dealt with endangering the food

supply; 2001 Substitute for SB 36 which

expanded the Farm Animal and Field Crop

Research Facilities Protection Act to extend

the coverage to field crops; 2001 SB 139

which expanded state laws relating to the

assumption of risk of domestic animal activ-

ity law to include bison, camels, giraffes, or

any other creature of the ratite family; 2002

SB 334, which amended the provisions of the

commercial feeding stuffs law, to allow the

Secretary of Agriculture to issue and enforce

printed stop sale orders for any commercial

feeding stuff which may contain any sub-

stance injurious to public health. The con-

feree also testified to three primary areas of

KDA authority which are the: Plant Protec-

tion Program; Meat and Poultry Inspection

Program; and the Dairy Inspection Program,

and explained that each of the regulatory

programs has a significant interface with

regulatory programs on the federal level.

The conferee noted that KDA’s efforts have

been focused on maintaining the current

food safety and agricultural product safety

mechanisms, while broadening the scope

sufficiently to include the prospect of inten-

tional acts. The conferee also commented

that the absence of comprehensive planning

and coordination on the statewide level is

severely lacking in agricultural and food

safety security, and added that extensive

work had been done in Kansas on infectious

animal disease. However, the conferee

stated coordinated planning for all other

vulnerable food production and food pro-

cessing sites and facilities within the state

was virtually non-existent. The conferee

suggested that the need exists for the devel-

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Kansas Legislative Research Department 2003 Kansas Security

opment of a comprehensive plan that desig-

nates duties and utilizes the particular

strengths and expertise of each level of

participant from local and state law enforce-

ment, food and agriculture regulating agen-

cies, and academia.

A Representative of the Kansas Farm

Bureau (KFB) explained agricultural security

and how it impacts KFB’s members. The

conferee stated that KFB members support

the actions by the U.S. Department of Home-

land Security that ensure agriculture’s con-

tinued ability to produce food and fiber. He

discussed plans to develop and test a re-

sponse plan that would be activated in the

event of a foreign animal disease outbreak in

conjunction with that of the State of Kansas,

KAHD, and other private organizations. The

conferee informed the Committee that KFB

policy encourages farmers and ranchers to

develop and implement their own individ-

ual, voluntary bio-security plans and to

minimize the opportunities for crime to

occur. The policy also recommends that

regulatory agencies adopt bio-security mea-

sures, with prearranged visits and on-farm

inspections. In regard to animal identifica-

tion, the conferee remarked that KFB’s

member-adopted policy opposes mandatory

animal identification, and that members

support the development of a new, world-

class national animal health emergency

management plan for the U.S. Independent

businesses that may change their practices

and have certain flexibility presently are

concerned about disclosing the exact number

of livestock they may have on the premises.

A representative with the Kansas Live-

stock Association (KLA) testified on the size

of the cattle industry in Kansas, and how

bioterrorism would affect the Kansas econ-

omy including: the value of the industry, its

importance to the state, the state's ranking

relative to the number of cattle and calves on

farms, the number of cattle and calves on

grain feed, and production by commercial

slaughter plants. The conferee also provided

detailed information relating to the economic

impact of the livestock industry on Kansas,

especially in the western section of the state.

The conferee suggested that the Committee

address the funding for the KAHD’s disease

control functions which could possibly be

discontinued at the end of FY 2006. It was

noted that the proposed Animal Identifica-

tion Program would be discussed during an

upcoming convention in December, and that

there would be members who would oppose

or be reluctant to support an animal identifi-

cation system.

CONCLUSIONS AND RECOMMENDATIONS

The Committee recommends that:

!The term “first responder” be further

clarified. During testimony, the Commit-

tee expressed concern relative to the

designation of an individual or an entity

as a “first responder”, and noted that

currently the federal definition for the

term is much broader than the definition

utilized by the State of Kansas.

!The development and creation of a state-

wide communication system to be uti-

lized by state and local agencies. The

Committee heard testimony detailing the

difficulties with multiple agencies re-

sponding to an emergency and attempt-

ing to coordinate efforts via the “commu-

nication” network currently available.

The Committee supports the Public

Safety Communication Committee

(chaired by David Lake, Administrator of

the Board of Emergency Medical Ser-

vices) in its effort to create a system that

is federally Project 25 compliant. The

system would create interoperability

statewide by providing the “backbone”

that would allow local agencies access to

a statewide communication network and

ease communication among cities, coun-

ties, and the state for those who choose

to connect.

!Homeland Security dollars be reviewed

and identified through the current bud-

getary system. The Committee recom-

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Kansas Legislative Research Department 2003 Kansas Security

mends the earmarking of those funds for

ease of identification and tracking.

!An Oversight Committee be created or

the endorsement of the Governor’s Coun-

cil of Homeland Security (with legislative

management) to review and approve the

distribution of Homeland Security fund-

ing by designated state agencies to other

state agencies and local units of govern-

ment. The Committee met with a great

level of difficultly in tracking the fund-

ing, and ensuring that the agencies are

communicating effectively in distributing

the funds. The Committee would like to

make certain that funding is being ex-

pended in the most efficient and effective

way possible to ensure the safety of Kan-

sas citizens.

!The LCC compose a letter to the Environ-

mental Protection Agency (EPA) and the

Kansas Congressional Delegation to in-

quire of the current policy which pre-

vents the State of Kansas emergency and

law enforcement agencies access to vul-

nerability and threat assessment studies

relating to community water systems.

Currently, the EPA only allows EPA

personnel access to those documents for

security reasons and excludes access to

state and local officials. The 2002 Spe-

cial Committee of Kansas Security heard

testimony from the Adjutant General’s

Department which expressed concern

that access to those documents is impera-

tive to its ability to respond to an inci-

dent or to assist in securing those loca-

tions to prevent an accident or event

from occurring. The 2002 Committee

directed the agency to continue its efforts

in attempting to secure those documents.

The 2003 Committee directed staff to

contact the Adjutant General’s Depart-

ment to verify whether the EPA had

changed the policy which denied access

to those documents. Staff was informed

that the policy remains unchanged.

!Legislation be introduced to allow local

entities to close meetings and secure

records relating to a general discussion of

terrorism, emergency response plans, or

Homeland Security based on testimony

presented to the Committee by local

entities. Within the Kansas Open Meet-

ings Act, there is a provision allowing

executive sessions for matters "relating to

the security of a public body or agency,

public building or facility or the informa-

tion system of a public body or agency" if

the disclosure of information would

compromise security. (KSA 75-4319

(b)(13).) The Overland Park Police De-

partment, the League of Kansas Munici-

palities, and the Kansas Association of

Counties provided testimony addressing

the issue. Currently, a local entity (for

example Overland Park) cannot close a

meeting to discuss security measures

with elected officials or to discuss sensi-

tive or confidential security plans. The

conferees were concerned that failure to

update the Kansas Open Records Act and

the Kansas Open Meetings Act to allow

such closures places the local entities

and private industry in a precarious

position of being unable to develop se-

cure plans behind closed doors.

!The LCC continue the development of

contingency plans for the continuity of

government activities for the Legislative

and Judicial Branches. The Committee

received an update on the plans from the

Director of Legislative Administrative

Services (LAS) and efforts being made to

ensure the continuance of legislative

business in the event that an emergency

occurs.

!The LCC continue to review the issuance

of key-card access to registered lobbyists.

The Committee makes no recommenda-

tion at this time on this issue.

SPECIAL COMMITTEES

Reports of the

Special Committee on Local Government

to the

2004 Kansas Legislature

CHAIRPERSON: Representative Jene Vickery

VICE-CHAIRPERSON: Senator Barbara Allen

RANKING MINORITY MEMBER: Representative Roger Toelkes

OTHER MEMBERS: Senators Mark Gilstrap, Kay O’Connor, and Jean Schodorf;

Representatives Ruby Gilbert, Ralph Ostmeyer, Roger Reitz, Tom Thull, and Jim Yonally

STUDY TOPICS

Kansas Open Records Act

Local Government Publication Requirements

Modernization of Local Governments

December 2003

7-3

Kansas Legislative Research Department 2003 Local Government

Special Committee on Local Government

KANSAS OPEN RECORDS ACT

CONCLUSIONS AND RECOMMENDATIONS

The Committee recommends the Kansas House of Representatives and Senate each appoint a

special committee at the beginning of the 2004 Session, to begin a thorough and coordinated

review of the Kansas Open Records Act (KORA) exemptions. The Committee also recommends

various interest groups and state agencies meet prior to the 2004 Session to reach a consensus

on how the KORA exemptions review should be conducted by the Legislature and needed

amendments to specific exemptions.

Proposed Legislation: None

BACKGROUND

The Legislative Coordinating Council

directed the Special Committee on Local

Government to study: “all exceptions to the

Kansas Open Records Act (KORA) and rec-

ommend any needed changes. A 2000 law

provided that all exceptions to disclosure in

existence on July 1, 2005, and any new

exception to disclosure or substantial amend-

ment of an existing exception shall expire on

July 1 of the fifth year after enactment unless

the Legislature acts to reenact the exception.

The Revisor of Statutes currently is in the

process of identifying statutes which contain

such exceptions.”

Open Records Exemptions Sunset

Under KSA 45-229, all statutory exemp-

tions to disclosure in existence on July 1,

2000, expire on July 1, 2005, unless the

legislature acts to reenact the exceptions.

In the year before the expiration of an

exception, the Revisor of Statutes is required

to certify to the President of the Senate and

the Speaker of the House by June the statu-

tory language and statutory citation of each

exception which will expire the following

year. The first such certification of the

Revisor of Statutes will be June 1, 2004, for

the sections which expire July 1, 2005. To

date, the Revisor has identified approxi-

mately 380 exceptions in the Kansas Statutes

Annotated in addition to the 46 exceptions

contained in the KORA itself.

Under subsection (h) of KSA 45-229, the

Legislature is directed to “review the excep-

tion before its scheduled expiration. . . .”

New exemptions to disclosure of public

records expire on July 1 of the fifth year after

enactment unless the Legislature acts to

reenact the exception. Exceptions to disclo-

sure under KORA which are not subject to

review and expiration are exceptions re-

quired by federal law and exceptions which

apply solely to the legislature or the state

court system.

COMMITTEE ACTIVITIES

The Committee held its first public hear-

ing on KORA exceptions on October 24. A

letter was mailed to 103 state agencies and

state boards and to the following associa-

tions: the League of Kansas Municipalities,

the Kansas Association of School Boards, the

Kansas Association of Counties, the Kansas

Press Association, and the Kansas Associa-

tions of Broadcasters. The format of the

hearing as described in the notice was to

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Kansas Legislative Research Department 2003 Local Government

solicit “comments and recommendations

regarding those exceptions to the KORA that

are obsolete or no longer needed and that

could be repealed. The Committee is not

looking for agencies to testify to defend

exceptions to openness they believe should

be retained.”

The following appeared at the meeting:

editors of the Wichita Eagle and Manhattan

Mercury, representatives of the Kansas Press

Association, the Kansas Association of

Broadcasters, and the Kansas Sunshine

Coalition. The conferees pointed out prob-

lems they perceived with different excep-

tions to openness contained in KORA includ-

ing the personnel records exception; the

criminal records exception; the personal

privacy exception; preliminary drafts of

memoranda, and proposed legislation excep-

tions; research prepared for members of a

governing body; and other exceptions. The

consensus of the conferees was that the

Legislature should have full hearings on

each exception and that government agen-

cies and others desiring a continuation of the

exception should be required to explain why

the exception was necessary.

A second hearing was held on November

17 and 18 where the format was on the need

to continue four specific exemptions: the

personnel records, criminal investigation

records, personal privacy, and architectural

and engineering preliminary estimates ex-

ceptions.

Conferees included representatives of the

Kansas Bureau of Investigation; the Kansas

Attorney General’s Office; the Kansas Depart-

ment of Human Resources, the League of

Kansas Municipalities; the Kansas Associa-

tion of School Boards; Reno County, Ellis

County, Sedgwick County; USD 259-Wichita;

Kansas National Education Association, the

City of Overland Park; the Johnson County

Sheriff’s Office; the Kansas Press Associa-

tion, the Kansas Broadcasters Association

and the Wichita Eagle. In addition, written

testimony was submitted by 29 others repre-

senting public agencies and the press.

Conferees except those representing the

press and broadcasters, defended the need

for the four exceptions which were the sub-

ject of the hearing. The press and broad-

caster representatives attempted to clarify

further their positions on those four excep-

tions.

CONCLUSIONS AND RECOMMENDATIONS

The Committee recommends that the

House of Representatives and Senate each

appoint Special Committees at the start of

the 2004 Legislative Session to begin the

study of the exceptions to the KORA in a

systematic manner in order for the Legisla-

ture to conduct the statutory review of each

exception required by KSA 45-229.

The Committee further recommends that

the Legislative Coordinating Council urge

certain interest groups and state agencies to

meet together prior to the 2004 Session and

to try and arrive at a consensus about needed

changes, if any, to the KORA and to try and

arrive at a consensus recommendation re-

garding how the Legislature should conduct

its review of the over 400 exceptions to

KORA. For example, should hearings be

scheduled for each exception to KORA or

only on exceptions where there is some

specific recommendation for change.

Interested groups include the following:

!Kansas Press Association;

!Kansas Association of Broadcasters;

!League of Kansas Municipalities;

!Kansas Association of School Boards;

!Kansas Attorney General’s Office;

!Kansas Bureau of Investigation;

!Kansas Division of Personnel Services;

and

!other groups or persons with an interest.

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Kansas Legislative Research Department 2003 Local Government

Special Committee on Local Government

LOCAL GOVERNMENT PUBLICATION REQUIREMENTS

CONCLUSIONS AND RECOMMENDATIONS

The Committee makes no recommendation on this topic.

Proposed Legislation: None

BACKGROUND

The Legislative Coordinating Council

called for the Special Committee on Local

Government to study the publication require-

ments for local units of government. The

study was to include a review of publications

or notices required to be published in local

newspapers and their purposes.

Nearly identical bills SB 77 and HB 2085

were introduced in the House and the Senate

in 2003 which would allow the publication

of certain legal notices on the Internet by

cities and counties in lieu of newspaper

publication.

The bills permitted cities and counties to

designate an Internet website as their official

publication site. The bills require the

Internet site to have the following qualifica-

tions:

!The website shall not be password pro-

tected;

!The website shall be accessible to mem-

bers of the general public; and

!No fee shall be associated with or

charged for access.

The Kansas Association of School Boards

appeared at hearings during the 2003 Session

and requested schools be added to provisions

of the bill. The bills remain in the House

Local Government Committee and the Senate

Elections and Local Government Committee.

Staff of the Kansas Legislative Research

Department provided the Committee with a

list of 193 separate statutes dealing with

publication requirements affecting cities,

counties, townships, and school districts that

appear in five articles of Kansas Statutes

Annotated.

TESTIMONY OF CONFEREES

Conferees who testified before the Com-

mittee included representatives of the

League of Kansas Municipalities, the Kansas

Association of Counties, the Kansas Associa-

tion of School Boards, the Kansas Press

Association, the Kansas Broadcasters Associ-

ation, the Marion County Record, the Ander-

son County Review, the Atchison Daily

Globe, the Leavenworth Times, the Legal

Record of Olathe, the Lawrence Journal

World, and a resident of Wabaunsee County.

Written testimony was submitted by publish-

ers of the Miami County Republic, the Salina

Journal, and the Holton Recorder.

The representative of the League of Kan-

sas Municipalities said savings in publica-

tion costs for local governments could ex-

ceed $3 million annually. It was suggested

that a compromise be reached requiring a

newspaper publication of a heading and

short summary of the legal notice with the

bill text of the legal notice to be published

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Kansas Legislative Research Department 2003 Local Government

on the website. Representative of the local

governments and the Kansas Associations of

Broadcasters stressed the proposal was per-

missive not mandatory and that all local

governments are faced with the need to find

ways to cut expenses like state government.

Representatives of the media other than

the broadcasters urged the Internet publica-

tion proposal be defeated. They said pub-

lished notice was one of the big components

of a healthy open government. Several noted

that the publication of lists of delinquent tax

payers result in the payment by many of

their taxes. They noted that many citizens

do not have access to the Internet and that

the majority of local units of government do

not have an Internet website.

CONCLUSIONS AND RECOMMENDATIONS

The Committee agreed to make no recom-

mendations on this topic.

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Kansas Legislative Research Department 2003 Local Government

Special Committee on Local Government

MODERNIZATION OF LOCAL GOVERNMENTS

CONCLUSIONS AND RECOMMENDATIONS

The Committee makes no recommendation on this topic. It was unable to reach a consensus

on any suggestion.

Proposed Legislation: None

BACKGROUND

The Legislative Coordination Council

assigned the Special Committee on Local

Government the topic of modernization of

local governments. The topic called for a

study of the issue of allowing local units of

government to consolidate without the ne-

cessity for special legislation.

City Consolidation. Adjacent cities may

consolidate under KSA 12-301 et seq. and

form one city. The cities may consolidate by

passage of joint resolution stating their intent

to consolidate. Such resolutions are subject

to a protest petition and an election proce-

dure. If no protest is filed or if voters ap-

prove at an election, then the cities may

consolidate by the passage of a joint ordi-

nance. As an alternative any city may sub-

mit the issue of consolidation with an adja-

cent city to the city electors. There have

been at least ten consolidations of cities

since 1867. The most recent consolidation

involved the cities of Province Village and

Olathe in 1960.

City/County Consolidation: Kansas City

and Wyandotte County. Legislation enacted

in 1996 authorized the consolidation of the

City of Kansas City, Kansas with Wyandotte

County. The law which is codified at KSA

12-340 et seq., provided that the Governor

appoint a five-member Consolidation Study

Commission for Kansas City, Kansas and

Wyandotte County.

County Formation, Alteration of

Boundaries, Consolidation,

and Dissolution

There is no general law which clearly

authorizes county consolidation or dissolu-

tion. As noted in Article 9, §1 of the Kansas

Constitution, prescribes that the Legislature

shall provide for the organization of new

counties and the changing of county lines.

Laws of 1861, ch 19, §§2, 4, 6, 7, 8 and 9

are included by reference in KSA 18-301

regarding the formation of new counties.

The 1861 law sets forth procedures for the

formation of counties from the unorganized

counties of the state upon petition to the

governor by 20 or more freeholder inhabit-

ants of the area when such area contains not

less than 600 inhabitants. Included are

procedures for an election on the issue of the

location of the county seat. A second law, L.

1887, ch. 128 is included by reference in

KSA 18-303. The later act also provides for

the formation of new counties but contains

more stringent procedures, i.e., a petition of

400 householders to the governor and a

population in the unorganized county of

2,500 householders. Since the state is com-

pletely divided into counties, apparently

neither the 1861 or the 1887 laws continue to

have any viability.

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Kansas Legislative Research Department 2003 Local Government

The boundaries of each county are set

out in KSA 18-101 et seq.

There is a general law, KSA 18-202 to 18-

212, dealing with the change of county

boundaries. The law permits the issue to be

brought before voters of each county affected

by petition of at least 50 percent of the “le-

gal” voters of each county. Perhaps this law

would allow the complete consolidation of

two counties.

Township Formation, Consolidation,

and Dissolution

The board of county commissioners has

the responsibility for the organization of new

townships, the alteration of township bound-

aries as well as the dissolution of townships.

(See KSA 19-212, seventh, 19-217; 80-1101 et

seq.) New townships must contain at least

30 square miles (originally 36 square miles

were required under Territorial Laws, Ch. 28,

§15) and a population of at least 200 persons

unless a city is contained with the township.

The process must be initiated by a petition.

(See KSA 19-217.) In Fulkerson v. Commis-

sioners of Harper County, 31 K. 125, 1 P. 261

(1883), the Court held that the board of

county commissioners was not required to

organize a new township if presented with a

petition and that the decision could not be

appealed since appeals are not allowed when

the board exercises political, legislative,

administrative, discretionary or ministerial

power, only judicial power (p. 128).

Townships may be reduced in size or

dissolved as a result of territory being an-

nexed by a city of the first or second class.

In addition, townships may be disorganized,

reorganized or consolidated as a result of

actions of the board of county commissioners

or the township residents. Under KSA 80-

1101, a county may disorganize a township

with less than 200 residents and attach the

territory to another township unless a protest

petition is filed by a majority of the electors

of the township. The statute further permits

the disorganization of townships of more

than 200 inhabitants if electors so approve

following an initiative petition on the issue.

Another initiative procedure for an elec-

tion on the issue of disorganization of town-

ships and the creation of new townships is

contained in KSA 80-1105 and applies to

counties with less than 3,000 persons. Con-

solidation of townships also may be accom-

plished under KSA 80-1109 if township

boards agree and electors approve. Finally,

counties with a county unit road system

under KSA 80-1110 et seq. may disorganize

a township and attach the territory to an-

other township subject to a protest petition

signed by a majority of the township electors

opposing the disorganization.

Legislation enacted in 1998 authorizes

townships to transfer their powers, responsi-

bilities and duties to the board of county

commissioners if township voters approve.

Township voters also are authorized to

initiate by petition ( 20 percent of the quali-

fied electors) and hold an election on the

issue of the return of powers to the township

board. The board of county commissioners

is authorized to levy taxes and expend funds

on behalf of the township if a transfer oc-

curs. (See KSA 80-120.)

School District Consolidation

Current law provides for three methods

by which school district boundaries may be

changed. These include a transfer of terri-

tory, disorganization and consolidation.

Consolidation is discussed below.

The boards of education of any two or

more school districts may enter into agree-

ments to form one consolidated school dis-

trict. (See KSA 72-8701 et seq.) The territory

which will comprise the consolidated school

district may be noncontiguous. Consolida-

tion agreements must be approved by the

State Board of Education and by voters at a

question submitted election. (See KSA 72-

8703.)

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Kansas Legislative Research Department 2003 Local Government

Any proposed agreement must specify

the following items:

!The home county of the consolidated

district;

!The date of the election for approval of

the proposed consolidation;

!The method of election and the type of

voting plan to be used for electing the

school board;

!A description of school board member

districts if the voting plan involves elec-

tion of board members from districts; and

!The membership of a temporary board of

education. (See KSA 72-8702.)

All electors of the districts proposed to be

consolidated are entitled to vote. If approved

at the election, the State Board then issues

an order establishing the consolidated school

district. (See KSA 72-8705.)

Special District Government

Boundary Matters and

the County

The board of county commissioners plays

a special role in the formation and boundary

expansion decisions of certain “special

benefit districts” under KSA 19-270. Specifi-

cally, the statute requires a hearing and

approval by a three-fourths vote of the board

of county commissions before any of the

following special benefit districts may be

created or their boundaries expanded within

the three-mile ring of any city. The hearing

before the board of county commissioners

must be held only when the creation or

expansion of the special benefit district will

occur within the fringe area (three-mile ring)

of a city and only in the county which

contains a city whose fringe area will be

directly affected by the special benefit dis-

trict creation or expansion. Included are: (l)

Sewer districts; (2) water districts; (3) rural

water districts; (4) water supply districts; (5)

fire districts; (6) improvement districts; (7)

drainage districts.

Some special district governments besides

schools have the ability to consolidate. (See

for example KSA 12-3910 et seq. which

establishes a procedure for the consolidation

of fire districts.)

2003 SB 238

SB 238 as it passed the Senate during the

2003 Session, would enact the “Efficiency in

Local Government Act” which would autho-

rize any county and city or cities therein to

reorganize and form one local government

entity.

The House Local Government Committee

deleted the contents of SB 238 and replaced

it with antitrust legislation dealing with meat

packers. The bill, as amended, is in the

House Agriculture Committee.

TESTIMONY OF CONFEREES

Conferees included representatives of the

Division of Legislative Post Audit, the Kansas

Association of Counties, the League of Kan-

sas Municipalities, a resident of Topeka, and

a resident of Wichita.

The representative of the Division of

Legislative Post Audit reviewed the recent

performance audit entitled “Local Govern-

ment Reorganization: Assessing the Potential

for Improving Cooperation and Reducing

Duplication.”

Permissive legislation allowing the con-

solidation of a county with a city or cities

was supported by the League of Kansas

Municipalities. The representative of the

Kansas Association of Counties said his

association had no position on city-county

consolidation. The individuals from Topeka

and Wichita opposed any permissive legisla-

tion authorizing city-county consolidation.

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Kansas Legislative Research Department 2003 Local Government

CONCLUSIONS AND RECOMMENDATIONS

The Committee makes no recommenda-

tion on this topic. It was unable to reach a

consensus on any suggestion.

SPECIAL COMMITTEES

Report of the

Special Committee on Utilities

to the

2004 Kansas Legislature

CHAIRPERSON: Senator Stan Clark

VICE-CHAIRPERSON: Representative Carl Holmes

RANKING MINORITY MEMBER: Senator Chris Steineger

OTHER MEMBERS: Senators Karin Brownlee, and Jay Emler; Representatives Nile

Dillmore, Carl Krehbiel, Annie Kuether, Judy Morrison, Cindy Neighbor, and Josh Svaty

STUDY TOPICS

Telecommunications

December 2003

8-3

Kansas Legislative Research Department 2003 Utilities

Special Committee on Utilities

TELECOMMUNICATIONS

CONCLUSIONS AND RECOMMENDATIONS

The Committee recommends that:

!KAN-ED provide services to medical clinics in those communities that do not have a

hospital.

!The House Utilities Committee, Senate Commerce Committee, and Joint Committee on

Information Technology meet jointly during the third week of the 2004 Session for an

update on KAN-ED implementation.

!The Legislature consider increasing the maximum administrative fine that can be imposed

by the KCC for violation of its orders.

!The Department of Transportation provide to the House Committee on Utilities and to the

Senate Commerce Committee during the 2004 Session documentation supporting the

Department’s policies regarding use of the 800 MHz radio towers.

!A link be created between the KDOT fiber backbone that runs along I-70 through Topeka

and the Capitol in downtown Topeka.

Proposed Legislation: None

BACKGROUND

The Special Committee on Utilities was

directed to:

Assess the current broadband coverage in

Kansas by various technologies. Study

any barriers to deployment and discuss

possible incentives to encourage

deployment. Review the recent February

20th FCC ruling on broadband

deregulation and the current issues of

Kansas deployment before the KCC. In

addition, review the current status of the

KAN-ED network.

The Legislative Coordinating Council

(LCC) assigned the telecommunications topic

requested by Senator Brownlee. Senator

Brownlee’s request to the LCC specified that

the matter of interest before the Kansas

Corporation Commission (KCC) was SBC’s

(formerly Southwestern Bell Telephone)

failure to meet its deployment schedule.

Previously, the issue of broadband

deployment was studied by the Joint

Committee on Economic Development in

2002. That examination concluded that

further study of the following issues would

be required:

!State and federal regulation and the

impact of regulation on both

intermodal and intramodal

competition in the broadband

market;

!Use of Universal Service Funds to

subsidize broadband deployment;

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Kansas Legislative Research Department 2003 Utilities

!Tax incentives for broadband use or

deployment;

!Regulatory barriers to broadband

deployment; and

!Lease rates of incumbent carriers’

infrastructure.

During the 2003 Legislative Session,

attention was focused on the issue of

broadband deployment during consideration

and debate of HB 2019. The bill, which

remained in the House Committee on

Utilities at the end of the session, would

exempt broadband services from state

regulation. The House Committee on

Utilities did not recommend the bill for

passage after conducting extensive hearings

on issues presented in the bill.

Policy questions raised for Committee

study included:

!What public policy barriers prevent all

Kansans from having access to broadband

services for Internet access?

!What incentives can/should the state

provide to ensure all Kansans have access

to broadband services for Internet access?

!What role does state policy play in

ensuring ubiquitous broadband access?

!What role does/will KAN-ED play in (1)

increasing demand for high-speed

Internet access across the state; and (2)

catalyzing deployment of broadband

services?

The Federal Communication Commission

(FCC) defines “broadband” as “ . . . evolving

digital technologies that provide consumers

a signal switched facility offering integrated

access to voice, high-speed data service,

video-demand services, and interactive

delivery services.” 1 Generally, the term

broadband is used to describe services that

provide consumers with fast access to data

over telecommunication lines, coaxial cable

(as used by cable television companies) or

radio waves. Experiments testing the

potential to provide broadband services over

electric lines are being conducted in several

locations throughout the nation. In most

instances, broadband services are used to

access the Internet or to access dedicated

information systems (such as those used by

geographically separated facilities of a

company).

The FCC has defined two classes of

broadband services: Advanced services –

upload and download speeds in excess of

200 kbps; and high-speed service – 200 kbps

in at least one direction. When upload and

download speed capacities are not equal, the

service is described as being asymmetrical.

Kansas law defines broadband as “. . .

the transmission of digital signals at rates

equal to or greater than 1.5 megabits per

second” (KSA 66-1,187). That speed also

could be expressed as 1,500 kbps.

In addition to broadband services

provided by telephone companies,

intermodal competitors (cable operators,

wireless, and satellite) have entered the

broadband market in the years since 1996

when the existing telephone regulatory

framework was created in both federal and

state law. Currently, cable modem service is

available to over 70 percent of households in

the United States. By mid-2002 over 90

percent of the nation’s population lived in

counties with at least three wireless

providers. Broadband service provided via

satellite is available in most areas of the

1 Federal Communications Commission. “Glossary of

Telecommunications Terms.”

http://www.fcc.gov/glossary.html. 7/31/02 .

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Kansas Legislative Research Department 2003 Utilities

United States, but generally cannot compete

with digital subscriber line (DSL) and cable

modem pricing.2

State and federal jurisdictions in regard

to regulation of broadband services currently

are being sorted out. The most recent ruling

by the FCC, the Triennial Review Order

(TRO) issued in August 2003 has been

appealed to the federal district court for the

District of Columbia.

In the Triennial Review Order the

Commission delegated to the states specific

market analyses to determine the existence of

competition for a particular telecom-

munication service. The existence of

competition, both intermodal and

intramodal, is key to determination of the

degree of regulation required to ensure

provision of the service at a reasonable price.

Two aspects of the FCC’s Triennial

Review Order are of particular importance in

connection with broadband services: packet

switching and low capacity loops.

The FCC determined that incumbent

local exchange carriers, i.e., companies

providing telecommunication services to an

area in 1996, are not required to lease routers

and digital subscriber line access

multiplexers (DSLAMs) as a stand alone

element to competitors. In regard to “loops”

which provide access to individual homes

and businesses, incumbent carriers are not

required under the order to provide

competitors access to high frequency

portions of high capacity loops. That means,

essentially, that incumbent telephone

companies will not be required to lease their

broadband facilities to competitors if the

FCC’s decision is upheld through pending

litigation.

COMMITTEE ACTIVITIES

The Committee held 2 of its allotted 3

days of meetings in October. That first

meeting included background presentations

by the Kansas Corporation Commission

(KCC) on broadband, its availability in the

state and the current regulatory

environment. Also at the first meeting, the

Committee convened a roundtable

discussion involving legislators and

providers of broadband services: telephone

companies, cable companies, fixed wireless

service providers and a satellite service

provider. Finally, at the October meeting,

the Committee was briefed on the status of

KAN-ED.

At its single-day meeting in November,

the Committee received information

regarding state-owned broadband capable

facilities including those owned or operated

by the Department of Transportation and the

Division of Information Systems and

Communication (DISC). The Committee also

received information regarding civil fines

that can be imposed to enforce laws

administered by the KCC and the

Department of Health and Environment and

those agencies’ orders and rules and

regulations.

The Department of Transportation

(KDOT) is the owner of a “dark fiber”

network as a result of the bankruptcy of

Digital Teleport, Inc. (now known as

LightCore). KDOT is the only state agency

currently using these systems. The

Committee learned that DISC is considering

installation of a connection between the

Capitol Complex and the Historical Museum.

That extension would put the state fiber

network in Topeka in very close proximity to

the KDOT fiber along I-70 but would not

connect the two systems without an

extension from the Historical Society to the

KDOT fiber.

2 Summary of the FCC’s Triennial Review Order.

NARUC Triennial Review Implementation Process

Task Force. September 5. 2003.

8-6

Kansas Legislative Research Department 2003 Utilities

Broadband Coverage

In regard to broadband availability, KCC

staff informed the Committee that highly

detailed coverage information regarding

broadband services is not readily available.

That is because the lowest geographic level

for which the FCC collects and reports such

data is zip code. Thus, if broadband service

is provided in some, but not the entire extent

of a zip code, the FCC’s summary will show

coverage of the entire area. In many parts of

Kansas, zip codes are sufficiently large that

technical distance limitations imposed by

broadband technology result in only partial

coverage. The KCC’s ability to collect data

from entities such as cable, wireless and

satellite companies that provide broadband

service is limited to requests for voluntary

reporting because those entities are not

regulated by the Commission.

Barriers and Incentives

The roundtable discussion focused on the

type of technology utilized to provide

broadband services, barriers to complete

state-wide availability of broadband, and

incentives for companies to provide those

services. During the roundtable, a variety of

perspectives regarding barriers and

incentives were presented. Barriers to

widespread availability of broadband

include:

!technical issues unique to each type of

broadband delivery technology;

!access to rights-of-way;

!uncertain regulatory environment;

!price;

!access to capital; and

!low consumer demand.

In regard to incentives, broadband

industry participants in the roundtable

expressed a variety of positions:

!Some participants stated that any

incentives must be technology/provider

neutral.

!Several participants noted that their

entry and continuation in the broadband

service market was not dependent upon

incentives other than those provided by

the marketplace.

!Rural telephone companies recognized

rate of return regulation as a service

expansion incentive.

!Regulatory incentives might spur

expansion of broadband services in

sparsely populated areas of the state.

!The provision of broadband services to

public facilities such as schools and

libraries would create demand among

other customers.

SBC Deployment of DSL Services

The Committee received a briefing from

KCC staff, counsel for the Citizens’ Utility

Ratepayer Board (CURB) and SBC regarding

the proposed settlement of a case before the

KCC (Docket Number 99-SWBT-677-GIT).

The docket, originally opened in 1999, was

initially settled by a Stipulation and

Agreement in January 2000. One provision

of that settlement was that SBC would

provide broadband to Kansas customers in

40 wire centers in 24 communities during

the three years beginning on August 1, 2000.

The service was to be provided nearly

ubiquitously in Hays, Hutchinson, Kansas

City, Lawrence, Manhattan, Salina, Topeka,

and Wichita. The service was to be provided

where technically feasible in Arkansas City,

Bonner Springs, Coffeyville, Dodge City, El

Dorado, Emporia, Garden City, Great Bend,

Independence, Leavenworth, Liberal,

McPherson, Newton, Ottawa, Parsons and

Pittsburg.

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Kansas Legislative Research Department 2003 Utilities

In March 2003, the KCC directed SBC to

file reports regarding broadband deployment

required by the initial settlement. In April

2003 SBC filed reports with the Commission,

one of which indicated that erroneous

information had been provided to

Commission staff in 2001 and 2002. Also in

April, SBC requested an extension of time to

complete the broadband deployment. The

extension was requested because SBC had

not met the requirement of the original order

in regard to broadband deployment.

Commission staff suggested fines be

imposed on SBC for the inaccurate reports

that overstated significantly the extent of

broadband deployment. KCC staff also

recommended imposition of fines on SBC

under KSA 66-138 for violation of the

Commission’s order regarding deployment of

DSL. After negotiation of issues, KCC staff,

CURB, and SBC formulated a second

Stipulation and Agreement regarding

broadband deployment. At the time of the

Committee’s final meeting in November, the

Commission had not acted on that proposed

settlement agreement.

The September 2003 proposed settlement

provided for additional broadband

deployment, specific upgrades to telephone

lines in specific communities, intermediate

completion dates for some portions of the

work, and regular reporting to the KCC. The

broadband deployment outlined in the

agreement would be completed by December

31, 2004.

The 2003 proposed settlement provides

for DSL service in 81 new central offices,

fourteen of which are in or near Topeka and

Wichita. Other central offices identified in

the settlement are in rural areas and serve at

least 1,000 access lines. Service would be

provided in those instances by DSLAMs to

locations within approximately 3 miles of the

central office. Further, 108 additional DSL-

capable remote terminals will be deployed by

December 31, 2004 in the “near ubiquitous”

cities: Hays, Hutchinson, Kansas City,

Manhattan, Salina, Topeka and Wichita.

Other technical upgrades would be required

for all exchanges covered by the 2000 and

2003 agreements. Finally, SBC would be

required to file with the KCC quarterly

reports of progress toward completion of the

required work. KCC staff indicated these

reports would be certified in the future in

order to better deal with erroneous

information such as that contained in reports

filed under the prior settlement.

CURB and the KCC staff identified the

following benefits of the proposed

settlement:

!DSL deployment in the "near ubiquitous"

communities is closely aligned with KCC

staff's interpretation of the original

settlement.

!The settlement would make DSL services

available to approximately 90 percent of

SBC's customers in metropolitan areas in

the "near ubiquitous" cities.

!The settlement would result in

deployment of DSL in 19 communities

identified in 2002 as not having any

available broadband service: Atwood,

Blue Rapids, Waterville, Cottonwood

Falls, Ellsworth, Eureka, Greensburg,

Herington, LaCrosse, Lincoln, Marion,

Meade, Minneapolis, Oakley, Plains,

Sedan, Smith Center and St. Francis.

Imposition of fines as a penalty for SBC

not meeting the deadline was discussed,

but more widespread deployment was

the more desirable outcome.

!DSL service would become available to

between 70 percent and 75 percent of all

SBC customers by the end of the

implementation period.

!The settlement would achieve benefits in

the time that would have been spent in

litigation had the settlement not been

reached.

The briefing on the status of KAN-ED

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Kansas Legislative Research Department 2003 Utilities

described progress toward implementation of

the network that will eventually link the

state’s schools, libraries, and hospitals. The

State Librarian reported that 291 libraries,

representing approximately 90 percent of the

library system, currently are utilizing the

KAN-ED network. The Committee also

learned that KAN-ED had provided $2.4

million in subsidies to network participants.

CONCLUSIONS AND RECOMMENDATIONS

The Committee heard from

representatives of the industry and discussed

the issue of additional incentives for

broadband deployment. The Committee

makes no recommendation regarding the

issue at this time.

The Committee recommends that:

!KAN-ED provide services to medical

clinics in those communities that do not

have a hospital.

!The House Utilities Committee, Senate

Commerce Committee and Joint

Committee on Information Technology

meet jointly during the third week of the

2004 Session for an update on KAN-ED

implementation. The report to those

committees is to include:

"Information about broadband services

available in each community. That

portion of the report should be

developed cooperatively by KAN-ED,

the industry, and the KCC. The

Committee would prefer that

information be presented as a map in

sufficient detail for members to

determine precisely where gaps in

service availability exist in the state.

"A report of the use of Kansas

Universal Service Fund moneys by

public school districts, libraries and

hospitals for KAN-ED

implementation. Specifically, the

Committee is interested in the

amount spent and the purpose for

which it was spent. This portion of

the report also should highlight

where and how KAN-ED is

encouraging broadband deployment.

!The Legislature consider increasing the

maximum administrative fine that can be

imposed by the KCC for violation of its

orders. Under current law, the

maximum fine for violation of a

Commission order is $1,000. That

maximum has been in place since

enactment of KSA 66-138 in 1911. The

Committee further recommends that any

such increase in the maximum fine be

aligned with fines imposed under the

Consumer Protection Act.

!The Department of Transportation

provide to the House Committee on

Utilities and to the Senate Commerce

Committee during the 2004 Session

documentation supporting the

Department’s policies regarding use of

the 800 MHz radio towers. In particular,

the Committee is interested in

documentation regarding interference

that results from placement of equipment

using other radio frequencies on those

towers. Also, the Committee specifically

is interested in documentation

supporting the Department’s position

that weather warning system equipment

should not be located on those towers.

!A link be created between the KDOT

fiber backbone that runs along I-70

through Topeka and the Capitol in

downtown Topeka.

JOINT COMMITTEES

Report of the

Joint Committee on Arts and

Cultural Resources

to the

2004 Kansas Legislature

CHAIRPERSON: Representative Deena Horst

VICE-CHAIRPERSON: Senator Jean Schodorf

RANKING MINORITY MEMBER: Representative Ruby Gilbert

OTHER MEMBERS: Senators Les Donovan, Jay Emler, Paul Feleciano, Jr., and Chris

Steineger; Representatives Lana Gordon, Ethel Peterson, and Jo Ann Pottorff

STUDY TOPIC

Program Descriptions and Funding Issues

December 2003

9-3

Kansas Legislative Research Department 2003 Arts and Cultural Resources

Joint Committee on Arts

and Cultural Resources

PROGRAM DESCRIPTIONS AND FUNDING ISSUES

CONCLUSIONS AND RECOMMENDATIONS

The Committee strongly supports the programs and goals of the Kansas Arts Commission, the

Kansas Humanities Council, the Kansas State Historical Society, the Kansas State Department

of Education, the State Librarian, and the Kansas Film Commission. The Committee urges

continued funding of these programs and exploration of other revenue sources to enhance arts

and humanities programs. The Committee believes unequivocally that these programs enhance

not only the quality of life of Kansans but also foster the economies of Kansas communities.

Thus they merit the strongest support of our Legislature.

Proposed Legislation: None

BACKGROUND

The Joint Committee on Arts and Cultural

Resources was established by KSA 46-1801

in 1989. The statute provides, among other

things, that Legislature shall study,

investigate, and analyze the following:

!goals appropriate to the future of the arts

and cultural life in Kansas including but

not limited to public art, individual

artists, video, radio and music, and

historical preservation;

!the role of the Legislature and state

government in the realization of those

goals;

!art legislation in other states and at the

federal level;

!the budget and programs of the Kansas

Arts Commission and other state-

supported agencies;

!arts education programs in the state; and

!the impact of the arts and cultural

programs on the state’s economy.

The statute also requires the Joint

Committee to report to the Legislature on or

before December 31 of each year any

findings and recommendations concerning

the arts in Kansas. The Committee may

introduce legislation necessary to achieve its

objectives.

COMMITTEE ACTIVITIES

This interim the Joint Committee

conducted hearings on June 25 and 26, 2003,

in Topeka. At this meeting, the Committee

received testimony from the following: the

Executive Director, Kansas Arts Commission

(KAC); the Program Director, Kansas

Humanities Council (KHC); the Manager of

the Kansas Film Commission; the Fine Arts

Consultant, Arts Education, Kansas State

Department of Education; the State Librarian

and the library directors of Salina and

Wichita; and the Executive Director, Kansas

State Historical Society. The Committee also

received background information at various

sites on its tour of November 17 and 18,

2003, at Concordia, Lindsborg, and Salina,

Kansas.

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Kansas Legislative Research Department 2003 Arts and Cultural Resources

KAC Testimony

The testimony of the Executive Director,

KAC, centered principally on funding

concerns, especially recent budget cuts. He

explained that during the 2003 Session the

agency weathered two attempted cuts in the

House of Representatives. It was further

explained that the FY 2002 appropriation to

the KAC was $1,650,105, and $1,522,850 for

FY 2003, and $1,504, 038 for FY 2004. On a

related issue, the Executive Director said

total nationwide funding for the arts had

dropped from $408.6 million in FY 2002 to

$354.9 million in FY 2003, or a 13.1 percent

decrease. Finally, it was noted that among

jurisdictions Kansas ranks 41th in per capita

spending on the arts.

KHC Testimony

The Program Director of KHC discussed

various programs it offers the public. These

programs include:

!“Kansas Chautauqua” a program entitled,

“Bleeding Kansas: Where the Civil War

Began”;

!“Stories At Work”–a program structured

around fictional stories that consider

ethical questions in professional life;

!“Great Plains Chautauqua”–a revival of

the traveling tent Chautauquas that

entertained and educated Kansans during

the first decade of the 20th century;

!“Yesterdays’s Tomorrows: Past Visions of

the American Future”–a traveling exhibit

from the Smithsonian Institution;

!The “KITES” program– a traveling

exhibition produced by the Kansas State

Historical Society;

!“Produce for Victory: Posters on the

American Home Front, 1941-1945"–an

exhibition of 25 vintage replica posters of

World War II; and

!TALK (Talk About Kansas Literature)–a

series of discussions about a topic of

interest to adult readers.

Kansas Film Commission Testimony

The role of the film industry in Kansas

was discussed by the Manager of the Kansas

Film Commission. This conferee stated that

in the past 17 years the film industry has

spent over $219 million in Kansas. He also

noted that film companies spend between 25

and 50 percent of their budgets on location.

With regard to competition in the industry,

the Manager indicated that over the past

several years United States film producers

have lost work to Canada, Australia, and

other countries. He said estimates indicate

that “runaway production” (relocation of

U.S. film companies to foreign venues) costs

the U.S. economy over $10 billion a year and

that foreign competition has led some states

to offer producers tax exemptions or rebates.

The Manager also said Kansas could

strengthen its film infrastructure by: offering

Kansas students opportunities to learn about

film production, marketing, and distribution;

encouraging partnerships with agencies and

organizations; increasing promotion and

support for Kansas film makers; offering

incentives to attract film makers to Kansas;

and promoting “film education” statewide.

Department of Education Testimony

The Fine Arts Consultant of the

Department of Education appeared before the

Committee to discuss her role in promoting

the arts in Kansas. She said her duties

include:

!serving as advisor for fine arts education

in Kansas;

!providing professional development

opportunities for fine arts educators;

!helping school districts implement the

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Kansas Legislative Research Department 2003 Arts and Cultural Resources

Fine Arts graduation requirement of the

Kansas State Department of Education;

!providing research to the Kansas Board of

Education and the Kansas State

Department of Education; and

!educating Kansas communities and

policymakers on the importance of the

arts in the education of youth.

Library Representatives’ Testimony

The role of libraries in promoting arts

and humanities programs was discussed by

the State Reference Librarian, the Library

Director of the Salina Public Library, and the

Director of Libraries, Wichita, Kansas. The

State Reference Librarian stated that:

!there are 327 public libraries in 355

communities, 70 college and university

libraries, and over 1,000 school libraries;

!libraries contain the resources to help

patrons enhance their knowledge about

world literature, history, local art, and

local history; and

!new online connections allow libraries to

bring the arts and humanities

information to patrons.

The other two conferees, the Library

Director of the Salina Public Library and the

Director of Libraries, Wichita, discussed

various programs they offer patrons. The

Salina librarian stressed the Salina’s library

role in providing arts and humanities

programs through traditional book

discussion programs. The Wichita librarian

cited a variety of programs and materials

Wichita libraries provide their patrons. She

also noted that the Wichita library system

recognizes the importance of outreach

programs as well as various community

programs.

Kansas State Historical

Society Testimony

The testimony of the Executive Director

of the Kansas State Historical Society (KSHS)

focused on budget issues, funding sources,

Heritage Trust Fund grant projects, and

Federal Historical Preservation Fund

subgrants to recipients. The information

provided by the Executive Director indicated

that:

!the KSHS’s budget included the FY 2003

allotments of 2 and 3.9 percent;

!the FY 2004 appropriation of $5,602,595

includes allotments and reductions made

by the Governor and Legislature;

!in FY 2003/2004, the total grants and

contracts awarded to the Historical

Society was $3.5 million;

!in FY 2003, the KSHS awarded 19

grantees a total of $1.2 million; and

!in FY 2003 the KSHS awarded 13

recipients $192,006 of federal Historical

Preservation Fund subgrants.

Committee Tour-November

17-18, 2003

This interim the Joint Committee toured

selected sites in Concordia, Lindsborg, and

Salina. At Concordia the Committee visited

the Brown Grand Theatre and the Concordia

Elementary Grade School where it viewed

the school’s stained glass windows. At

Lindsborg, the Committee toured the

Sandzen Memorial Art Gallery, the

McPherson County Old Mill Museum, the

Heritage Square Historic Complex, the Red

Barn Studio/Raymer Society, the Dala Horse

Factory, and the Courtyard Gallery. Finally,

at Salina, the Committee toured the Salina

Art Center, the Salina Community Theatre,

the Bergen studio, and the Smokey Hill

Museum. At the Museum, the Executive

Director of the KAC updated the Committee

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Kansas Legislative Research Department 2003 Arts and Cultural Resources

on funding issues. He said that KAC had

requested restoration of grants and operating

funds to allow the agency to function at the

FY 2002 level. He also said that the KAC

was requesting $50,000 to conduct an

economic impact study of the arts in Kansas.

He further reported that the reduced

resources package of $75,514 for FY 2005

submitted by the KAC has been reduced by

the Division of Budget. Instead, the Division

of Budget recommended a $35,000 cut,

which is about one-half of the amount

submitted by the KAC. The Committee

concluded its tour with a luncheon at the

Smokey Hill Museum where the Committee,

the Executive Director of the KAC, and local

arts groups discussed ways to convey the

importance of the arts to Kansas legislators.

CONCLUSIONS AND RECOMMENDATIONS

As noted in this report, the Committee

strongly endorses the programs and goals of

the Kansas Arts Commission, Kansas

Humanities Council, the Kansas State

Historical Society, the Kansas State

Department of Education, the State Librarian,

and the Kansas Film Commission.

The Committee wishes to commend the

cities of Concordia, Lindsborg, and Salina for

their outstanding commitment to arts and

humanities programs. As a partner in

funding local programs, the state through the

Kansas Arts Commission and other agencies

plays an important role in the furtherance of

these programs. These programs not only

enhance the quality of life for all Kansans

but also foster the economies of Kansas

communities. Finally, the Committee

believes that because the arts and humanities

enhance the economies and quality of life of

Kansas communities, the Legislature should

consider additional funding sources at the

most appropriate time.

JOINT COMMITTEES

Report of the

Joint Committee on Corrections

and Juvenile Justice Oversight

to the

2004 Kansas Legislature

CHAIRPERSON: Representative Ward Loyd

VICE-CHAIRPERSON: Senator Pete Brungardt

RANKING MINORITY MEMBER: Representative Janice Pauls

OTHER MEMBERS: Senators David Adkins, Greta Goodwin, David Haley, Nancey

Harrington, Kay O’Connor, Lana Oleen, and Jean Schodorf; Representatives Doug

Gatewood, Jeff Goering, Thomas Klein, Bill Light, Dean Newton, and Dale Swenson

STUDY TOPICS

2003 Interim Committee Report

December 2003

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Kansas Legislative Research Department 2003 Corrections and Juvenile Justice

Joint Committee on Corrections

and Juvenile Justice Oversight

2003 INTERIM COMMITTEE REPORT

CONCLUSIONS AND RECOMMENDATIONS

The Joint Committee reviewed the topics included in the statutory charge as well as several

specific topics which were assigned by the Legislative Coordinating Council. The Committee

will introduce two bills related to deleting the sunset provisions of the Juvenile Justice Reform

Act and requiring wholesalers or distributors of ephedrine and pseudoephedrine to register

their Kansas sales.

Non-legislation recommendations made by the Committee include the following:

!Initiate the construction of an additional housing unit at the El Dorado Correctional facility,

and consider privatization options regarding construction and operation of correctional

facilities as appropriate.

!Retain an expert to evaluate the adequacy of mental health services and facilities for

inmates, and request proposals for collaborative evaluation of the adequacy of the mental

health system in general.

!Assume funding of former federal grants related to methamphetamine abuse enforcement

and prevention ($750,000 and $350,000 per year, respectively).

!Continue the InnerChange Freedom Initiative Prison Fellowship program as currently

administered by the Kansas Department of Corrections (KDOC).

!Endorse the KDOC risk management philosophy.

Proposed Legislation: The Committee recommends the introduction of two bills.

BACKGROUND

The 1997 Legislature created the

Committee on Corrections and Juvenile

Justice Oversight, which is comprised of

seven members each from the House and

Senate. The statutory duties of the

Committee include:

!Monitor the inmate population and

review the programs, activities, and plans

of the Department of Corrections;

!Monitor the establishment and review

the programs, activities, and plans of the

Juvenile Justice Authority;

!Review the adult correctional programs,

activities, and facilities of counties,

cities, and other local governmental

entities, and private entities; and

!Review juvenile offender programs,

activities, and facilities of counties,

cities, school districts, other local

governmental entities, and private

entities including programs for the

reduction and prevention of juvenile

crime and delinquency.

KSA 46-2801 extends the Committee to

December, 2005.

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Kansas Legislative Research Department 2003 Corrections and Juvenile Justice

COMMITTEE ACTIVITIES

In addition to conducting activities

during the 2003 Interim relating to its

statutory charges, the Committee examined

a number of additional adult and juvenile-

related topics. All items considered by the

Committee during the 2003 Interim are

reviewed in the material that follows, along

with Committee recommendations and

proposed legislation.

Additional Inmate Capacity

Current and Projected Adult Inmate

Prison Population. The Committee was

charged with studying the issue of additional

inmate capacity, which includes reviewing

population projections and comparing them

to existing capacity in the Kansas

Department of Corrections’ existing facilities.

According to the Kansas Sentencing

Commission’s (KSC) official FY 2004

projections, the state’s prison population

should increase by 1,113 inmates (12.3

percent) by the end of the ten-year forecast

period (FY 2013).1 Aggregate estimates, not

broken down by gender or security level,

show current adult inmate capacity will be

exceeded in FY 2007.

However, according to the Kansas

Department of Corrections (KDOC),

reviewing only the aggregate estimates

produces a mistaken impression,

specifically, that capacity is not exceeded

until FY 2007. To the contrary, stated

Corrections Secretary Roger Werholtz, the

KDOC system is currently near or over

capacity for maximum and medium security

males. In July 2003, KDOC housed 3,705

medium-custody male inmates and had 3,701

medium-security male beds. Also in July,

there were 2,098 male inmates classified

maximum-custody, special management or

awaiting classification, and 2,255 maximum

security male beds existed. Male inmates

cannot be placed in female inmate housing,

and higher custody inmates cannot be

housed in lower security housing. But a

number of minimum custody inmates must

be housed in maximum or medium custody

beds because of medical, mental health or

programmatic reasons, and this reduces any

surplus in beds at the higher custody levels.

Specifically, approximately 165 maximum-

security beds are occupied by medium- or

minimum-custody males at any given time,

and 80 to 85 medium-security beds are

occupied by minimum-custody male

inmates. Secretary Werholtz indicated the

most problematic sector, i.e., the group for

which some type of action to increase

capacity is most pressing, is medium-

security males.

Legislative Options to Address Capacity

Issue. The Committee’s charge included

reviewing all available options for providing

additional bed space. This included a

review of the following: Maximizing bed

space using available structures and funding;

expansion, including new construction or

renovation of existing facilities; leasing bed

space from private, out-of-state facilities; and

inviting the construction of a private, in-state

facility.

The options, as reported by KDOC, are as

follows:

!Do nothing, allowing the prison

population to exceed capacity. The

advantage to this option would be there

are no immediate costs, and

overcrowding actually reduces the per

capita expenditure. Disadvantages

include that prisons become less safe to

operate and pose greater risks to staff,

inmates and potentially the public; and,

when a facility’s population exceeds its

capacity, the ability to provide essential

1 KSC explained the increase is “due to the

pronounced presence of the ‘stacking effect’

of lengthy sentences for the most serious and

violent offenses.” The “stacking effect”

occurs as these serious offenders, who are

incarcerated for longer periods, are joined by

additional offenders incarcerated for the

same types of offenses.

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Kansas Legislative Research Department 2003 Corrections and Juvenile Justice

services is impaired, thus increasing risk

of litigation, either through an original

lawsuit, or a reactivation of the Federal

action (Porter, et al. vs. Graves, et al., In

the United States District Court for the

District of Kansas, Case No. 77-3045-R).

!Implement an early release mechanism.

The advantage here is low or no financial

cost. Disadvantages include the potential

that one or more offenders released

under such a mechanism would commit

a new crime or harm someone. Secretary

Werholtz noted that, under this scenario,

the only way to achieve any immediate

impact would be to apply any sentence

reductions or changes in sentencing

policy retroactively.

!Lease out-of-state private prison beds.

KDOC reported this would be a workable

temporary solution, and KDOC has

utilized leased prison beds in the past

(FY 2002). Among the advantages: (1)

Leasing could delay the need for

construction of additional cell houses in

existing KDOC facilities or of a new

facility. (2) Private facilities are eligible

to receive Violent Offender

Incarceration/Truth in Sentencing

(VOI/TIS) funds as payment, which

matches State General Funds on a 90/10

basis.2 Approximately $1.9 million in

VOI/TIS funding is available for lease of

private prison beds, after which this

funding source is depleted and no further

appropriation is expected from Congress.

(3) KDOC has finalized a non-binding

contract that will provide available

medium security beds at the daily cost of

$38.50 per bed in FY 2004 and $39.27 in

FY 2005, or approximately $15 less than

the average daily KDOC facility cost of

$54.05 (based on the FY 2004

appropriation). The disadvantages

include: (1) As mentioned previously,

once VOI/TIS funds already received are

expended, this funding option will no

longer be available. (2) According to the

current KDOC contract, the beds are not

guaranteed. The vendor is free to lease

the beds to another customer. Although

the implementation of SB 123 will affect

inmate population totals, the revised

estimate of that impact (released by the

KSC in November 2003) means KDOC

might need to use some of the leased

beds in FY 2004, since the department’s

bed utilization adjustments indicate a

potential shortage of medium and

maximum security beds. (3) Offenders

are not retained locally, making access to

the courts, families and KDOC more

difficult and expensive. (4) The distance

factor makes contract monitoring more

difficult and expensive, but contract

monitoring is still important to ensuring

safe and effective inmate control.

!Lease jail beds from Kansas counties.

KSA 75-52,129 authorizes the Secretary

of Corrections to place inmates in a

county jail if the jail provides and

maintains appropriate and recognized

standards of safety, health, and security.

Officials from a number of jails have

expressed interest in this option, having

seen the leasing of jail space as a

potential source of revenue and have

built excess capacity. Advantages

include: (1) Offenders are retained

locally, resulting in easier access to the

courts, families and KDOC. (2) This

option might serve to establish goodwill

and some economic relief to counties

with which KDOC would contract. (3)

Use of this option could delay the need

for construction of additional cell houses

in existing facilities or of a new facility.

Among the disadvantages are: (1) The

state could not receive VOI/TIS funds as

payment for this option. (2) Most jails

are not equipped to provide long-term

offender housing. The lack of sufficient

opportunity for treatment and

educational programming means idleness

among inmates. (3) Some jails the

officials of which have expressed interest

2 VOI/TIS funding is limited to private

facilities, regardless of whether the place-

ments are in-state or out-of-state.

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Kansas Legislative Research Department 2003 Corrections and Juvenile Justice

in partnering with KDOC, have not met

minimal safety, security, and policy

compliance standards. (4) Jail officials

would be required to work cooperatively

with KDOC’s medical contractor; a

dispute over billings or charges could

place KDOC in the midst of such a

conflict and could expose counties to

significant liability for expenses. (5)

Depending on the jail’s location, a

favorable per diem rate could be offset by

attendant transportation expenses for

both inmates and case management staff.

!Authorize private construction of a prison

in Kansas. The Committee received

information from three corporations that

construct and operate private prisons in

various locations in and outside of the

United States. Corporation

representatives described their

organizations’ services and

accomplishments, and they discussed

available private construction/operation

alternatives. Among the advantages

mentioned were: (1) If the legislature

determined to construct a new,

freestanding facility, initial construction

and, perhaps, operation costs would be

somewhat lower. One report noted a

possible savings of one percent in this

case. (Public additions to or expansions

of existing public facilities would likely

result in a lower cost to the state, because

existing infrastructure could be used and

because administrative costs could be

absorbed.) (2) New jobs would be

created for the community containing the

private prison. (3) Capacity can be

created more quickly than through state

methods. (4) Absent abatements or

incentives, the local tax base could be

enhanced. (5) Regarding a publicly

operated facility, some potential exists for

cost sharing with local communities, and

the facility could be tied into existing

facility administrative structures (i.e., El

Dorado or Norton correctional facilities).

Disadvantages include, for a privately

operated facility: (1) State oversight and

control over safety and security issues is

less direct than if the facility were

operated publicly. (2) State control over

later costs, e.g., per diem charges, might

be reduced. (3) Some private prisons

have tended to accept only those inmates

who are easiest to manage and least

challenging medically and

programmatically. More challenging

inmates are generally more expensive to

house and manage. A disadvantage of

either a privately or publicly operated

facility that is constructed privately is that

it might be more expensive than leased

beds, especially when considering use of

VOI/TIS funds. VOI/TIS money may be

used only for construction costs; it

cannot be used for operational costs of

government-operated facilities.

!Authorize a new state constructed and

operated facility. Among the advantages

are: (1) This option offers KDOC

management and the state the greatest

flexibility, as well as consistency of

operation. (2) If the choice is to build

onto an existing facility (e.g., EDCF),beds

can be operated less expensively than at

a stand-alone new prison (either private

or public). The disadvantages include:

(1) This option could require the longest

time to bring new capacity online. (2)

The least expensive option (addition to

EDCF) creates some management issues,

due to concerns about a large increase in

the number of idle inmates within the

facility’s perimeter. Idleness increases

safety and security risks.

Recommendation. The Committee

discussed at length the issue of privatization.

While some expressed interest in comparing

costs further between public and private

construction and operation, the Committee

voted ultimately to recommend the

completion of an additional housing unit at

the El Dorado Correctional Facility.

Additionally, the Committee recommends

the Legislature and KDOC continue to

consider private contracting of correctional

construction and services as appropriate.

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Kansas Legislative Research Department 2003 Corrections and Juvenile Justice

Records of Children in Need of Care

and Juvenile Offenders

The Committee was asked to review the

public policy of the current closed system of

records and proceedings regarding children,

including “Children in Need of Care” (CINC)

and juvenile offenders, and consider the

opening of all records and proceedings. The

Committee also examined the situation

regarding children in adoption situations.

The Committee reviewed 2003 SB 67, a

bill designed to open state child protection

records in instances in which a child who

was previously adjudicated a CINC dies or

nearly dies. The bill’s sponsor, Senator

David Adkins, requested the Committee

introduce this legislation again, in revised

form, for consideration in the coming

legislative session.

Staff reports and Committee review

covered the status of current Kansas law.

Current laws require that all records and

reports concerning a CINC be kept

confidential; however, the statutes provide a

number of exceptions, allowing certain

Department of Social and Rehabilitation

Services (SRS) staff, court officials, law

enforcement officers, and health care

providers access to privileged information.

Regarding juvenile offenders 14 years of age

or older, one file (the Original File) is open

to the public; the second file (the Social File)

is not; nevertheless, a judge is allowed

discretion to close the first or open the

second to the public. With respect to the

adoption process, all adoption proceedings

are closed except to involved parties, their

attorneys, and SRS representatives. KSA 59-

2122 allows SRS to act as a conduit of

information between genetic and adoptive

parents but prohibits direct contact between

genetic and adoptive parents.

The Committee also reviewed materials

reporting on other states’ legislation

regarding public disclosure of information in

child-fatality or near-fatality cases, as well as

other national materials regarding the topic.

The Committee then received a staff

summary of how SB 67 was amended during

the 2003 legislative session. The bill, as

introduced by Senator David Adkins, would

allow information from CINC reports or

records, including law enforcement records,

to become public and subject to disclosure

when a child suffers a life-threatening injury

or death as a result of child abuse or neglect.

The Senate Judiciary Committee

amendments, among other changes, revised

the language to use the terms “near fatality or

fatality” instead of life-threatening injury or

death to be more consistent with the current

statute. Among the several amendments

made to the bill by the House Corrections

and Juvenile Justice Committee were the

following: (1) Clarifying the exception

allowing members of certain legislative

standing committees to receive information

would be limited to that information

received by SRS, law enforcement or any

juvenile intake and assessment worker; (2)

prohibiting SRS from summarizing the

outcome of SRS actions regarding the alleged

CINC information; (3) requiring that, if child

abuse or neglect results in a child fatality or

near fatality, reports or records of a CINC

received by SRS, a law enforcement agency

or any juvenile intake and assessment

worker become a public record and subject

to disclosure pursuant to the Kansas Open

Records Act (KSA 45-215); and (4) setting out

procedures to follow regarding notification of

such open records requests and requests to

prevent such disclosure.

SB 67 is presently in a Senate-House

Conference Committee. The proposed

Adkins modification would narrow the bill’s

focus to apply only to records of a victim of

child abuse or neglect that results in a near

fatality or fatality and the victim has

previously been adjudicated a CINC. The

language would increase the number of

records, reports or documents to be made

public, including those received by, in the

possession of, or under the control of SRS

and SRS contractors, but also clarify that

nothing in the subsection concerned would

allow the disclosure of reports, records or

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Kansas Legislative Research Department 2003 Corrections and Juvenile Justice

documents concerning incidental innocent

third parties or references to these third

parties in those reports, records or

documents. According to this bill version,

these provisions would be effective for any

such fatality or near fatality occurring on or

after January 1, 2002.

Finally, the Committee was informed that

the Kansas Judicial Council was reviewing

CINC and juvenile statutes, is working to

restructure the CINC confidentiality section,

and expects to have a draft bill ready for

submission to the 2004 Legislature.

Recommendation. Based on its review

and discussion, the Committee decided to (1)

take no position on SB 67, but rather leave

this to the Conference Committee to take

such action as the Conference Committee

deems appropriate and in the best interests

of the state; and (2) make no

recommendation until the Judicial Council

has presented its report and

recommendations, including a bill draft if

one is proposed.

Treatment of Mentally Ill Inmates

Adequacy of Correctional Facilities for

Mentally Ill Inmates. The Committee was

charged with reviewing the current number

of mentally ill persons incarcerated, the

availability and adequacy of treatment and

the adequacy of correctional facilities for

mentally inmates. In doing so, the

Committee toured the Larned Correctional

Mental Health Facility (LCMHF), received

information from KDOC regarding the

increase in the number of mentally ill

inmates, and heard from a Washburn

University professor with expertise in this

issue.

Professor William Rich, Washburn

University School of Law, noted the number

and percentage of inmates with diagnosed

mental illness has grown dramatically in the

past 10 to 15 years, in Kansas and nationally.

The percentage of Kansas inmates receiving

psychotropic medication has grown from less

than eight to more than sixteen percent in

less than ten years.

KDOC officials noted there were

currently nearly 6,100 inmates (or more than

two-thirds of the inmate population) who are

diagnosed as having either an Axis I

(substance abuse disorders, adjustment

problems, sexual disorders as well as

anxiety, mood, psychotic, or delusional

disorders) or Axis II (personality disorders

and mental retardation) condition or

disorder. In addition, KDOC is experiencing

dramatically increased levels of mental

health needs for offenders entering the

system.

Professor Rich noted at least three factors

appear to be significant in causing these

increases. First, improvements have

occurred in mental health screening,

diagnosis and treatment. KDOC officials

noted more attention is being paid to mental

health overall and better medications are

available.

Second and third, Professor Rich

reported closure of mental hospitals and the

increased use of incarceration to solve social

problems have contributed to a situation

where prison becomes the first place at

which mental illness is diagnosed. Those

inmates who are placed on probation or

released on parole without adequate,

continuous mental health treatment tend to

become recidivists.

Also reviewed was the law and court

action related to treatment of mentally ill

inmates. This review covered two standards:

!Eighth Amendment (prohibition of cruel

and unusual punishment) standards.

LCMHF was created as the result of

litigation that ended in a federal court

conclusion that Kansas needed to

develop “appropriate accommodations

and treatment alternatives for mentally

ill inmates.” This decision stemmed in

part from a 1976 U.S. Supreme Court

decision that states could not be

“deliberately indifferent” to the

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Kansas Legislative Research Department 2003 Corrections and Juvenile Justice

significant health care needs of inmates.

Estelle v. Gamble, 429 U.S. 97 (1976).

The deliberate indifference standard is

met when state officials learn of the

serious nature of problems and fail to

take reasonable corrective action.

!Equal Protection standards. Issues of race

and sex discrimination may also be tied

to the treatment of mentally ill inmates,

according to Professor Rich. He reported

studies have shown problems exist

nationally in both of these areas.

Professor Rich pointed out that those on

parole and probation, as well as juvenile

offenders, warrant special concern when

considering possible improvements to the

mental health treatment system for offenders.

He recommended the Legislature consider

the following: (1) Seek an expert’s assistance

in evaluating mental health services

currently provided by KDOC; (2) improve

mental health training of correctional staff

and coordination of mental health treatment;

(3) assess transitional and long-term mental

health care for persons on probation or

parole; (4) establish pre-sentencing

assessment of mental illness for persons

convicted of crimes; (5) recognize mental

illness and treatment as a basis for diversion

and mitigation of sentencing guidelines; and

(6) improve screening, treatment and

community placement alternatives for

juveniles.

Additionally, KDOC recommended the

Legislature take into consideration the

increase in the cost of medications, the

numbers of inmates requiring special

housing needs, the need for specialized

programs and training for staff, and

transition and treatment planning, when

determining facility and program adequacy.

It should be noted cost increases in some

areas are being anticipated3, and KDOC is

reviewing potential modifications to offset

some of the anticipated increases.

Committee discussion centered in part on

the reduction in program funding. KDOC

reported it has experienced a 47 percent cut

in programs between FY 2000 and FY 2004.

The Committee notes that, although

significantly reduced in capacity and scope

by budget reductions during the past four

years, the department maintains some core

program interventions which provide

positive opportunities for offenders to

prepare for successful release and re-entry.

These core program areas, primarily sex

offender treatment, therapeutic community-

substance abuse treatment, and education

(especially vocational education programs)

should be enhanced and expanded as

funding levels are restored.

Committee members commented on the

enormity and extremely complex nature of

mental health as a public policy issue.

Involved, among many other issues, is the

issue of substance abuse, which is a complex

problem in its own right.

Comment was also made regarding the

growing number of mentally ill individuals

who commit crimes, and that the burgeoning

mental health industry has discovered it

must compete with the correctional system

for funding. Because of the changes in

research, knowledge and opinions regarding

what works in the area of mental health

programming for inmates, several agreed the

state needs an expert to assist in determining

how to proceed with this issue, and to ensure

we are providing mental health services to

inmates in such a manner that the

constitutional deficiencies identified in the

Kansas decision (Porter, et al. vs. Graves, et

al., In the United States District Court for the

District of Kansas, Case No. 77-3045-R) will

not recur.

Recommendation. The Committee

3 This includes that of the KDOC inmate

medical contract. The current contract, set

to expire in June 2005, was purchased by a

new contractor, to whom the original con- tractor is paying a consideration in order to

be released from the contract.

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Kansas Legislative Research Department 2003 Corrections and Juvenile Justice

recognizes KDOC stays abreast of the recent

research that describes what treatment and

programs are effective in correcting behavior,

particularly with respect to mentally ill

inmates, and investment in effective

programming should become a priority. The

Committee is aware these treatment and

program alternatives might increase the

state’s ability to reduce recidivism and might

help to resolve long-term problems. With

regard to the sufficiency and adequacy of

facilities and programs for the mentally ill,

the Committee recommends the Legislature

retain an expert to evaluate mental health

facilities and services currently provided by

KDOC. The consultant should first help the

Legislature determine whether and to what

extent problems exist inside the state’s

correctional system, including an

examination of services available to those on

parole and probation. Second, the

consultant should examine public policy

issues surrounding mental illness in general,

and not just with respect to individuals in

the correctional system, to determine

whether adequate funding exists for

treatment. The Legislature should seek a

partnership with other organizations and

groups, including Kansas Advocacy and

Protective Services, the Kansas Health

Foundation, and the Sunflower Foundation,

to design and fund the study.

Capital Punishment Where the

Defendant is Mentally Retarded

The LCC asked the Committee to review

2003 HB 2349, which would amend the

Kansas law on capital punishment where the

defendant is mentally retarded. The bill’s

intent was to respond to the latest U.S.

Supreme Court decisions related to this

issue.

In 2002, the U.S. Supreme Court

concluded the death penalty for mentally

retarded defendants was excessive

punishment under the Eight Amendment

(prohibition of cruel and unusual

punishment). Atkins v. Virginia (536 US 304)

This conclusion, representing a change from

a 1989 decision in which the Court found

there was insufficient evidence of a national

consensus against the execution of mentally

retarded persons, was based on construction

and application of the Eighth Amendment in

light of the nation’s “evolving standards of

decency.”

In addition to staff presentations

regarding this issue, the Committee received

expert testimony through a video

teleconference with University of New

Mexico School of Law Professor James Ellis,

who successfully argued the Atkins case

before the U.S. Supreme Court. Professor

Ellis also presented his testimony before the

Kansas Judicial Council during the fall of

2003, as the Judicial Council was also asked

to examine this issue. The presentations by

Professor Ellis were made possible in part by

Kansas Advocacy and Protective Services

(KAPS), of which former Kansas

Representative Rocky Nichols is Executive

Director. Representative Nichols in 2003

introduced HB 2349 to address changes to

conform Kansas law to the Atkins decision.

Current Kansas law prohibits sentencing

a mentally retarded person to death, which

meant the Atkins decision’s effect in Kansas

was more limited than in other states.

However, four issues remain for Kansas:

!Timing, or, when defense counsel may

raise the mental retardation issue. Under

current law the mental retardation issue

is raised after the defendant is found

guilty of capital murder.

!Definition of mental retardation, i.e.,

whether the definition is sufficiently

refined, as determined by most recent

research on the issue.

!Whether a judge or a jury should decide

the issue of mental retardation. Under

current law, the trial judge determines

mental retardation after receiving reports

from licensed physicians or

psychologists after a hearing.

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Kansas Legislative Research Department 2003 Corrections and Juvenile Justice

!Whether the burden of proof standard for

mental retardation should be proven by

a “preponderance of evidence” or

“beyond a reasonable doubt.” Current

law requires the “preponderance of the

evidence” standard.

Under HB 2349, defense counsel may file

a motion requesting the finding that the

defendant is not eligible for the death

penalty because of mental retardation. This

motion is to be filed within 180 days after

the prosecution files a notice of intent to

seek the death penalty. In other words,

under HB 2349 the mental retardation issue

is decided before there has been a conviction

of capital murder.

HB 2349 also attempts to address the

definition of mental retardation. Of the 18

states (Kansas included) that had excluded

mentally retarded individuals from the death

penalty prior to Atkins, 17 define mental

retardation in purely clinical terms. The sole

exception is Kansas, which appended to the

clinical definition “to an extent which

impairs one’s capacity to appreciate the

criminality of one’s conduct or to conform

one’s conduct to the requirements of law”

(KSA 21-4623[e]). This appended language

was taken from language used in Kansas in

the past when Kansas recognized an insanity

defense, and some believe this additional

language might call the constitutionality of

the Kansas statute into question while

serving no useful purpose. Also, recent

refinements have been made to the clinical

definition.

The Kansas Judicial Council has

examined in depth the definition issue,

including the question of whom should be

considered disabled in the sense of applying

the Atkins decision. Its fall 2003 sessions

included testimony that some individuals

might have incurred brain injury after the

age of 18, which resulted in their otherwise

fitting the clinical definition of mental

retardation.

Under current Kansas law, the trial judge

determines mental retardation after receiving

reports from licensed professionals after a

hearing. Under HB 2349, the trial judge

would continue to make this initial

determination but, if the judge does not find

the defendant mentally retarded, allows the

opportunity for the death penalty jury to

“unanimously find, beyond a reasonable

doubt, that the defendant does not have

mental retardation.”

Finally, under current law, the burden of

proof is proven by “preponderance of the

evidence.” HB 2349 requires the initial

determination of mental retardation by the

trial judge to also be by “preponderance of

the evidence.” However, if the judge does

not find the defendant mentally retarded and

the issue goes to the death penalty jury, a

special verdict question by the death penalty

jury requires a finding of no mental

retardation “beyond a reasonable doubt.”

(While the question of whether this “beyond

a reasonable doubt” finding is

constitutionally required has not been

answered directly in mental retardation

cases by the U.S. Supreme Court. But in

another U.S. Supreme Court case, i.e., Ring

v. Arizona, the holding was that when

something has been deemed to be an element

of a crime or its equivalent, the prosecution

must carry the burden of persuasion “beyond

a reasonable doubt.” Analysts have

concluded that the question of whether a

defendant has mental retardation bears most

of the attributes described in the Ring case.)

At the time of the last meeting of the

Joint Corrections and Juvenile Justice

Committee, the Judicial Council had not yet

finalized its recommendations.

Recommendation. The Committee

recognizes the need to modify Kansas law

with respect to capital punishment when the

defendant is mentally retarded and supports

modification of the law in light of the recent

U.S. Supreme Court cases. The Committee

wishes to receive the Judicial Council report

before making a recommendation on this

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Kansas Legislative Research Department 2003 Corrections and Juvenile Justice

topic.

Statewide Policy to Address

Methamphetamine Abuse

The LCC requested that the Committee

study the development of a unified and

statewide policy to effectively address the

methamphetamine abuse problem, including

possible funding sources. On August 12,

2003, the Committee spent the day hearing

presentations regarding methamphetamine

abuse and its effects from several experts in

the areas of law enforcement, prevention,

treatment, children and their care, and

environment. (Note: The day’s session was

videotaped; the videotape is available in the

Kansas Legislative Research Department.)

Information provided revealed that

methamphetamine was first discovered in

1919 in Japan. In the 1940's it was given to

soldiers and factory workers during World

War II. It was legally manufactured in the

1950's for use by college students, truck

drivers and athletes, prescribed in the 1960's

for weight loss, and distributed in the 1970's

by west coast motorcycle gangs. Its use

reached epidemic proportions in the 1990's,

due in part to the availability of the recipe on

the Internet.

Experts explained methamphetamine

(also called “speed,” “crank,” or “ice”) carries

dangers that are greater in scope than nearly

all other illegal drugs.

!It is extremely addictive. Some 10 to 12

percent of those who use alcohol become

addicted, and about 80 percent of those

who use cocaine become addicted.

However, 95 to 98 percent of

methamphetamine users become

addicted.

!It is synthetic, and is often manufactured

directly by the users themselves. This is

done with relative ease, because the

ingredients used to make

methamphetamine are quite common

products (e.g., pseudoephedrine,

Coleman lantern fuel, anhydrous

ammonia, red phosphorous from road

flares or household match striker plates).

This makes the user his or her own

source of supply.

!It is consumed in highly pure form.

Because the user’s source of supply is

very close (or is, in fact him- or herself),

the drug can be 100 percent pure.

!The high from methamphetamine can

last for up to 24 hours; the rush is 5-30

minutes. With cocaine, the high itself

lasts up to a maximum of 30 minutes.

!According to one national source, rural

eighth graders in 2000 were 104 percent

more likely than those in urban areas to

use methamphetamine.

!It can be used in many different ways. It

can be smoked, snorted, injected, or

taken orally.

!It affects the “limbic reward system” (the

brain’s pleasure center), and continued

use, often of increasingly greater

amounts to produce the “high”, means

greater stimulation is needed to produce

pleasurable effects. This results in

behaviors that negatively, and often

violently, affect those around the addict,

including children.

!Treatment for methamphetamine

addiction takes longer. Whereas cocaine

addicts can be treated in 90 to 120 days,

methamphetamine addiction takes 12 to

18 months to treat.

!Because the user is also often the source

of supply, children are frequently

exposed to toxicity and other dangers in

their home environment.

!Discovery, confiscation and cleanup of

clandestine methamphetamine

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Kansas Legislative Research Department 2003 Corrections and Juvenile Justice

laboratories is highly dangerous. Several

law enforcement officers and others have

died or been permanently injured in

these efforts.

!Methamphetamine labs are common in

remote, rural areas, causing significant

problems for rural law enforcement

officials.

!Methamphetamine causes numerous

environmental problems. It results in

contaminated soil, septic systems,

structures and water wells, produces

indoor air contaminants, and causes

hazardous waste accumulations. One

pound of Methamphetamine produces

about five pounds of hazardous waste.

The Committee also received testimony

and information from a national organization

of manufacturers of consumer healthcare

products, including ephedrine and

pseudoephedrine, and from a major national

drugstore chain, regarding private efforts to

curb the sale of these items to

methamphetamine manufacturers.

Finally, the Committee learned major

federal grants to two Kansas organizations,

which have been used to combat

methamphetamine and its effects, have

recently been eliminated.

!The Kansas Bureau of Investigation

received two federal grants totaling

almost $2.5 million. The funding, which

will end in April 2004, has been used to

train and equip 250 local law

enforcement officers on lab confiscation;

hire six special agents, stationed through-

out rural Kansas and dedicated to work-

ing with local agencies on

methamphetamine enforcement; hire

four additional chemists to clear the

backlog of methamphetamine lab

forensic examinations that had recently

accumulated; and hire two crime

analysts to analyze and use the

intelligence information being developed

by the Kansas Department of Health and

the Environment and the federal Drug

Enforcement Agency. KBI has requested

the Legislature take over the funding of

these items, which would entail a

$750,000 annual appropriation.

!The Kansas Methamphetamine

Prevention Project (KMPP) was notified it

was not to be funded beginning in

October 2003 by the federal government,

after having receiving indications that

the funding could be expected. Lost was

approximately $1.05 million to be

distributed over three years beginning in

October 2003 at $350,000 per year. This

grant funding comprised the vast

majority of methamphetamine abuse

prevention funding for Kansas counties.

During the Project’s one-year existence, it

reported, nearly 50 percent of Kansas

counties implemented methamphetamine

prevention efforts or efforts to assist

children whose parents are using or

manufacturing methamphetamine.

Coupled with mini-grant funding and

technical assistance from the KMPP,

mini-grant recipients were able to gear

their prevention efforts to fit the needs of

their communities. Many related

services were also funded by the grant

money, including continuation of the

Drug Endangered Children (DEC) efforts.

Recommendations. The Committee

voted to recommend the Legislature fund the

KBI and KMPP methamphetamine programs

at $750,000 and $350,000 respectively per

year, for a total of $1.1 million in FY 2004.

The Committee also recommends

introduction of a bill requiring wholesalers

or distributors of ephedrine and

pseudoephedrine to register their Kansas

sales.

Sentencing Policies (Grid)

Increased Sentences for

Certain Offenders

Review of Criminal Sentencing

The Legislative Coordinating Council

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Kansas Legislative Research Department 2003 Corrections and Juvenile Justice

(LCC) asked the Committee to (1) study the

current Kansas sentencing policies in

relation to other states and review possible

adjustments that may relieve or eliminate

prison capacity issues in Kansas; (2) while

considering the enactment of 2003 SB 123

(non-prison sentences of treatment for

possession-only offenders), review and

recommend how best to enhance the

sentence for an offender who is not subject

to treatment; and (3) conduct a review of

crimes and sentencing, including the

proportionality of punishment, and

recommend any needed changes to the

sentencing grid with particular emphasis on

the “drug grid.”

KSC Executive Director Patricia Biggs

explained to the Committee that the KSC is

in the process of contracting for a study of

the current system of sentencing, to, among

other things, determine the degree of

punishment proportionality. In addition,

Director Biggs provided the Committee with

a five-year analysis (1999-2003) of those

sentenced to prison under the drug grid. The

KSC found:

!The number of prison admissions

sentenced under the drug grid increased

by 44 percent.

!Drug Severity Level 1 (the highest

severity drug offenses) has seen the most

dramatic increase. In 1999 there were 10

admissions, and in 2002 there were 209.

!The average length of stay in Level 1 has

decreased from 105 months in 1999 to 92

months in 2003.

!The average length of stay sentenced

under the Drug Severity Level 1 is

consistently under the minimum term of

incarceration.

Concern was expressed about the

disparity between the length of sentence

called for under Drug Severity Level 1 and

the sentences actually imposed for these

offenses. On average, this departure appears

consistent across many judges and for many

offenders. Director Biggs suggested this

might be because judges either view the

sentence recommendation as too harsh or

consider the offenses not as serious as the

recommended sentence length implies. The

KSC will include further study of the drug

grid in its sentencing study.

Recommendation. None. By consensus,

the Committee expressed confidence in the

KSC, which, when its findings are complete,

will be the proper voice to speak to the

Kansas Legislature on these topics.

Review of the Juvenile Justice

Authority Act

The Committee reviewed the current

situation with regard to compliance of the

juvenile justice system, in the context of the

original intent of the Juvenile Justice Reform

Act. The Committee was to consider any

issues identified in the recent Legislative

Post Audit on the subject.

The Kansas Legislative Division of Post

Audit issued a January 2003 K-Goal audit

report, which reported on the effectiveness

of JJA’s oversight of Juvenile Justice

Prevention Programs. Suggestions for

improvement were made in monitoring

prevention programs and ensuring

expenditure of prevention grant funds is for

effective prevention activities.

Juvenile Justice Authority (JJA)

Commissioner Denise Everhart reviewed the

history of the JJA, which was created by the

Legislature in 1995 along with the Kansas

Youth Authority. The Juvenile Justice

Reform Act went into effect in 1997, and

according to statute it is scheduled to

“sunset” on July 1, 2004. This act transferred

authority to the JJA to manage court

programs, such as juvenile intake and

assessment, juvenile supervision probation,

and community case management of

juveniles.

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Kansas Legislative Research Department 2003 Corrections and Juvenile Justice

Community program representatives

testified regarding their experience with JJA

and with the restructured juvenile justice

system. Those who testified supported the

continuation of the JJA. One individual

reported overcrowding of juvenile detention

facilities had ceased to be a significant

problem with the advent of JJA. Some

comments were offered regarding existing

problems or possible improvements that

could be made, including difficulty in

finding community service providers in

western Kansas, a need for improvement in

communication with community agencies,

and a need to develop supervision standards

for community agencies.

Recommendation. The Committee voted

to introduce a bill in the House of

Representatives, which would repeal the

sunset provision related to the JJA. (Note:

The bill recommendation to make JJA subject

to K-Goal audits was deleted, once it was

confirmed that the JJA is currently and

would still be statutorily subject to the K-

Goal audit process.)

Prison Fellowship Program

KDOC officials provided background

information on the program. The

InnerChange Freedom Initiative (IFI) began

in Texas in 1997 and is now operating in

four states, including Kansas and Texas, as

well as Iowa and Minnesota. IFI is a

voluntary program open to inmates of any

faith. It uses a Christ-centered, biblically

based curriculum, through which

participating inmates are taught six core

values: integrity/truth, fellowship,

affirmation, responsibility, productivity, and

restoration. The IFI program consists of four

phases, through which the inmate’s thinking

process is changed and value system is

rebuilt, the newly developed value system is

tested in a number of settings, and the

inmate is reintegrated back into the

community through the development of a

number of productive relationships.

It takes 18 months to complete the

program, and it is open to minimum- and

medium-security inmates. The program was

moved last year from Winfield to the

Ellsworth Correctional Facility.

KDOC officials reported IFI effectiveness

in Kansas is being tracked, but as the

program was begun in 2000 enough time has

not passed to obtain an accurate, long-term

picture on the effects of the program on

recidivism. According to a study completed

on the Texas program, offenders actually

completing the program had significantly

lower recidivism rates (eight percent after

two years) than any of the three comparison

groups (which ranged from 19 to 22

percent).4

KDOC maintains a contract with the

Prison Fellowship Ministries organization,

which sponsors the IFI program. KDOC’s

annual contract amount is $200,000 per year,

which can be expended only on non-

religious instruction. Due to the

department’s budget cuts in FY 2003, Prison

Fellowship Ministries agreed to defer all but

$83,000 of the FY 2003 contract amount to

FY 2004.

KDOC officials noted the IFI program

required about 200 inmates to be viable and

that the program is not appropriate for short-

term offenders. They also indicated it was

important to maintain the voluntary nature

4 It is important to note that, according to

this study, results for the completers were

mitigated by the high recidivism rates of

offenders who began but did not complete

the IFI program. Those who did not com-

plete the program had a 36 percent recidi-

vism rate after two years, compared to the 19

to 22 percent rates for the comparison

groups. However, process study results and

recommendations might serve to improve the

selection of IFI participants. (Study source:

“Initial Process and Outcome Evaluation of

the InnerChange Freedom Initiative: The

Faith-Based Prison Program in TDCJ," Crimi-

nal Justice Policy Council, February 2003;

Tony Fabelo, Ph.D., Executive Director.)

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Kansas Legislative Research Department 2003 Corrections and Juvenile Justice

of the program; hence, it should not be

expanded to cover the entire inmate

population.

Recommendation. By consensus, the

Committee recommended continuation of the

IFI program as presently administered by the

KDOC.

KDOC Risk Management Philosophy

In addition to the eleven topics assigned

by the LCC, the Committee undertook to

review and discuss the new KDOC risk

management philosophy. Corrections

Secretary Werholtz explained the

philosophy, which stresses the need on the

part of the corrections community to begin

preparing inmates for their release as soon as

they enter the prison. Also important is the

need to recognize that some inmates will

recidivate, regardless of the treatment and

programs provided them while they are

serving their sentences. Secretary Werholtz

explained the conclusion of the new

philosophy is that, while the corrections

community must retool its system to focus

on preparing inmates for release, the general

community needs to recognize the inherent

risk to the community of some offenders, no

matter how well they are prepared for

reentry into society.

Recommendation. The Committee

endorses the KDOC risk management

philosophy.

JOINT COMMITTEES

Reports of the

Joint Committee on Economic Development

to the

2004 Kansas Legislature

CHAIRPERSON: Representative Kenny Wilk

VICE-CHAIRPERSON: Senator Nick Jordan

RANKING MINORITY MEMBER: Representative Tom Burroughs

OTHER MEMBERS: Senators Jim Barone, Karin Brownlee, and U.L. “Rip” Gooch;

Representatives Don Dahl, John Faber, Lana Gordon, Judith Loganbill, Vern Osborne, and

Valdenia Winn

STUDY TOPICS

Agritourism Limited Liability

Healthcare and the Business Community

Kansas Economy and Future Business Developments in Kansas

Rural Economic Development Initiatives

Tourism in Kansas

University Research and Development

Virtual Tax Increment Financing District

Workforce Development Coordination

December 2003

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Kansas Legislative Research Department 2003 Economic Development

Joint Committee on Economic Development

AGRITOURISM LIMITED LIABILITY

CONCLUSIONS AND RECOMMENDATIONS

!The Committee recommends that the Kansas Insurance Commissioner open a dialog with the

Kansas insurance industry about the lack of liability insurance for farmers and ranchers who

are developing an agritourism enterprise and report back to the appropriate standing

committees during the 2004 Session. In addition, the Commissioner is asked to encourage

Kansas insurance companies to assist in providing coverage.

!The Committee wishes to acknowledge Senator Schmidt’s proposed bill regarding limiting

liability in agritourism. At this time, the Committee recommends that all of the interested

parties come together to propose a cooperative bill early in the 2004 Session that addresses

their differences. If there is no new legislation with significant consensus and support

introduced by this group, the Committee recommends that the language from 2003 SB 134

as presented to the Governor be reintroduced as the basis for discussion for agritourism

during the 2004 Session. In addition, any agritourism bill sponsor is asked to consider

including both entities and individuals in the definition of operator.

Proposed Legislation: None

BACKGROUND

The Legislative Coordinating Council

assigned this topic to the Joint Committee on

Economic Development. Specifically, the

Committee was directed to “study the issues

surrounding limited liability for agritourism

activities within Kansas; review issues

related to 2003 SB 134, which was approved

by the Legislature, but vetoed by the

Governor.”

COMMITTEE ACTIVITIES

Staff reviewed the provisions of 2003

SB134 which dealt with “agritourism.” The

bill expanded the definition of “recreational

purpose” as it relates to the liability of a

property owner toward an individual

entering that property. Recreational farming

activities would include an individual’s

farming activities, but not the operation of

agricultural equipment by a person who is a

member of the public on the land for

recreational purposes.

Staff from the Office of the Governor

appeared before the Committee to explain

the Governor’s veto. He noted that, in the

Governor’s opinion, the bill allowed nearly

total immunity from liability for activities

identified as agritourism. He also noted that

few, if any other states, are developing

agritourism by limiting liability.

The Committee reviewed and discussed

an opinion issued by Attorney General, as

requested by this Committee, regarding the

Land and Recreational Area Act and the

amendments to this law contained in 2003

SB 134.

The Committee received testimony from

a representative of the Kansas Farm Bureau

concerning the organization’s view that

current state law provides adequate liability

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Kansas Legislative Research Department 2003 Economic Development

protections for agritourism. The conferee

also noted that the state could assist

agritourism providers more by providing

incentives for business development and

technical expertise in the areas of assessment

of tourism potential, calculation of

operational costs, and financing.

A representative of the Kansas Sampler

Foundation provided the Committee with

several examples of the difficulties

agritourism providers have in obtaining

liability insurance. The conferee stated that

the difficulties stem from a lack of

consistency in insurance policy guidelines,

a lack of consideration on the part of

insurance companies for the safety

precautions taken by the landowner, and a

lack of education on the part of the

landowners about liability policies.

The Kansas Livestock Association

presented the Committee with several

questions which the organization believes

must be answered by the insurance industry

before the issue can be resolved. These

questions include:

!Does the farm or ranch liability policy

typically purchased by landowners in

Kansas include protection for

recreational uses of that property?

!Is the current farm or ranch liability

insurance policy purchased by Kansas

landowners discounted because of the

protections offered by the statute?

!What changes would the insurance

industry offer to clarify, simplify, and

assure affordable and available coverage

to landowners seeking to engage in

tourism activities?

Senator Derek Schmidt appeared before

the Committee to present a draft of a new bill

which he intends to pre-file for the 2004

Legislative Session. The bill would propose

a new statute on agritourism rather than

amending the current Land and Recreational

Area Act as S.B. 134 was intended to do.

The proposed statute would be modeled after

the current Kansas Domestic Animal Law.

The bill includes a provision that the

Secretary of Commerce review requests from

landowners for protection under the law. In

addition, the landowner would be required

to post a sign warning tourists of potential

risks.

CONCLUSIONS AND RECOMMENDATIONS

The Committee recommends that the

Kansas Insurance Commissioner open a

dialog with the Kansas insurance industry

about the lack of liability insurance for

farmers and ranchers that are developing an

agritourism enterprise and report back to the

appropriate standing committees during the

2004 Session. In addition, the Commissioner

is asked to encourage Kansas insurance

companies to assist in providing coverage.

The Committee wishes to acknowledge

Senator Schmidt’s proposed bill regarding

limiting liability in agritourism. At this time,

the Committee recommends that all of the

interested parties come together to propose a

cooperative bill early in the 2004 Session

that addresses their differences. If there is no

new legislation with significant consensus

and support introduced by this group, the

Committee recommends that the language

from 2003 SB 134 as presented to the

Governor be reintroduced as the basis for

discussion for agritourism during the 2004

Session. In addition, any agritourism bill

sponsor is asked to consider including both

entities and individuals in the definition of

operator.

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Kansas Legislative Research Department 2003 Economic Development

Joint Committee on Economic Development

HEALTHCARE AND THE BUSINESS COMMUNITY

CONCLUSIONS AND RECOMMENDATIONS

The Committee acknowledges that health care costs continue to be a major concern for all

Kansas business.

Proposed Legislation: None

BACKGROUND

The Joint Committee on Economic

Development is statutorily authorized to set

its own agenda. The Committee recognized

this topic as being important to the

discussion of economic development in

Kansas.

COMMITTEE ACTIVITIES

At the October meeting, Dr. Andrew

Allison, Director of Health Care Finance and

Organization, Kansas Health Institute,

reported on national public health care

spending. He informed the Committee that,

although nationally tax financed health care

has grown approximately 15 percent, the rate

in Kansas has held at 11 percent. Nationally,

spending on the uninsured accounts for

approximately 5 percent of total health care

expenditures. In Kansas, the 5 percent for

uninsured health care is several hundred

million dollars. The Institute of Medicine

estimates the loss economically to be $65 to

$130 billion annually to the nation due to

poor health.

Dr. Allison reported that 30 percent of

the cost of health care received is paid by the

uninsured individual, out-of-pocket with a

mix of public subsidies, physicians, and

hospitals paying the remaining 70 percent.

However, about 80 percent of hospitals’

uncompensated health care costs are covered

through Medicare and Medicaid or direct tax

support from local communities and states.

Finally, Dr. Alison reported that the facts and

figures include the cost of nursing home care

as part of the expenditures for acute care.

Sandy Praeger, Insurance Commissioner,

Kansas Department of Insurance, addressed

the cost of health insurance to small

businesses. Commissioner Praeger said this

ongoing issue is centered around cost and

availability.

The Commissioner pointed out that the

face of insurance is changing due to fewer

choices for consumers, medical malpractice

insurance costs and contraction, growth in

the utilization of services, prescription drug

use and costs, and cost shifting involving the

uninsured as well as the Medicaid and

Medicare programs. She also mentioned that

there are fewer choices with 10 insurance

companies withdrawing from the Kansas

market since July 1, 2001, and five additional

companies that have closed blocks of

business in Kansas in the last two years.

Three of the major medical malpractice

carriers have quit writing coverage in the last

two years due to financial difficulties.

Kansas has also seen a rise in rates due to an

increase in severity of losses, and carriers in

Kansas appear to have been under-priced for

a few years. There also has been a downturn

in the investment market. Commissioner

Praeger reported that the total national

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Kansas Legislative Research Department 2003 Economic Development

health care spending is projected to continue

growing 7 to 20 percent a year through 2006.

CONCLUSIONS AND RECOMMENDATIONS

The Committee acknowledges that health

care costs continue to be a major concern for

all Kansas business.

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Kansas Legislative Research Department 2003 Economic Development

Joint Committee on Economic Development

KANSAS ECONOMY AND FUTURE BUSINESS DEVELOPMENTS IN KANSAS

CONCLUSIONS AND RECOMMENDATIONS

!The Committee is requesting a follow-up report from the Federal Reserve Bank of Kansas

City on the economic condition of the state and asks that this report be given to the

appropriate committees during the 2004 Legislative Session.

!The Committee is encouraged by the new leadership of Kansas, Inc. and its vision and

goals for the agency.

!The Committee strongly recommends that reports from the Life Sciences Initiative and the

Stowers Institute need to be presented to the Senate Ways and Means Committee and the

House Appropriations Committee.

!The Committee suggests that there needs to be a consistent emphasis in our schools on

science and math and this emphasis needs to start during a child’s early years. The

Committee hopes this emphasis coupled with new opportunities in employment will slow

or stop the “brain drain” from Kansas.

Proposed Legislation: None

BACKGROUND

The Joint Committee on Economic

Development is statutorily authorized to set

its own agenda. The Committee recognized

this topic as being important to the

discussion of economic development in

Kansas.

COMMITTEE ACTIVITIES

Mr. William R. Keeton, Senior

Economist, Economic Research Department,

Federal Reserve Bank of Kansas City,

presented an update on the Kansas economy.

The report included information about the

recent performance of the Kansas economy,

including employment and income;

manufacturing, construction and real estate;

services and government; and agriculture.

Mr. Keeton explained that housing has kept

the economy going, and is solid in Kansas.

Private sector service jobs are holding steady,

but state and local jobs are down more than

2 percent over a year ago. However, retail

trade is currently adding jobs and consumer

spending has been edging up. In addition,

Kansas is not as dependent on farming as it

had been in the past; however, the farm

sector has been helped by a good wheat

harvest and high livestock prices. Services

and manufacturing make up much more of

the economy, and travel and tourism

accounts for more than manufacturing. Mr.

Keeton said that firms are moving jobs

overseas increasingly in the service area. He

did note, however, that he is seeing some

signs that business is starting to improve

because of an increase in future hiring plans.

In closing, Mr. Keeton summed up with the

following:

!Kansas is slowly recovering from the

recession like the rest of the nation;

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Kansas Legislative Research Department 2003 Economic Development

!Businesses must start investing and

hiring for recovery to continue;

!Most economists think this investment

will happen which will allow the

recovery to continue; and

!Demographic trends pose challenges for

both rural and urban Kansas.

Mr. Jerry Lonergan, President, Kansas

Inc., reported that a 2-year decline in private

sector jobs has occurred, but noted that

Kansas’ 1.2 percent loss is a smaller

percentage in total private jobs than either

the nation or the six surrounding states. He

mentioned that the Kansas per capita income

level of $28,838 in 2002 has stabilized the

past two years relative to the national

average at 93.5 percent of the nation’s per

capita income. However, Kansas’ income

performance is less positive than

employment since the state now has only the

4th highest income level in the seven state

region after ranking second for a number of

years. Kansas’ population growth lags the

nation, and with the exception of Nebraska

and Iowa, trails the states in the region. A

growing and younger population base with

an increasing minority population would

suggest that Kansas has the base to be a

leading participant in future economic

turnarounds.

As the new President of Kansas, Inc., Mr.

Lonergan proposed the following goals for

the organization:

!Be the economic development policy and

research arm for the state and be a role

model for other states;

!Leverage resources to attract public and

private dollars to create a healthy

research agenda; and

!Make board service and board meetings

interesting and challenging, so people

will desire to be board members

Dr. Melissa H. Birch, Associate Professor,

Director, Center for International Business

Education and Research (CIBER), University

of Kansas School of Business, reminded the

Committee that in 2002, Kansas exports

increased 7 percent to a record $5.8 billion.

However, the 1998 Annual Survey of Kansas

Manufacturers and Exporters (ASKME),

indicated that only about one-third of Kansas

firms export when 85 percent thought their

products or services had export potential.

Dr. Birch said CIBER has the capability to

help firms access international customers for

their products and services. CIBER’s portfolio

of activities include Internet resources,

seminars and workshops, research on foreign

markets, and cooperation with other

organizations to maximize their mutual

effectiveness.

Mr. Carl J. Schramm, President and CEO,

Kauffman Foundation, spoke about

recognizing tomorrow’s opportunities today,

and specifically entrepreneurship,

technology transfer, and the life sciences.

The point was made that firms of fewer than

20 employees generate the majority of new

jobs in the United States. In addition, more

than 10.1 million adults in the U.S. attempt

at some time in their life to create a business

and this is almost as common as getting

married or having a baby. He mentioned

that one of the keys to entrepreneurship is to

facilitate the transfer of new technology. For

this reason, the Kauffman Panel of Advisors

on the Life Sciences was initiated to find

ways of accelerating new advances in life

sciences into the marketplace.

From a Kauffman Foundation study, it

was learned that universities’ ability to

transfer expertise and commercialization of

products has not kept pace with the

increases in research funding. Mr. Schramm

believes the organization and operation of

technology transfers are not very productive

due to under-funding, insufficient staff, and

not being an integral part of research

departments. He stressed that this was

particularly disturbing because 60 percent of

government funding for academic research

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Kansas Legislative Research Department 2003 Economic Development

and development now goes to the life

sciences.

Mr. Schramm’s testimony stated that

Kansas City ranks 42nd out of 51

metropolitan statistical areas. However,

Kansas City ranks 18th best in terms of

economic structure and 3rd in terms of

resource endowment. The point was made

that Kansas City is ripe for success, but

needs improvement in innovation in

research and development spending and in

the ability to transfer research from the lab to

the marketplace. Mr. Schramm stated that

the Stowers Institute has the possibility of

becoming one of the most innovative

biomedical research facilities in the world.

He stressed that, “Life Sciences is the next

frontier of entrepreneurship,” and that he

hopes the Kansas Legislature will strive to

help advance entrepreneurship.

CONCLUSIONS AND RECOMMENDATIONS

The Committee is requesting a follow-up

report from the Federal Reserve Bank of

Kansas City on the economic condition of

the state and asks that this report be given to

the appropriate committees during the 2004

Legislative Session. Furthermore, the

Committee is encouraged by the new

leadership of Kansas, Inc. and its vision and

goals for the agency.

The Committee strongly recommends

that reports regarding the Life Sciences

Initiative and the Stowers Institute need to

be presented to the Senate Ways and Means

Committee and the House Appropriations

Committee. Finally, the Committee suggests

that there needs to be a consistent emphasis

in our schools on science and math and this

emphasis needs to start during a child’s early

years. The Committee hopes this emphasis

coupled with new opportunities in

employment will slow or stop the “brain

drain” from Kansas.

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Kansas Legislative Research Department 2003 Economic Development

Joint Committee on Economic Development

RURAL ECONOMIC DEVELOPMENT INITIATIVES

CONCLUSIONS AND RECOMMENDATIONS

!The Committee recognizes that entrepreneurship is the key to rural economic development

and will require the passage of legislation during the 2004 Legislative Session. However,

at this time, the Committee does not propose to submit any legislation with regard to

entrepreneurship.

!The Committee has begun the groundwork with Kansas Technology Enterprise Corporation

(KTEC) to facilitate the development of ‘farmaceutical’ ventures which include the growth

and processing of genetically engineered crops to create components, proteins in particular,

for use in the manufacturing of drugs. At this time, no progress has been reported to the

Committee.

! The Committee supports and encourages the expansion of the Enterprise Facilitation

Initiative at the Department of Commerce.

Proposed Legislation: None

BACKGROUND

The Legislative Coordinating Council

assigned the topic of rural economic

development initiatives to the Joint

Committee on Economic Development.

COMMITTEE ACTIVITIES

The Committee heard testimony on this

topic at its August meeting. Staff

summarized the white paper report of the

Rural Development Subcommittee of the

Senate Commerce Committee. The

Subcommittee was formed during the 2003

Legislative Session to examine the

challenges unique to economic development

in non-urban settings and the current

resources available to meet those challenges.

Several recommendations were outlined in

the white paper including:

!Formation of a task force of legislators,

state agencies, and stakeholders to

develop long-term strategy for rural

development;

!Examination of federal, state, and local

programs for effectiveness, duplication,

and unnecessary barriers;

!Development of a one-stop call center for

available resources;

!Examination of programs to make more

capital available for entrepreneurs;

!Examination of ways to deploy

broadband state-wide;

!Creation of a state-wide, regional or local

foundation to fund rural community

projects;

!Development of stronger working

relationships with the institutions of

higher education in the area of economic

development and entrepreneurship;

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Kansas Legislative Research Department 2003 Economic Development

!Development of a program to encourage

the purchase of downtown buildings in

smaller communities; and

!Examine policies concerning rural air

transportation.

Representatives of the Higuchi

Biosciences Center testified to the Committee

on the subject of “farmaceuticals” in which

the natural protein in a plant is replaced

with a protein needed for a biotechnologic

application such as the production of

pharmaceutical drugs. According to the

conferees, farmaceutical development of

medications would be more cost effective

than the process currently being used. In

addition, the economic impact on a

community would include not only the

farming operations, but also the down-stream

protein extraction and manufacturing

facilities which could provide capital

investment and high wage jobs in the area

where the crops are grown.

A representative of the Kansas Rural

Center outlined the potential risks of

engineered crops. He noted that the major

risk was contamination of surrounding food

crops or stores in grain elevators. Other

concerns were that large companies would

buy large tracts of land rather than contract

with small family farms and that the required

inspections would be difficult due to staffing

and distances.

The Committee also heard testimony

from a representative of the Kansas Center

for Rural Initiatives, Kansas State University.

The purpose of the center is to connect the

resources of the university with the needs of

the community. Classes at KSU use projects

to assist communities with rural

development issues.

Staff from the Community Development

Division, Kansas Department of Commerce,

testified to the Committee regarding the

Enterprise Facilitation program. The

program was developed by the Sirolli

Institute as a person-centered approach to

community and economic development.

There are currently five pilot programs in

Kansas being funded through Community

Development Block Grant funds.

CONCLUSIONS AND RECOMMENDATIONS

The Committee recognizes that

entrepreneurship is the key to rural

economic development and will require the

passage of legislation during the 2004

Legislative Session. However, at this time,

the Committee does not propose to submit

any legislation with regard to

entrepreneurship.

The Committee has begun the

groundwork with Kansas Technology

Enterprise Corporation (KTEC) to facilitate

the development of ‘farmaceutical’ ventures

which include the growth and processing of

genetically engineered crops to create

components, proteins in particular, for use in

the manufacturing of drugs. At this time, no

progress has been reported to the Committee.

The Committee supports and encourages

the expansion of the Enterprise Facilitation

Initiative at the Department of Commerce.

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Kansas Legislative Research Department 2003 Economic Development

Joint Committee on Economic Development

TOURISM IN KANSAS

CONCLUSIONS AND RECOMMENDATIONS

!The Committee noted that the boxing industry could be one vehicle to promote tourism in

Kansas and to generate revenues for the state.

!The Committee is very encouraged by Scott Allegrucci and his staff in the Travel and

Tourism Division at the Department of Commerce on their approach to promoting tourism

in Kansas.

!The Committee recognizes the importance of product development and marketing, and that

in Kansas, the funding for these endeavors has fallen short. In the future, the Committee

believes the state must make a significant financial investment in tourism. The Committee

hopes that information and assistance from the Federal Reserve Bank of Kansas City can

help identify the state’s return on this investment.

Proposed Legislation: None

BACKGROUND

The Joint Committee on Economic

Development is statutorily authorized to set

its own agenda. The Committee recognized

this topic as being important to the

discussion of economic development in

Kansas.

COMMITTEE ACTIVITIES

During the August meeting

Representative Burroughs made a

presentation of boxing as a means to increase

tourism. Representative Burroughs pointed

out that Kansas has a strong tie to the boxing

industry. Today’s average ticket prices are

$40.00 at most local events, which could

generate significant revenues if a 2,500 seat

area is sold out, which is occurring with

martial arts competitions. He believes that a

5,000 seat arena would be three-fourths sold

out, and that kind of a market brings in

national television, HBO, and other media.

Unfortunately, the Kansas Athletic

Commission, which could have been used to

promote the sport, was abolished, and

Kansas separated itself from boxing. This

has limited the ability to bring sanctioned

fights from national and international

competition to the State. Representative

Burroughs hopes consideration will be given

to reestablishing the Kansas Athletic

Commission.

At the November meeting the Committee

heard from the Scott Allegrucci, Director,

Travel and Tourism Division, Department of

Commerce. Mr. Allegrucci stressed that

there are many areas in tourism which

remain untapped, and that Kansas could be

doing a much better job. He went on to state

that not only is money needed to solve the

problems, but he believes that priorities must

be established and a plan developed before

the state will know how to spend tourism

dollars. The Department has heard from the

tourism industry and the following concepts

continue to surface again and again:

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Kansas Legislative Research Department 2003 Economic Development

!Data and a unified state image and

marketing plan;

!Leadership;

!Communication (from the state office);

!Planning; and

!Stability.

Mr. Allegrucci reported that the growth

in the travel industry seems to be in travelers

finding authentic destinations and

participating fully in the experiences offered

by these destinations. People are looking to

get more “hands on” experiences which are

off the beaten path. This is partially because

people are taking more trips and shorter

trips. Today’s lifestyles are demanding

opportunities for recreational and

educational experiences, and general quality

of life experiences. Finally, he reported that

the Department of Transportation has been a

great partner in funding travel and tourism

initiatives with highways; Wildlife and Parks

has managed and maintained some of the

most scenic and beautiful land; and the Sales

Tax and Revenue (STAR) bonds legislation,

the Attraction and Development Grant; and

other Commerce programs and ideas are

forthcoming.

CONCLUSIONS AND RECOMMENDATIONS

The Committee noted that the boxing

industry could be one vehicle to promote

tourism in Kansas and to generate revenues

for the state.

The Committee is very encouraged by

Scott Allegrucci and his staff in the Travel

and Tourism Division at the Department of

Commerce on their approach to promoting

tourism in Kansas.

The Committee recognizes the

importance of product development and

marketing and that in Kansas the funding for

these endeavors has fallen short. In the

future, the Committee believes the state must

make a significant financial investment in

tourism. The Committee hopes that

information and assistance from the Federal

Reserve Bank of Kansas City can help

identify the state’s return on this investment.

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Kansas Legislative Research Department 2003 Economic Development

Joint Committee on Economic Development

UNIVERSITY RESEARCH AND DEVELOPMENT

CONCLUSIONS AND RECOMMENDATIONS

The Committee acknowledges that the implementation of 2002 HB 2690 is currently on

schedule and under budget for the construction of research facilities at Kansas State University,

University of Kansas Medical Center, and Wichita State University. Furthermore, the

Committee, with great interest, will continue to follow the progress of the University Research

and Development Act created by HB 2690.

Proposed Legislation: None

BACKGROUND

The Joint Committee on Economic

Development is statutorily authorized to set

its own agenda. The Committee reviewed

the implementation of the University

Research and Development Act (2002 HB

2690). This Act authorized the issuance of

not more than $120.0 million in bonds to

fund a portion of the financing for research

facilities at the state universities. The bill

also directed the Board of Regents to form a

subsidiary corporation to oversee and

implement the projects. The proceeds of the

research bonds were to be used for four

specific projects:

!Constructing the Biosecurity Research

Institute at Kansas State University;

!Constructing the Biomedical Research

Facility at the University of Kansas

Medical Center;

!Expanding the Aviation Engineering

Complex at Wichita State University; and

!Equipping the Biosciences Research

Building at the University of Kansas.

The legislation also provided for

additional bonding authority of $13.0 million

for capital improvements and equipment

purchases for the National Institute for

Aviation Research at Wichita State

University.

COMMITTEE ACTIVITIES

At its November meeting, the Committee

heard testimony from a representative of the

Research and Development Enhancement

Corporation established by the Board of

Regents as authorized by the 2002

legislation. The conferee noted that the new

facilities would improve on the universities’

current strengths and make them more

competitive for research grants.

Groundbreaking on the infrastructure for the

facilities at Kansas State University and the

University of Kansas Medical Center have

already taken place. Groundbreaking at the

University of Kansas is expected in April

2004. The facilities at Kansas State

University and Wichita State University are

in the design phase.

The conferee also noted that doctoral

students at the University of Kansas, Kansas

State University, and Wichita State

University would be analyzing the different

construction methods throughout the

process. Recommendations based on this

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Kansas Legislative Research Department 2003 Economic Development

analysis will then be made for use in future

state construction projects.

A representative of the National Institute

for Aviation Research at Wichita State

University provided the Committee with a

listing of its current research partnerships as

well as an explanation of the aircraft

development cycle and the laboratory’s role

in that cycle. The conferee also outlined the

areas of focus and proposed uses for the

additional $13.0 million bond issuance:

!Wind tunnel;

!Crash dynamics;

!Fatigue and fracture;

!Composites and advanced materials;

!Full-scale structural testing laboratory;

and

!Equipment for the new Engineering

Research Laboratory Building.

The Committee received testimony from

a representative of the University of Kansas

concerning research at the main campus.

The Life Sciences Research Laboratory is a

three-building research complex purchased

in 2001. This complex houses the Center for

Environmentally Beneficial Catalysis, the

Combinatorial Methodology and Library

Development Center, the Center for Cancer

Experimental Therapeutics, and the Early

Child Care and Youth Development Center.

The $3.6 million purchase price for the

building has generated $42.2 million in

research projects. During the discussion of

the enacting legislation in 2002, the

equipment to be purchased through the bond

issuance was to have been placed in this

complex. However, the space is now

completely utilized by other research

projects and the building does not meet the

structural requirements for the equipment.

A new building will be constructed using

other funds with completion projected for

August, 2004.

A representative of the University of

Kansas Medical Center appeared before the

Committee to discuss the new Biomedical

Research Center being built on their campus.

The building will contain facilities to

conduct bench research in neuroscience;

reproductive sciences; toxicology,

pharmacology, and drug discovery; and

protein structure and function. The conferee

also noted the Biotechnology Development

Center of Greater Kansas City which is a wet

lab business incubator for early-stage

bioscience companies to provide them with

the resources needed to bridge the gap

between bench science and product

commercialization.

The Committee received information

from a representative of Kansas State

University concerning its Food Safety and

Security Program, the National Agricultural

Biosecurity Center, and the Biosecurity

Research Institute. The Biosecurity Research

Institute will contain facilities to conduct:

!Food crop infectious disease research;

!Food animal infectious disease research;

!Food processing research;

!Basic molecular biology research; and

!Biosecurity education and training.

CONCLUSIONS AND RECOMMENDATIONS

The Committee acknowledges that the

implementation of 2002 HB 2690 is currently

on schedule and under budget for the

construction of research facilities at Kansas

State University, University of Kansas

Medical Center, and Wichita State

University. Furthermore, the Committee,

with great interest, will continue to follow

the progress of the University Research and

Development Act created by HB 2690.

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Kansas Legislative Research Department 2003 Economic Development

Joint Committee on Economic Development

VIRTUAL TAX INCREMENT FINANCING DISTRICT

CONCLUSIONS AND RECOMMENDATIONS

The Committee has no conclusions or recommendations concerning the Virtual Tax Increment

Financing Districts.

Proposed Legislation: None

BACKGROUND

The Joint Committee on Economic

Development is statutorily authorized to set

its own agenda. The Committee studied the

concept of a virtual tax increment financing

(TIF) district. Tax increment financing

enables a city to dedicate future increased

tax revenues to finance redevelopment in

statutorily-defined geographic areas. A

snapshot of the tax receipts from a

redevelopment district is taken when that

district is established. This becomes the

base year assessed valuation. As the

property is redeveloped and property values

and taxes increase, taxpayers within the

district pay the tax due on the new assessed

values. The difference between the taxes

raised from the base year assessed valuation

and from the new assessed valuation is call

the “tax increment.” This tax increment is

then used to pay for the redevelopment costs.

COMMITTEE ACTIVITIES

A representative of the Kansas City Area

Development Council provided the

Committee with historical information about

the organization. It is an 18-county, bi-state

regional economic development group

funded almost entirely by the Kansas City

business community. The Committee’s

attention was brought to a letter from the

president and chief executive officer of the

Stowers Institute stating that future growth

of the Institute in the greater Kansas City

area hinged upon the increased annual

investment by both Kansas and Missouri in

basic biomedical research at the University

of Missouri - Kansas City and the University

of Kansas Medical Center. The conferee also

noted that a second campus of the Stowers

Institute was projected to have a ten-year

economic impact of $1.4 billion on the

Kansas City area.

A new funding strategy was presented to

the Committee. Rather than establishing a

tax increment financing district based upon

geography, a “virtual” TIF district would be

based upon the functionality of the

businesses. In this situation, the current

amount of tax revenue generated from life

sciences companies and their employees

would be used as the base. A portion of the

incremental growth from these sources

would then be used to fund life sciences

research at the universities. The conferee

noted a study by Arthur Andersen which

estimated the incremental revenue at $260.4

million for Johnson County alone for the

2004-2013 period.

CONCLUSIONS AND RECOMMENDATIONS

The Committee has no conclusions or

recommendations concerning the Virtual Tax

Increment Financing District.

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Kansas Legislative Research Department 2003 Economic Development

Joint Committee on Economic Development

WORKFORCE DEVELOPMENT COORDINATION

CONCLUSIONS AND RECOMMENDATIONS

!The Committee wishes to commend and encourage the continued collaboration and success

of the Kansas Technical Training Initiative (KTTI) in Wichita. KTTI is working with the

City of Wichita and Sedgwick County which provided start-up funding to KTTI to retrain

laid-off workers in the airframe program.

!The Committee wishes to commend the Departments of Commerce and Revenue for their

cooperative efforts on economic development issues as this cooperation is an essential

element for a positive business climate.

Proposed Legislation: None

BACKGROUND

The Legislative Coordinating Council

assigned the topic of workforce development

coordination to the Joint Committee on

Economic Development. Specifically, the

Committee was directed to “study

coordination of Workforce Development and

progress made by the Administration in

consolidation of administrative functions.”

COMMITTEE ACTIVITIES

Lieutenant Governor John Moore,

Secretary, Department of Commerce,

appeared before the Committee to discuss

the consolidation of workforce development

programs. He noted that the workforce

development system must be market driven

and able to meet and anticipate employers

needs. He added that the Department of

Commerce grants or loans approximately $14

million per year to employers to do their

own training but that the funds might be

better utilized by providing the training

through Kansas educational institutions.

The Lt. Governor proposed that a

comprehensive, integrated program must be:

market driven; fully integrated; easily

accessible to and widely recognized by

employers and employment seekers; cost

effective with minimum administrative costs

and duplication; designed with assessment

as a key component; flexible; designed with

meaningful evaluation criteria such as job

preparedness, placement, and retention; and

designed with accountability for quality

clearly assigned.

Lt. Governor Moore outlined the steps to

creating a comprehensive, integrated

workforce development system:

!Create seven economic development

regions organized around similar

industries, geography, and opportunity;

!Maintain the service delivery areas

established under the Workforce

Investment Act for funding;

!Eliminate community college service

areas for workforce development

(keeping service areas for education);

!Place one-stop shops in community

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Kansas Legislative Research Department 2003 Economic Development

colleges or technical colleges and

renamed centers of excellence for

workforce development;

!Relocate Department of Human

Resources training programs and

Workforce Investment Act in the

Department of Commerce;

!Charge the Department of Commerce

with responsibility for identifying market

requirements;

!Identify training programs at community

colleges and technical colleges that are

true programs of excellence;

!Create a single point of entry for

businesses within the Department of

Commerce (KansasFirst);

!Eliminate payments from the Department

of Commerce to employers who expand

in or relocate to Kansas, but instead

guarantee qualified, certified employees

for these employers. Payments will be

made to KansasFirst and the educational

institutions providing the training; and

!Implement a well-defined strategy to

have one-stop shops pay Kansas

educational institutions.

CONCLUSIONS AND RECOMMENDATIONS

The Committee wishes to commend and

encourage the continued collaboration and

success of the Kansas Technical Training

Initiative (KTTI) in Wichita. KTTI is working

with the City of Wichita and Sedgwick

County which provided start-up funding to

KTTI to retrain laid-off workers in the

airframe program.

The Committee wishes to commend the

Departments of Commerce and Revenue for

their cooperative efforts on economic

development issues as this cooperation is an

essential element for a positive business

climate.

JOINT COMMITTEES

Report of the

Joint Committee on Information

Technology

to the

2004 Kansas Legislature

CHAIRPERSON: Representative Joe McLeland

VICE-CHAIRPERSON: Senator Tim Huelskamp

RANKING MINORITY MEMBER: Representative Joe Shriver

OTHER MEMBERS: Senators Paul Feleciano, Jr., Larry Salmans, Derek Schmidt, and

Chris Steineger; Representatives Nile Dillmore, John M. Faber, and Jim Morrison

STUDY TOPICS

Statutory Duties and Studies

December 2003

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Kansas Legislative Research Department 2003 Information Technology

Joint Committee on Information Technology

STATUTORY DUTIES AND STUDIES

CONCLUSIONS AND RECOMMENDATIONS

The Committee directs the Legislative Branch Chief Information Technology Officer (CITO) to

include enterprise security within the Long-Range Strategic Plan revision that currently is

being developed.

The Committee recommends a number of changes in the proposed policy statements for the

legislative information technology policy and procedures update.

The Committee recommends that the House Appropriations Committee and Senate Ways and

Means Committee monitor approved projects that have had changes in end date, plan cost, or

plan scope that either recasts or redefines the information technology developments. Several

other projects should be monitored because of costs or pending approval by the Executive

Branch CITO.

The Committee also recommends a number of other planned or proposed projects be reviewed

by the House Appropriations Committee and Senate Ways and Means Committee.

Proposed Legislation: None

BACKGROUND

The Joint Committee on Information

Technology (JCIT) is authorized by KSA 46-

2101 et seq. The Joint Committee may set its

own agenda, may meet on call of its

chairperson at any time and any place within

the state, and may introduce legislation. The

Joint Committee consists of 10 members,

including five senators and five

representatives. The JCIT met eight days as

authorized by the Legislative Coordinating

Council (LCC): June 19-20, August 21-22,

September 18-19, and December 4-5. Copies

of the minutes and attachments are filed

with the Division of Legislative

Administrative Services.

The duties assigned the JCIT by its

authorizing legislation in KSA 46-2102 are

noted below, and the first three duties also

defined its general areas of interim activity:

!Study computers, telecommunications,

and other information technologies used

by state agencies and institutions. The

state governmental entities defined by

KSA 75-7201 include executive, judicial,

and legislative agencies, and Regents

institutions.

!Review proposed new acquisitions,

including implementation plans, project

budget estimates, and three-year strategic

information technology plans of state

agencies and institutions. All state

governmental entities are required to

comply with provisions of KSA 75-7209

et seq. in submitting such information for

review by the Joint Committee.

!Monitor newly implemented

technologies of state agencies and

institutions.

!Make recommendations to the Senate

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Kansas Legislative Research Department 2003 Information Technology

Ways and Means and House

Appropriations Committees on

implementation plans, budget estimates,

and three-year plans of state agencies and

institutions.

!Report annually to the LCC and make

special reports to other legislative

committees as deemed appropriate.

In addition to the Joint Committee’s

statutory duties, the Legislature or its

committees, including the Legislative

Coordinating Council (LCC), may direct the

JCIT to undertake special studies and to

perform other specific duties.

KSA 75-7208(g) provides that the

Legislative Chief Information Technology

Officer (CITO) is staff to the Joint Committee.

The position is appointed by the LCC and

the Joint Committee may recommend

persons for consideration by the LCC in

making the appointment. Among the duties

assigned to the Legislative CITO by KSA 75-

7211 are those of monitoring state agency

execution of information technology projects

and reviewing information technology

project budget estimates and revisions to the

estimates. The Legislative CITO also may

perform other functions and duties as

directed by the LCC or the Joint Committee,

as provided in KSA 75-7208(h).

KSA 75-7210 requires the Legislative,

Executive and Judicial CITOs to submit

annually to the Joint Committee all

information technology project budget

estimates and revisions, all three-year plans,

and all deviations from the state information

technology architecture. The Legislative

CITO is directed to review the estimates and

revisions, the three-year-plans, and the

deviations, then to make recommendations

to the Joint Committee regarding the merits

and appropriations of the projects. In

addition, the Executive and Judicial CITOs

are required to report to the Legislative CITO

the progress regarding implementation of

projects and proposed expenditures,

including revisions to such proposed

expenditures.

The JCIT presents this annual report in

compliance with KSA 46-1207 that requires

the LCC to receive information about the

interim work for submission to the 2004

Legislature.

COMMITTEE ACTIVITIES

The Joint Committee reviewed a number

of agency information technology projects

that either are being developed or have been

implemented. In addition, reports were

received from the Legislative, Executive and

Judicial CITOs. Several other topics were

reviewed during the 2003 interim in keeping

with the statutory duties.

Legislative Information Technology

The Committee received periodic reports

from the Legislative CITO. Don Heiman

became the new CITO in September, 2003.

Other legislative staff reviewed and

demonstrated the status of a centralized

document management system known as

Liberty.

The Legislative CITO review proposed

changes in the Legislative Coordinating

Council’s Information Technology Policies,

dated November 20, 2003.

Information Network of Kansas

The Committee received a briefing by the

Executive Director, Information Network of

Kansas (INK), on the history and operations

of INK which was created by KSA 74-9301 et

seq. to provide electronic access to state and

local units of government information and

services, to be the official portal for state

government, and to improve the welfare of

citizens and businesses. The 10-member

INK Board of Directors was formed in 1991.

The Kansas Information Consortium

(KIC) was selected as the network manager.

INK maintains over 65 applications, provides

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Kansas Legislative Research Department 2003 Information Technology

over 300 services, and serves as access to

over 380,000 state, local, and association

web pages. INK records more than two

million page-hits per month. INK is fee-

based and self-funded, collecting fees from

subscribers and passing them on to agencies

that provide the information. INK’s long-

range plan was to be available in the fourth

quarter of this year.

Enterprise Security Issues

The Committee reviewed issues

associated with enterprise security faced by

the Legislature, by the state agencies, and by

the Regents institutions. Reports detailing

the problems in the different sectors were

received from the Legislative Branch CITO,

the Executive Branch CITO, and the Board of

Regents. In addition, a Post Audit review of

the Department of Health and Environment

was examined, and the agency response to

the audit was heard.

The Legislative CITO indicated that

extrapolating from national studies the

estimated cost to Kansas for enhancing

enterprise security would be approximately

$1.6 million and require 6.0 FTE positions.

These positions would be incorporated with

the Kansas Information Technology Office

(KITO) under the Executive CITO for

monitoring state government operations.

The Executive CITO reported that the

Governor has asked that a plan be developed,

but the cost estimates were not yet prepared.

A central information technology security

office would:

!monitor the network for intrusions,

virus/worm outbreaks.

!scan for network vulnerabilities.

!perform asset management updates.

!assist with remediation efforts.

!act as the core for a computer emergency

response team.

!train technicians throughout the

enterprise.

!devise lesson plans and perform as

trainers for desktop security users.

!interface with national cybersecurity

organizations and with federal law

enforcement.

!analyze security data, such as firewall

logs, ID logs.

A representative of the Board of Regents

defined the areas of need identified for the

Regents institutions needed for information

technology security. Four areas were

outlined:

!security staff, 12.5 FTE positions and

$1,129,858 financing.

!intrusion detection (network, server and

workstation), $875,000.

!system hardening, $4,965,000 (one-time

expenditure.)

!antivirus protection, $750,750.

Judicial Information Technology

A review was completed of the Office of

Judicial Administration’s (OJA) integrated

statewide case management system known as

FullCourt. The OJA selected Justice Systems

Inc. (JSI) in May, 2001 as its vendor. JSI had

previous experience with statewide court

systems. Its software, FullCourt, is an open

system. As of the September, 2003 review,

65 courts had been connected in Kansas.

Expenditures totaled $4,047,346 through

September 30, 2003.

Office of Judicial Administration

FullCourt Case Management System

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Kansas Legislative Research Department 2003 Information Technology

Planned Cost: $6,031,868

Start Date: 7/01 End Date: 7/04

This system will provide a standard case

management system for Kansas courts to

have uniform software.

Administrative Information Technology

The Executive Branch CITO provided

quarterly project progress reports for

executive branch agencies undertaking

information technology work. A summary of

each reported project by agency is presented

below.

Department of Administration

SHARP—PeopleSoft Upgrade

Plan Cost: $3,755,579

Start Date: 3/01 End Date: 5/03

Completed.

Project will implement PeopleSoft Release

8.03, and to incorporate changes required for

the Kansas version of the software.

Department of Agriculture

Registration, Enforcement, & Compliance

System (RECS)

Plan Cost: $1,012,572

Start Date: 6/01 End Date: 11/03

Revised end date: 4/04

CITO approval: 11/4/03

This project will migrate the agency’s

Passport and FilePro systems to an Oracle

platform to reduce agency costs. The project

will provide additional functionality in

collecting legal information and storing

additional historical information. Statutory

and regulatory processes will be

incorporated.

Conservation Commission

Management Information System

Plan Cost: $463,326

Plan Start: 8/01 End Date: 10/03

Revised end date: ???

CITO approval: pending

The new system will provide an integrated

program to manage the various cost-share

programs and other functions of the agency.

Emporia State University

Information Management System

Plan Cost: $2,415,500

Start Date: 10/02 End Date: ???

This project is on hold.

Due to a lack of funding, the project has not

started. The new system will provide an

integrated enterprise system.

Fort Hays State University

Administrative System

Plan Cost: $1,206,828

Revised Plan Cost: $1,474,530

Plan Start: 5/01 Plan End: 8/04

Revised End Date: 6/06

CITO approval: pending

A project plan was refiled with the CITO in

October, 2003. The project was to

implement a new university administration

system, including human resource, financial,

and student subsystems. The project used

Sungard as vendor, operated on an Oracle

platform. Financial and human resources

modules are working, but the project

experienced difficulty in implementing the

student system. A refund for the $182,000 in

licensing fees paid for the latter system was

sought. The agency did recover all money

spent on the student system from the vendor,

but a small loss occurred due to monies

disbursed to third parties by the vendor.

Kansas State Board of Healing Arts

IT Enhancement Program

Plan Cost: $550,000

Start Date: 8/03 End Date: 1/05

This project will provide online renewal of

licenses and allow updating of information

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Kansas Legislative Research Department 2003 Information Technology

regarding practice status of licensees. A

revised plan is anticipated to be filed with

the CITO during December, 2003.

Department of Health and Environment

Child Care Licensing and Information

System (CLARIS)

Plan Cost: $1,023,960

Start Date: 7/01 End Date:8/03

Revised end date: 3/04

CITO approval: pending

This project will create a web-based

information system for the management of

child care licensing, inspection, compliance,

and enforcement.

Health Alert Network II(HAN II)

Plan Cost: $3,377,438

Start Date: 5/02 End Date: 1/04

As a response to bioterrorism, and through a

cooperative agreement with the U.S. Center

for Disease Control (CDC), the agency

provides a notification capability for the

public health network infrastructure

developed in HAN I at a cost of $1,703,906.

This project will meet the enhancement

requirements of the Center for Disease

Control and Prevention. The federal agency,

after the events of September 11, 2001,

received additional funding of $10.6 billion,

of which $12.3 million was allocated to

Kansas to build a statewide infrastructure to

enhance public health capacity for

preparedness and response. Funding of $3.4

million was earmarked for the project, $1.4

million of which directly passes through to

the 99 local health departments for local and

regional infrastructure projects.

Vital Statistics Integrated Information System

Planned Cost: $3,141,800

Revised Plan Cost: $3,885,000

Start Date: 1/01 End Date: 1/05

Revised end date: ???

CITO approval: not yet requested

This project will replace existing Vital

Statistics systems, migrate existing DB2

index databases to Oracle, web-enable birth,

death, divorce, and marriage certificate

processes, and support electronic filings. A

rebaselined project was approved by the

CITO on November 26, 2003. The agency

advised that an electronic death registration

system would be submitted later as an

additional subproject at a cost of $748,333.

CITO approval for this subproject has not

been requested, and start or end dates have

yet to be determined.

Kansas WIC Automation (KWIC)

Planned Cost: $5,358,851

Start Date: 1/98 End Date: 6/04

The new system will connect those involved

in the delivery of services by email and

provide a server-based application that will

allow better state management of the

supplemental nutritional program for

women, infants and children.

Network One Stop

Plan Cost: $379,625

Start Date: 9/02 End Date: 1/05

This project will allow interaction with the

National Environmental Information

Exchange Network.

Safe Drinking Water Information System

Plan Cost: $580,000

Start Date: 5/03 End Date: 7/05

An upgrade to the Kansas Drinking Water

Database has been required due to the

federal Safe Drinking Water Act

requirements.

Kansas Board of Regents

Kansas Education Network

Plan Cost: $2,435,561 (FY 2004)

Start Date: 3/03 End Date: 6/04

KAN-Ed will provide connectivity for

schools, pubic libraries, and hospitals. The

startup costs in FY 2004 were included in the

project plan approved by the CITO on March

31, 2003, for the first year of the project.

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Kansas Legislative Research Department 2003 Information Technology

Kansas Bureau of Investigation

Criminal Justice Information System (CJIS)

Plan Cost: $1,942,360

Start Date: 4/01 End Date: 6/03

Project Completed.

The original CJIS project consisted of 10

strategic initiatives and involved 25 tactical

projects with a total budget of $12,036,000. It

spanned several years. This project further

enhances CJIS capabilities.

Laboratory Information Management System

(LIMS)

Plan Cost: $515,710

Start Date: 5/03 End Date: 12/03

This system will replace a 20-year old legacy

system with a new PC-Client Server

technology.

Kansas State University

Legacy Application System Empowered

Replacement (LASER)

Plan Cost: $12,784,427

Start Date: 3/03 End Date: 8/06

The project will replace the major central

information systems, namely the student and

financial systems.

Juvenile Justice Authority

Juvenile Justice Information System (JJIS)

Plan Cost: $1,889,557

Start Date: 4/01 End Date: 6/03

Project Completed.

This project is to develop and implement an

integrated system that will provide timely

information to support effective decision

making and the treatment of juvenile

offenders necessary to reduce recidivism and

improve public safety.

Technology Infrastructure of the Kansas

Juvenile Correctional Complex (Topeka)

Plan Cost: $917,560

Start Date: 9/03 End Date: 6/04

This project will provide the required

technology infrastructure needed to operate

the new facility.

Kansas Public Employees Retirement

System (KPERS)

Workflow Reengineering with Imaged

Document Management—Image2000

Plan Cost: $1,240,373

Recast Plan Cost: $4,762,595

Start Date: 10/99 End Date: 10/04

Revised End Date: 7/06

CITO approval: not yet requested.

Previously, this project was split into three

subprojects. A fourth subproject component

has not been approved by the CITO that

would add $1,442,595 in costs to upgrade or

replace the computer system. Additional

subprojects have been discussed. A recast

project will be submitted to the CITO. A

summary of actual and estimated costs was

presented:

!Subproject 1: $811,303 End date: 2/01

!Subproject 2: $210,000 End date: 11/03.

!Subproject 3: $680,000 End date: 6/04.

!Subproject 4: $4,762,595 End date: 6/06.

!Subproject 5: $2,600,000 End date: post

7/06.

Department of Revenue

Computer-Aided Mass Appraisal (CAMA)

Replacement

Plan Cost: $3,839,235

Recast Plan Cost: $2,772,538

Start Date: 5/99 End Date: 1/04

Revised End Date: 2/06

CITO approval: pending

This project has been on hold.

The original contractor for Phase II was

selected and award made in August 2001.

However, work was suspended and the

project has halted in 2002. A rebaselined

project plan has been submitted to the CITO.

A new contract was awarded on October 6,

2003.

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Kansas Legislative Research Department 2003 Information Technology

The revised plan indicates the contract fee

for implementing the new software in 10

beta counties is $2,772,538. New hardware

will be required that is not included in the

contract, and a contract option to acquire

software licenses for the other 95 counties

would be an additional cost.

Department of Social and

Rehabilitation Services

Medicaid Management Information System–

Replacement and HIPPA Implementation

Plan Cost: $26,220,360

Start Date: 11/00 End Date: 7/04

This project will replace the existing

Medicaid Management Information System

(MMIS) with an updated technology system

that utilizes a relational database.

Enterprise Circle Plan Program

Plan Cost: $16,551,036

Start Date: 8/02 End Date: 7/07

This project is intended to integrate the

primary information systems of the agency.

Department of Transportation

Access Permit Database

Plan Cost: $453,651

Start Date: 4/99 End Date: 9/03

Project Completed.

This project will provide a database for the

physical and geometric features, accident

data and usage characteristics for access

points and/or intersections to the state

highway system.

Construction Detour Reporting System

(CDRS)

Plan Cost: $585,916

Start Date: 3/99 End Date: 8/03

Revised End Date: 12/03

CITO approval: pending

The project will provide road and

construction conditions statewide. A revised

plan was submitted to the CITO in early 2003

and approved on March 6, 2003.

Truck Routing Information System (TRIS)

Plan Cost: $641,559

Start Date: 7/99 End Date: 9/03

Project Completed.

Advanced Public Transportation

Management System

Plan Cost: $838,500

Start Date: 7/03 End Date: 6/04

This project is on hold until 1/04.

The new system will provide a computerized

method of routing and issuing

oversize/overweight permits.

Harrison Center Infrastructure.

Plan Cost: $837,271

Start Date: 7/03 End Date: 12/03

This project will support KDOT in its new

headquarters location.

Data Warehouse

Plan Cost: $635,879

Plan Start: 6/01 Plan End: 6/03

Project Completed.

The project provides an agency-wide

relational database for internal and public

access to records and information.

University of Kansas

Student Information System

Plan Cost: $13,991,734

Revised Plan Cost: $12,852,494

Plan Start: 11/00 Plan End: 4/05

This project will develop an integrated

student records system for registration,

financial aid, and other services.

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Kansas Legislative Research Department 2003 Information Technology

CONCLUSIONS AND RECOMMENDATIONS

The following recommendations are

made by the Committee.

!The Committee directs the Legislative

CITO to include enterprise security

within the Long-Range Strategic Plan

revision that currently is being

developed for the Legislature.

!The Committee recommends a number of

changes in the proposed policy

statements for the legislative information

technology policy and procedures

update.

A letter will be sent to the LCC.

!The Committee recommends that the

House Appropriations Committee and

Senate Ways and Means Committee

monitor certain projects that have had

changes in end date, plan cost, or plan

scope that either recasts or redefines the

information technology developments.

"Department of Agriculture, Registration,

Enforcement, & Compliance System

(RECS), Plan cost: $1,012,572, Revised

end date: 4/04.

"Conservation Commission, Management

Information System, plan cost: $463,326,

Revised end date: unknown, CITO

approval: pending.

"Fort Hays State University,

Administrative System, plan cost:

$1,206,828, Revised plan cost:

$1,474,530, Revised end date: 6/06, CITO

approval: pending.

"Kansas State Board of Healing Arts, IT

Enhancement Program, Plan cost:

$550,000, revised plan is anticipated to

be filed with the CITO during December

2003.

"Department of Health and Environment,

Child Care Licensing and Information

System (CLARIS), Plan cost: $1,023,960,

Revised end date: 3/04, CITO approval:

pending.

"Department of Health and Environment,

Vital Statistics Integrated Information

System, Planned cost: $3,141,800,

Revised plan cost: $3,885,000, Revised

end date: unknown, CITO approval: not

yet requested. The agency advised that

an electronic death registration system

would be submitted later as an additional

subproject at a cost of $748,333.

"Kansas Public Employees Retirement

System (KPERS), Workflow

Reengineering with Imaged Document

Management—Image2000, Plan cost:

$1,240,373, Recast plan cost: $4,762,595,

Revised end date: 7/06, CITO approval:

not yet requested.

"Department of Revenue, Computer-Aided

Mass Appraisal (CAMA) Replacement,

plan cost: $3,839,235, Recast plan cost:

$2,772,538, Revised end date: 2/06, CITO

approval: pending.

"Department of Transportation,

Construction Detour Reporting System

(CDRS), Plan cost: $585,916, Revised

end date: 12/03, CITO approval: pending.

"Department of Transportation, Advanced

Public Transportation Management

System, Plan cost: $838,500. Project is on

hold until 1/04.

!In addition, there are several large

projects that should be monitored

because the cost, extended time frame,

and complexity of the undertakings adds

risk.

"Department of Social and Rehabilitation

Services, Medicaid Management

Information System—Replacement and

HIPPA Implementation, Plan cost:

$26,220,360.

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Kansas Legislative Research Department 2003 Information Technology

"Department of Social and Rehabilitation

Services, Enterprise Circle Plan Program,

Plan cost: $16,551,036.

!A number of other planned or proposed

projects have come to the Committee’s

attention that the House Appropriations

Committee and Senate Ways and Means

Committee should monitor during the

2004 Session:

"Department of Human Resources,

America’s JobLink, Plan cost: $1,750,000.

This project apparently started 10/02

without CITO approval. The agency is

developing a project plan and will

submit a request for CITO approval.

"Department of Human Resources,

Unemployment Insurance Benefits, Plan

cost: To be determined. The agency

reported that its current system was

implemented in 1967 and poses major

problems for the agency due to a lack of

flexibility and an inability to respond

quickly to change at both the state and

federal level. The main support staff for

the system retired nine years ago and

soon this staff will be unavailable for

system changes. The agency noted, in

reviewing standards for other states’

benefits projects, that this project would

take 18 months to three years for

implementation. The agency has

developed a Needs Assessment and

Feasibility Study based on agency and

customer needs, and state and federal

requirements.

"Department of Health and Environment,

Kansas Immunization Registry, Plan

cost: $1,000,000.

"Department of Health and Environment,

Management Information System for

Food, Drug and Lodging, Plan cost:

$597,900.

"Secretary of State, Help America Vote

Act (HAVA) of 2002, Plan cost:

$3,000,000.

"Wichita State University, Information

Management System, Plan cost:

$12,000,000.

JOINT COMMITTEES

Reports of the

Joint Committee on Legislative Budget

to the

2004 Kansas Legislature

CHAIRPERSON: Representative Melvin Neufeld

VICE-CHAIRPERSON: Senator Stephen Morris

OTHER MEMBERS: Senators Paul Feleciano, Jr., and Dave Kerr; Representatives Bill

Feuerborn, Dean Newton, and Clark Shultz

STUDY TOPICS

Board of Indigents’ Defense Services Funding

Capital Punishment

Community College Operating Grant

Community Developmental Disability Organization (CDDO) Redesign

Long-Range Revenue Structure Planning Group (2003 SR 1842)

Review the Current Status of the State Budget, Both Revenues and Expenditures

December 2003

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Kansas Legislative Research Department 2003 Budget

Legislative Budget Committee

BOARD OF INDIGENTS’ DEFENSE SERVICES FUNDING

CONCLUSIONS AND RECOMMENDATIONS

!The Legislative Budget Committee recommends that the salary of public defenders be

increased so that it is reasonably equivalent to that of attorneys in other state agencies. In

the Committee’s opinion, the salary inequity is illogical given the public defender caseload

and the difficulty of the work involved. However, the Committee also recognizes the state’s

current budget situation and recommends that the salaries be increased incrementally over

a time period of not more than five years.

!On the topic of a new public defender office in the 14th Judicial District, the Committee

believes that it would provide better representation for the agency’s clients as well as being

more cost effective for the state. However, the Committee expresses concern over the cost

of establishing a new office and recommends that any state funds be contingent upon the

county furnishing available office space. The Committee also suggests that the agency study

the possibility of establishing a satellite office of the Chanute public defender office rather

than a stand-alone office.

!The Committee acknowledges the need to increase the hourly rate for assigned counsel, but

also notes that funding is not currently available. The Committee recognizes that, should

attorneys continue to withdraw from assigned counsel panels, the establishment of more

public defender offices might be required even though that may not be the most cost

effective delivery of services.

!During the Committee’s discussion, several suggestions were made by the Executive Director

of the Board of Indigents’ Defense Services which the Committee believes have great merit

for further study. The Committee would like the House Appropriations Public Safety Budget

Committee and the Senate Ways and Means Judicial Subcommittee to review all of the

Executive Director’s suggestions particularly the ideas of hiring an additional Assistant

Director to audit applications for indigency and establishing a free-standing group similar

to the Kansas Bureau of Investigation to provide expert testimony for DNA testing and other

forensic studies.

Proposed Legislation: None

BACKGROUND

The Legislative Coordinating Council

directed the Legislative Budget Committee to

“review the funding and expenditures of the

Board of Indigents’ Defense Services,

including a study by the Judicial Council

regarding funding for death penalty cases as

compared with other states.” This topic was

requested by the Senate Committee on Ways

and Means based upon the budget shortfalls

faced by the agency during the last several

fiscal years.

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Kansas Legislative Research Department 2003 Budget

COMMITTEE ACTIVITIES

The Committee heard testimony from the

Executive Director of the Board of Indigents’

Defense Services who described the agency’s

request for additional funding for several

items including the establishment of a public

defender office in the 14th Judicial District

(Montgomery and Chautauqua Counties),

additional funding for the Assigned Counsel

Program, an increase in the assigned counsel

hourly rate, the establishment of a death

penalty trial and conflicts office, and an

increase in public defender salaries.

The Chief Judge of the 14th Judicial

District appeared before the Committee to

discuss the establishment of a public

defender office in that district. The Chief

Judge explained that it is very difficult to get

practicing attorneys in the district to take on

cases involving indigent defendants. As a

result, public defenders from the Chanute

office are used which further increases the

caseload for those individuals. In addition,

attorneys from Wichita have been hired at

substantial cost. It was noted by the Chief

Judge that increasing the hourly rate for

assigned counsel probably would not help in

this situation as the attorneys in the district

would not take on the cases even at a higher

rate of pay.

A member of the Board of Indigents’

Defense Services who is also a member of an

assigned counsel panel testified to the

Committee on the topic of increasing the

hourly rate for assigned counsel from $50 to

$80. The conferee explained that it is more

efficient in certain parts of the state to have

an assigned counsel panel rather than

establishing a public defender office. It also

was noted that the hourly rate for assigned

counsel has not been increased since 1987

and that the rate paid to federal assigned

counsel is $90 per hour.

The Committee also heard testimony

from the Executive Director of the Judicial

Council which was charged by the 2003

Legislature with the task of studying the

Board of Indigents’ Defense Services’ funding

of death penalty cases including a

comparison with other states. The final

report will not be available until February

2004, but the conferee listed the issues upon

which the report focuses:

!Why death penalty cases cost more than

other types of cases;

!The cost of death penalty cases in

Kansas;

!What death penalty cases cost in other

jurisdictions;

!What Kansas has done to contain costs in

death penalty cases; and

!What other jurisdictions are doing to

contain costs and whether those

strategies are applicable to Kansas.

CONCLUSIONS AND RECOMMENDATIONS

!The Committee recommends that the

salary of public defenders be increased

so that it is reasonably equivalent to that

of attorneys in other state agencies. In

the Committee’s opinion, the salary

inequity is illogical given the public

defender caseload and the difficulty of

the work involved. However, the

Committee also recognizes the state’s

current budget situation and

recommends that the salaries be

increased incrementally over a time

period of not more than five years.

!On the topic of a new public defender

office in the 14th Judicial District, the

Committee believes that it would provide

better representation for the agency’s

clients as well as being more cost

effective for the state. However, the

Committee expresses concern over the

cost of establishing a new office and

recommends that any state funds be

contingent upon the county furnishing

available office space. The Committee

13-5

Kansas Legislative Research Department 2003 Budget

also suggests that the agency study the

possibility of establishing a satellite

office of the Chanute public defender

office rather than a stand-alone office.

!The Committee acknowledges the need to

increase the hourly rate for assigned

counsel, but also notes that funding is

not currently available. The Committee

recognizes that, should attorneys

continue to withdraw from assigned

counsel panels, the establishment of

more public defender offices might be

required even though that may not be the

most cost effective delivery of services.

!During the Committee’s discussion,

several suggestions were made by the

Executive Director of the Board of

Indigents’ Defense Services which the

Committee believes have great merit for

further study. The Committee would like

the House Appropriations Public Safety

Budget Committee and the Senate Ways

and Means Judicial Subcommittee to

review all of the Executive Director’s

suggestions particularly the ideas of

hiring an additional Assistant Director to

audit applications for indigency and

establishing a free-standing group similar

to the Kansas Bureau of Investigation to

provide expert testimony for DNA testing

and other forensic studies.

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Kansas Legislative Research Department 2003 Budget Committee

Legislative Budget Committee

CAPITAL PUNISHMENT

CONCLUSIONS AND RECOMMENDATIONS

The Committee makes no specific recommendations regarding this topic.

Proposed Legislation: None

BACKGROUND

The Legislative Coordinating Council

directed the Legislative Budget Committee to

“study the effect and cost of capital

punishment in Kansas.” In addition, the

Judicial Council was directed in 2003 Senate

Substitute for HB 2444 to study funding for

death penalty cases as compared to other

states.

COMMITTEE ACTIVITIES

The Committee was unable to study this

topic due to the timing of the study by the

Legislative Division of Post Audit. The final

report of its study was not released until after

the last meeting of the Legislative Budget

Committee.

The Committee heard testimony from the

Executive Director of the Judicial Council

which was charged by the 2003 Legislature

with the task of studying the Board of

Indigents’ Defense Services’ funding of death

penalty cases including a comparison with

other states. The final report will not be

available until February 2004, but the

conferee listed the issues upon which the

report focuses:

!Why death penalty cases cost more than

other types of cases;

!The cost of death penalty cases in

Kansas;

!What death penalty cases cost in other

jurisdictions;

!What Kansas has done to contain costs in

death penalty cases; and

!What other jurisdictions are doing to

contain costs and whether those

strategies are applicable to Kansas.

CONCLUSIONS AND RECOMMENDATIONS

The Committee makes no specific

recommendations regarding this topic.

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Kansas Legislative Research Department 2003 Budget Committee

Legislative Budget Committee

COMMUNITY COLLEGE OPERATING GRANT

CONCLUSIONS AND RECOMMENDATIONS

The Legislative Budget Committee supports the efforts taken by the Board of Regents, the

Regents institutions, the community colleges, and the technical colleges to move toward a

performance-based funding plan for increases in state funding. Legislation passed during the

2002 Legislative Session authorized the Board of Regents to review and approve institutional

improvement plans and to use those plans to implement a performance agreement with each

institution. Each performance agreement is to include specific performance measures and,

beginning in FY 2006, any new state funds will be based upon compliance with those

measures. New state funds, whether actually received by the institution or not, would be

factored into the base in subsequent years for calculating any state funding increases.

The Committee also expresses concern about funding streams for technical colleges in light of

changes in the governance structure. The Committee notes that the Legislative Educational

Planning Committee studied the topic during the 2003 Interim and recommended the

introduction of legislation which provides authority for technical colleges to make separate mill

levies for adult basic education and operating expenditures.

Proposed Legislation: None

BACKGROUND

The Legislative Coordinating Council

(LCC) directed the Legislative Budget

Committee to study this topic. Specifically,

the LCC directed the Committee to “review

problems with the community college

operating grant and the impact of certain

schools attracting larger increases in out-

district students.” Also, “review a possible

formula adjustment proposal when

submitted in the fall.”

The Kansas Higher Education

Coordination Act passed in 1999 outlined an

operating grant formula to provide state

funding for the community colleges and

Washburn University beginning in FY 2001.

The grant amount is calculated as an amount

equal to 50.0 percent of the State General

Fund appropriation for one lower-division

FTE student at a regional Regents institution

(Emporia, Fort Hays, or Pittsburg) multiplied

by the higher of the community college’s

current or prior year’s FTE enrollment. The

regional institution percentage would

increase by 5.0 percent each year until

reaching 65.0 percent in FY 2004.

Subsequent amendments modified the

community college operating grant to

calculate the grant based upon the total

enrollment across all schools rather than on

an institution-by-institution basis. The

funding would then be allocated to the

colleges based upon each institution’s

percentage of previous year state funding.

County out-district tuition is paid when

a student from another county enrolls in a

community college. Prior to the passage of

the Higher Education Coordination Act, the

county of residence and the state would each

pay the community college $24 for each

credit hour taken by that student. The

Coordination Act provided that the county

portion of out-district tuition would be

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Kansas Legislative Research Department 2003 Budget Committee

phased out over the four years and be

replaced by state aid which would be added

to the operating grant. The college would

receive the same funding; the source would

shift from the county and state to just the

state. Only the first two years of either of

these provisions have been implemented.

One intent of the original legislation was

property tax relief in the counties in which a

community college is located. The

Coordination Act provided that community

colleges were to use at least 80.0 percent of

increased state revenue (not including the

replacement for out-district tuition) to reduce

mill levies supporting the college.

COMMITTEE ACTIVITIES

The President of Hutchinson Community

College testified that enrollments in

community colleges are increasing, partly

due to the downturn in the economy. He

explained that in bad economic times,

students tend to live at home and enroll in

less expensive institutions, enroll in job

training programs in order to keep their

skills current, or go to school when they lose

a job in order to acquire new skills.

The conferee told the Committee that the

failure of the state to adequately fund

community colleges has resulted in an

increased level of support from local

property taxes in those counties that have a

community college. Even though a feature of

SB 345 is dedication of state resources to the

reduction of property taxes, and even though

property tax mill levies were reduced in the

first two years after passage of the bill, mill

levies have increased dramatically in the last

two years and now are higher than they were

before SB 345 was implemented

Several recommendations were presented

regarding community college funding:

!Implement quality programming through

performance grants;

!Separate funding for business and

industry training;

!Recognize high cost programs that have

quality of life issues, such as nursing and

fine arts;

!Identify the role community colleges play

in economic development;

!Establish differential funding for

developmental programs; and

!Establish a funding stream for crumbling

campuses.

The President of Dodge City Community

College testified to the Committee. He noted

that the funding formula actually provides a

disincentive for community colleges to grow.

Each individual community college receives

the same percentage of the total operating

grant as the previous year regardless of any

enrollment growth.

The conferee also provided an update on

the Degree Completion Program. The

Regents’ University-Community College

Partnership includes Emporia State

University, Fort Hays State University, and

Kansas State University as well as all of the

community colleges in the region–Barton,

Pratt, Garden City, Dodge City, Liberal, and

Colby Community Colleges. The program

provides place-bound students in Western

Kansas with access to upper division and

graduate courses.

CONCLUSIONS AND RECOMMENDATIONS

The Committee supports the efforts taken

by the Board of Regents, the Regents

institutions, the community colleges, and the

technical colleges to move toward a

performance-based funding plan for

increases in state funding. Legislation

passed during the 2002 Legislative Session

authorized the Board of Regents to review

and approve institutional improvement plans

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Kansas Legislative Research Department 2003 Budget Committee

and to use those plans to implement a

performance agreement with each

institution. Each performance agreement is

to include specific performance measures

and, beginning in FY 2006, any new state

funds will be based upon compliance with

those measures. New state funds, whether

actually received by the institution or not,

would be factored into the base in

subsequent years for calculating any state

funding increases.

The Committee also expresses concern

about funding streams for technical colleges

in light of changes in the governance

structure. The Committee notes that the

Legislative Educational Planning Committee

studied the topic during the 2003 Interim

and recommended the introduction of

legislation which provides authority for

technical colleges to make separate mill

levies for adult basic education and

operating expenditures.

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Kansas Legislative Research Department 2003 Budget Committee

Legislative Budget Committee

COMMUNITY DEVELOPMENTAL DISABILITY

ORGANIZATION (CDDO) REDESIGN

CONCLUSIONS AND RECOMMENDATIONS

The Legislative Budget Committee recommends the introduction of a bill that would do the

following:

!Eliminate the Community Service Provider (CSP) functions of Community Developmental

Disability Organizations (CDDOs);

!Allow CDDOs that are currently providing CSP-type services to continue to do so until June

30, 2006;

!Allow for "bonus" state grant payments to CDDOs that discontinue the provision of CSP-

type services prior to the June 30, 2006 cut-off date;

!Define functions for which the CDDOs are responsible: client eligibility; tier determination;

annual review and quality control of services. (These functions may be provided directly

by the CDDOs or may be contracted.);

!Limit the number of CDDOs by requiring a minimum population base of 150,000 people;

!Authorize a pilot program for peer review of quality control;

!Require SRS to establish rules and regulations regarding CDDOs; and

!Authorize SRS to establish a single case management system for all waivers.

In addition, the Committee directs that SRS report back on the following issues to the

appropriate legislative committees during the 2004 session: the appropriate population size

for the CDDO service areas; a definition of case management for CDDOs; and a mechanism for

funding that would allow counties to target funds allocated through county mill levies for

CDDOs (and federal matching funds) to be expended at the counties' CSP of choice.

Proposed Legislation: The Committee recommends the introduction of one bill.

BACKGROUND

The Legislative Coordinating Council

directed to Legislative Budget Committee to

review and study the redesign of the

Community Developmental Disability

Organization (CDDO) system that would

include reducing the numbers of CDDOs

from 28 to 13 or fewer, reducing

administrative costs, allowing CDDOs to

provide a match for an additional $10.6

million in federal funds, and make CDDOs

independent of direct service provision.

2003 SB 242, introduced by the Committee

on Ways and Means, addressed the redesign

issue, but did not pass.

COMMITTEE ACTIVITIES

Staff from the Legislative Research

Department presented an overview of CDDOs

and SB 242, which was not recommended by

the Senate Ways and Means Committee

during the 2003 Legislative Session.

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Kansas Legislative Research Department 2003 Budget Committee

The Executive Director of the Alliance for

Kansans with Developmental Disabilities

presented testimony on the Alliance’s plan

for separation and consolidation of the

Community Developmental Disability

Organization (CDDO) infrastructure. The

plan would reduce the number of CDDO

districts from 28 to 13 and separate

administrative duties from service providers.

She noted that SB 242 is not clear on case

management and evaluation of services.

She also indicated that, in the Alliance’s

plan, evaluation of progress and quality

assurance could be done by the CDDO;

however, case management would need to be

addressed.

The Executive Director of the Alliance

indicated that, with the Alliance’s redesign

proposal, they are attempting to provide the

best and greatest amount of service with the

available funds. The Committee noted

concern that the redesign plan, which

primarily changed the area of CDDOs in the

central part of Kansas, will cause some

counties to withdraw county funding. The

Executive Director of the Alliance pointed

out that SRS can only raise the rate for case

management up to that of the CDDO that has

the least amount of available match;

however, with the consolidation of CDDO

regions, the rate can be pooled, would be

higher, and could result in additional federal

funding.

The Secretary of Social and

Rehabilitation Services (SRS) presented

testimony on SRS’s assessment of the CDDO

redesign proposal. The Secretary stated that

it was her understanding that it was not the

intention of the redesign to eliminate

funding for non-waiver (Medicaid) clients.

With regard to case management and

evaluation of progress, the Director of

Community Supports and Services, SRS,

stated that there is ongoing discussion as to

who would have the responsibility for these

aspects. The Secretary indicated that she did

not feel quality or appropriate care is a major

problem within the present system. The

Secretary acknowledged that there could be

a conflict between the quality control done

by the CDDO and SRS. The Director of

Community Supports and Services stated

that there was no additional funding

designated for capacity building; however,

the contract states that administrative

overhead from case management is to be

used for capacity building. This currently

varies between CDDOs—more areas use it for

case management, with some using the funds

for capacity building.

The Secretary of SRS stated that SRS has

some concern in raising the case

management level by consolidating from 28

to 13 CDDOs. It was the consensus of the

Committee that emphasis be placed on better

service for Kansas citizens and not on the

amount of federal dollars which the State

could draw down

The Director of the Kansas Council on

Developmental Disabilities presented

testimony opposing the redesign proposal to

reduce the number of CDDOs. She presented

a proposal that would create regional long-

term care resource centers to which

consumers and their family members could

go for intake, eligibility determination and

referral, financial eligibility determination,

and possibly case management, allowing

consumers a one-stop approach. She noted

that there are grant monies available from

the Federal Administration on Aging and

Centers for Medicaid and Medicare Services

for start-up funding for such an endeavor;

however, the deadline for the grant

application has passed for the current year.

The Director stated that her agency has

discussed this proposal with the Department

on Aging and that the agency has begun

internal planning to submit a proposal for

next year.

The Committee noted that the proposal

primarily adopts everything in the redesign

plan except the number of points of contact.

The Secretary of SRS noted that because of

the six waivers involved, it would be

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Kansas Legislative Research Department 2003 Budget Committee

necessary to staff the centers with people

who are knowledgeable of the requirements

and conditions of all six waivers.

The Legislative Liaison for the Self-

Advocate Coalition of Kansas (SACK)

presented testimony opposing the redesign

proposal.

The Topeka Center Coordinator, Families

Together, presented testimony regarding the

impact of SB 242 on the families served by

Families Together. She indicated that her

organization serves approximately 12,000

families with their newsletter, of which

2,200 receive disability services. She feels

their present system works well to serve the

consumer.

A representative from the Kansas

Association of Counties presented testimony

with regard to the redesign of the CDDO,

urging caution with change as the

reorganization could encourage dis-

investment in services by county

policymakers. He stated that he felt it is

critical to have communication and sharing

of ideas between the counties, CDDOs, and

the Legislature in order to find out if and

how the system could be improved and to

have the support for the redesign plan. The

Committee noted that the motive for SB 242

and a change to the current system is not

financial but an opportunity to work with the

entities involved to make the system better.

The Director of Government Relations for

Johnson County Developmental Supports

added comments concerning how the

redesign of the CDDO would affect Johnson

County and the Director of the Sedgwick

County Developmental Disability

Organization presented information on the

CDDO system in Sedgwick County.

The Director of Southwest

Developmental Services, Inc. (SDSI)

presented testimony indicating that SDSI

believes it would be beneficial to have a

complete separation of CDDO

responsibilities from direct service providers

in the developmental disability system to

eliminate any conflict of interest. He

indicated that since SDSI has converted to a

CDDO only, they have had strong support

from the county government. He felt it was

important that if the separation between

CDDOs and community service providers

(CSP) went forward, it would also be

important to reduce the number of districts

from 28 to 13.

The Executive Director of Topeka

Association of Retarded Citizens (TARC)

presented testimony stating that TARC felt

the present system works and does not

support the legislation in SB 242.

The Executive Director of InterHab

presented testimony stating that InterHab is

opposed to SB 242. He also provided the

Committee with a copy of information of SRS

developmental disability problems and

solutions which was produced by The

Alliance for Kansans with Developmental

Disabilities. The Committee had questions

concerning the reason for a 61.9 percent

increase in CDDO administrative costs

within the last five years as compared to a

20.6 percent increase for the total program,

the Executive Director felt that the

administrative costs, which were

approximately 4.5 percent of the total

budget, were not excessive for the program.

CONCLUSIONS AND RECOMMENDATIONS

The Legislative Budget Committee

recommends the introduction of a bill that

would do the following:

!Eliminate the Community Service

Provider (CSP) functions of Community

Developmental Disability Organizations

(CDDOs);

!Allow CDDOs that are currently

providing CSP-type services to continue

to do so until June 30, 2006;

!Allow for "bonus" state grant payments to

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Kansas Legislative Research Department 2003 Budget Committee

CDDOs that discontinue the provision of

CSP-type services prior to the June 30,

2006 cut-off date;

!Define functions for which the CDDOs

are responsible: client eligibility; tier

determination; annual review and quality

control of services. These functions may

be provided directly by the CDDOs or

may be contracted.

!Limit the number of CDDOs by requiring

a minimum population base of 150,000

people;

!Authorize a pilot program for peer review

of quality control;

!Require SRS to establish rules and

regulations regarding CDDOs; and

!Authorize SRS to establish a single case

management system for all waivers.

In addition, the Committee directs that

SRS report back on the following issues to

the appropriate legislative committees during

the 2004 session: the appropriate population

size for the CDDO service areas; a definition

of case management for CDDOs; and a

mechanism for funding that would allow

counties to target funds allocated through

county mill levies for CDDOs (and federal

matching funds) to be expended at the

counties' CSP of choice.

MINORITY REPORT

Senator Anthony Hensley

The committee’s proposal to alter the current laws defining the Kansas system of community

services for persons with developmental disabilities is unnecessary, will disrupt services for

persons with disabilities, and will risk an elimination of funding for up to one-third of the persons

currently served in communities across our state. It is a solution in search of a problem.

The Developmental Disabilities Reform Act, as passed in 1995, protects the rights of persons

with developmental disabilities and their families, and protects the community-based

organizational network—and therefore, our communities—into which we confidently assigned

the care and services for vulnerable Kansans who once were served exclusively in state

institutions. This proposal cheapens the partnership of community providers and state officials,

who worked so hard to create an effective service network.

The principal faults of the committee’s proposal are as follows:

!The proposal mandates the creation of a new, separate and costly level of

bureaucracy to provide the same administration that is currently delivered by

locally-designated service organizations. The creation of a new network of purely

administrative-only entities will cost taxpayers more money, not less. No mention

is given in this proposal of estimated fiscal costs to the community, and only the

proposal’s vague reference to “incentives” offers community organizations any

hope of state assistance in offsetting these costs.

!The proposal mandates a reconfiguration of most of the current 28 CDDO areas, to

reduce the numbers of CDDOs, and transfers authority from local communities to

the Secretary of SRS in choosing who will become the administrators of local

services after June 30, 2007. Not even SRS recommended that they replace county

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Kansas Legislative Research Department 2003 Budget Committee

decision-making in the selection of local organizations to administer DD programs.

It is predictable that counties (whose voluntary appropriations to community

systems are in the tens of millions of dollars) will be less likely to support the

system with the same generosity if the Legislature strips them of the local

designating authority they have so successfully implemented since the late1960’s.

The proposal identifies no mechanism for ensuring these communities will remain

enfranchised. As an afterthought to its creation, SRS, not the community, has been

asked to submit recommendations for ways to control the use of property tax

dollars. As a further affront to the communities, the proposal will “create more

funds” using a population-based method for consolidating CDDO areas.

Population-based methodologies will result in lost resources for rural communities

along with costly duplication of resources in urban areas. There is a reason it took

the community more than thirty years to build a successful network of services.

To overhaul 30 years of work with a few hours of inconclusive deliberations is a

slap in the face to the many compassionate Kansans who developed our current

system.

!The proposal mandates using the few remaining unmatched SGF dollars to expand

the HCBS program. The language, if strictly applied, would eliminate SGF-only

services for nearly one-third of all persons currently receiving DD services. Some

of those whose services would be lost would be infants and toddlers, who are not

eligible for HCBS/Medicaid programs. Many of the remaining on SGF funding

(adults) will have no choice but to replace their SGF services with HCBS services,

even though it may be more comprehensive and costly than their needs merit. The

resulting taxpayer-financed cost for that population will be far greater than

resources currently used for them in SGF-only funded programs. This proposal

makes no mention of fiscal costs incurred from such a shift in funding, nor does

it even acknowledge the possibility of increased taxpayer costs. The committee

clearly did not take sufficient time or input to make informed recommendations

for system change.

There are other flaws in the proposal, but the above clearly demonstrate why the proposal

should not be adopted by the Legislature.

Those who have argued for change have relied on data seemingly compiled more from fiction

than fact. The contentions of Legislative Post Audit’s recent report on CDDO/CSP issues appear

to be conjured from undocumented opinions rather than derived from the facts established in the

auditors’ findings.

The testimony of key conferees gave more than ample information by which the committee’s

concerns might be allayed, and by which the complaints of critics might be rebutted, but the

committee ignored both state and community officials.

Consider another view of the Kansas DD system from an outside, unbiased source. A recent

Federal assessment had zero recommendations for changing the Kansas developmental disability

service system. Such a finding is unprecedented for Kansas. Most states have never received a

zero-recommendation finding.

Credit for this impressive accomplishment is due in several ways.

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Kansas Legislative Research Department 2003 Budget Committee

First, the Legislature was right in assigning the primary statutory role of service delivery and

local administration into a network of community-founded and community-responsive non-profit

organizations whose standing was and is excellent in their communities.

Second, the Sebelius Administration and previous administrations have been right in their

support of community network partnership. The partnership has:

!saved the State millions of dollars;

!enabled the down-sizing of State government;

!secured in meaningful ways the rights of citizenship to persons with disabilities;

!established services to help keep families together who, in earlier eras, would have

been forever estranged in the absence of specialized community supports;

!empowered thousands of Kansans greater opportunities to become tax paying

workers; and

!significantly, the tens of millions of tax dollars formerly spent in a handful of

counties is now distributed in such a way as to assure that every county in Kansas

enjoys both the value of services for its citizens, but the economic benefits of their

tax dollars returning to their own communities.

Finally, it is critical that the Legislature acknowledge the foundation upon which this success

is based, the network of Kansas communities, community leaders, and the organizations founded

across the state to provide local services for persons with developmental disabilities.

Instead, the committee’s proposal diminishes the community in every way imaginable.

This is not a proposal to enhance the success of the community DD system. It was developed

with no regard for the advice of state and local officials, it repudiates community leadership,

ignores the unprecedented success of their work, and denies the overwhelming evidence of their

good stewardship.

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Kansas Legislative Research Department 2003 Budget Committee

Legislative Budget Committee

LONG-RANGE REVENUE STRUCTURE PLANNING GROUP (2003 SR 1842)

CONCLUSIONS AND RECOMMENDATIONS

The Committee recommends that the 2004 Session of the Legislature develop a plan to include

the allocation of State General Fund moneys used to pay for KPERS pensions for school

personnel as a part of the school finance formula to be reflected in the base state aid per pupil.

The Committee believes that the issue of long-range planning deserves an ongoing review.

Therefore, the Committee recommends that the Legislative Coordinating Council approve, for

the 2004 Interim, the creation of the Long-Range Revenue Structure Planning Group as outlined

in 2003 SR 1842.

Proposed Legislation: None

BACKGROUND

The Legislative Coordinating Council

directed the Legislative Budget Committee to

study a possible Long-Range Revenue

Structure Planning Group (2003 SR 1842).

More specifically, “study the tax and revenue

structure of the state and make revenue

projections into the future by five to ten

years, develop governmental expenditure

projections for the same time period, review

potential revenue adjustment options and

study State General Fund cash flow

requirements.”

COMMITTEE ACTIVITIES

Staff of the Legislative Research

Department provided an overview of the

State’s tax and revenue structure. State and

local taxes grew by 4.5 percent over FY 2002;

local units of government spent 72 percent of

the total state and local taxes in FY 2003 and

general property tax is still the most

important single revenue producer, declining

over the last decades, however, seeing an

increase again since FY 1998. Individual

income taxes, corporation income taxes and

sales and use taxes decreased to 88 percent

of State General Fund (SGF) receipts in FY

2003, compared to 91 percent in FY 2002.

Staff noted that because property taxes are

increasing, individual income taxes are

declining and sales tax collections are

sluggish, the balance of a diversified tax

system appears to be eroding. Staff also

provided the Committee with information on

estimates of potential sales tax increases and

an estimate of a one percent surtax on

income tax liability.

The Director of Policy and Research,

Department of Revenue, presented an update

on the Kansas Tax Amnesty Program. Phase

1 of the program ended on June 30, 2003,

and the Department exceeded its

expectations for this phase of the program

with approximately $21.5 million collected.

Phase 2 was authorized by HB 2005 and was

to be conducted from October 1 through

November 30, 2003. The $19.5 million that

the Department expects to collect in Phase 2

would come mainly from individual income,

withholding and sales tax.

An Associate Professor from the Hugo

Wall School of Urban and Public Affairs,

Wichita State University, gave a presentation

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Kansas Legislative Research Department 2003 Budget Committee

concerning long-range revenue structure and

how the State of Kansas compares with

adjoining states in revenues and

expenditures. Because of the unusual

growth during the 1990’s, historical

information should go back at least 15 years

in any comparison of revenues to get a true

picture of the economy. He also stated that

the error rate increases as you project

revenue and expenditure further into the

future.

The Director of Taxation for the Kansas

Chamber of Commerce and Industry

presented testimony on the negative impact

of raising taxes on the Kansas business

economy.

The Executive Director of the League of

Kansas Municipalities, presented testimony

concerning the League’s position on giving

local governments the tools to finance their

own operations.

Staff also reviewed the current time line

that the Consensus Revenue Estimating

group uses in making revenue projections

and estimating the State’s cash flow and a

document on Long-Range Revenue Structure

Planning which details how the consensus

revenue estimates are affected by the

amnesty program. Also discussed was the

Committee’s concern about the impact that

federal legislation would have on the State’s

ability to tax certain telecommunication

services, as it does at the present time, if the

federal legislation is passed.

The Director of the Division of the

Budget presented a report on FY 2004

anticipated cash flow. The report indicates

that the cash flow low time will hit about

January 2004, is significant in February and

March and begins to improve in April. He

stated that there are only two tools to use in

controlling the State’s cash flow and those

are certificates of indebtedness and the

delaying of payments to schools. He also

stated that 5-10 year projections are difficult

to make.

The Executive Director of the Free State

Center presented information on the

background of Kansas STAMP, a computable

general equilibrium tax model developed by

The Beacon Hill Institute at Suffolk

University. The Kansas STAMP model is

designed to determine the economic effects

of changes in state-level taxes and

expenditures. The model at the present time

only looks at FY 2004; however, it is possible

to alter the model. It was noted that

Nebraska uses the program and may be

contacted for information.

Staff also updated the Committee on a

press release issue from the Department of

Revenue announcing that Phase 2 of tax

amnesty had generated a preliminary total of

$23.6 million, with the potential for an

additional $9 million when processing is

complete.

CONCLUSIONS AND RECOMMENDATIONS

The Committee recommends that the

2004 Session of the Legislature develop a

plan to include the allocation of State

General Fund moneys used to pay for KPERS

pensions for school personnel as a part of the

school finance formula to be reflected in the

base state aid per pupil.

The Committee believes that the issue of

long-range planning deserves an ongoing

review. Therefore, the Committee

recommends that the Legislative

Coordinating Council approve, for the 2004

Interim, the creation of the Long-Range

Revenue Structure Planning Group as

outlined in 2003 SR 1842.

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Kansas Legislative Research Department 2003 Budget Committee

Legislative Budget Committee

REVIEW THE CURRENT STATUS OF THE STATE

BUDGET, BOTH REVENUES AND EXPENDITURES

CONCLUSIONS AND RECOMMENDATIONS

After conducting its usual monitoring of the state budget, the Committee makes no

specific recommendations on this topic.

Proposed Legislation: None

BACKGROUND

The Legislative Budget Committee, as

provided by law (KSA 46-1208) can set its

own agenda. The Committee conducted its

usual monitoring of State General Fund

finances. Other topics that the Committee

reviewed included the following: the status

of the Department of Revenue’s tax amnesty

program, and the implementation of the

Streamlined Sales Tax Project; utilization of

office space in the capitol complex,

including the new maintenance surcharge

for state agencies; federal fiscal relief; the

Menninger Foundation settlement; interstate

water litigation; the implementation of 2003

SB 123 (alternative sentencing for some drug

offenders); the University Research and

Development Act (2002 HB 2690); the Higher

Education Coordination Act (1999 SB 345);

KAN-ED implementation; Department of

Social and Rehabilitation Services office

closures; food stamp error rates and federal

penalties; the Nursing Workforce Partnership

program; and modifications to the Legislative

Research Department’s Budget Analysis. The

Committee also toured the EDS facility in

Topeka. EDS contracts with the state to

process and verify claims submitted by

health care providers within the state.

COMMITTEE ACTIVITIES

State Finances. At each meeting, staff of

the Legislative Research Department

presented reports comparing estimated and

actual receipts to the State General Fund and

responded to questions raised by the

Committee. Staff also presented information

on: actual FY 2003 resources, demands, and

balances of the State General Fund; State

General Fund profiles; FY 2003 State General

Fund receipts; November 2003 Consensus

Revenue Estimates; personal income; and

state agency layoffs.

Status Report on the Department of

Revenue’s Tax Amnesty Program and the

Department of Revenue’s Streamlined Sales

Tax Project. The Secretary of Revenue

informed the Committee that Phase I of the

two-phased tax amnesty program was an

accelerated settlement program focusing on

assessments for individual and corporate

income tax as well as state and local sales

and compensating use tax. Phase 1 of the

program ended on June 30, 2003. The

Secretary stated that the program brought in

approximately $21.5 million in FY 2003 to

the State General Fund, approximately

$273,000 to the State Highway Fund and

approximately $1.8 million in local sales tax

collections. Phase 2 of the program was

authorized by 2003 HB 2005 and was

scheduled to be conducted between October

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Kansas Legislative Research Department 2003 Budget Committee

1, 2003 and November 30, 2003. Phase 2

offers a waiver of penalties and interest to

taxpayers with accounts in collection or who

are non-filers or under-reporters upon

payment in full of the underlying taxes, if

payment is received within the Tax Amnesty

time frame.

The Director of Policy and Research of

the Department of Revenue, also presented

information to the Committee on the tax

amnesty program. He indicated that Phase 1

of the program exceeded the Department’s

expectations with approximately $21.5

million collected. He also indicated that

Phase 2 of the program was anticipated to

collect $19.5 million, primarily from

individual income, withholding and sales

taxes.

On December 12, 2003, the Department

announced that Phase 2 of tax amnesty had

generated a preliminary total of $23.6

million, with the potential for an additional

$9.0 million when processing is complete.

In addition, the Secretary of Revenue

presented an update on the status of the

implementation of streamlined sales tax

legislation contained in 2003 HB 2005

including the sales tax uniformity provisions

states are required to enact before they can

become members of the Streamlined Sales

and Use Tax Agreement. The Secretary

noted that she and her staff are traveling

throughout the State working with

businesses and communities to help them

understand the compliance problems

associated with the law. One of the main

problems is determining the sales tax rate

associated with the destination of a sale.

The Secretary noted that the Department is

emphasizing compliance rather than strict

enforcement for the first six months and will

focus on accuracy in reporting the

destination of the sale. The Secretary noted

that seventeen other states have

implemented the streamlined sales tax

program and that it is necessary for Kansas to

participate in an effort to collect sales tax on

products being shipped into Kansas. The

Department’s Director of Policy and Research

noted that the Department is researching

many of the compliance problems and will

continue to keep the Legislature aware of

problems and progress on the

implementation of the act.

Utilization of Office Space in the Capitol

Complex. The Secretary of Administration

presented information to the Committee on

capitol complex office space issues. He

noted that the Department is researching the

various options available to the State, either

renovation or leasing of office space, and the

best approach to take. With regard to the

deteriorating condition of the Docking and

Landon buildings, the Secretary stated that

the Department is researching the

availability of lease space in and around

Topeka, and the cost of renovating these two

buildings to determine what is most cost

effective for the State. The Secretary also

presented testimony regarding the

“maintenance surcharge” proposal the

Department has instituted with the FY 2005

budget. The decision has been made to

assess a rental surcharge on all state agencies

who lease space in Shawnee County to cover

routine maintenance of the State Capitol,

Kansas Judicial Center and Cedar Crest.

Federal Fiscal Relief. Staff presented

information regarding federal fiscal relief

provisions contained in federal legislation

(the Jobs and Growth Tax Relief

Reconciliation Act of 2003). Under

provisions of the legislation, the State of

Kansas is expected to receive a total of

$160.7 million over a two fiscal year period

(FY 2003 and FY 2004). Of that amount,

$91.4 million came to the state in the form of

a flexible grant which is available for any

purpose. That amount has been deposited

directly to the State General Fund. The

remaining amount, estimated at $69.3

million, will come to the state in the form of

increased Medicaid funding.

Menninger Foundation Settlement. The

Chief Deputy of the Civil Division of the

Attorney General’s office and an Assistant

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Kansas Legislative Research Department 2003 Budget Committee

Attorney General presented an update on the

Menninger Foundation settlement. The

Attorney General’s Office signed a settlement

agreement with the Menninger Foundation

that allowed the Menninger Foundation to

transfer its operations from Kansas to

Houston, Texas. The Menninger Foundation

campus consisted of 515 total acres with

properties available for sale valued at

approximately $27 million. The chapel on

the Menninger Campus, valued at $1 million,

has been donated to Washburn University

with an endowment of $82,000; three

resident homes will be donated to Valeo

Behavioral Health Care (a not-for-profit

organization associated with Shawnee

County and Crittenton Services) valued at

$1.9 million; and artifacts from the

Menninger operation have been donated to

the Topeka/Shawnee County Library with an

endowment of $50,000 for maintenance of

those artifacts. The OPUS firm is a

development firm, hired by the Menninger

Foundation, to assist in the development and

sale of the property. Once a pension

underfunding issue is settled, the Menninger

Foundation will receive 50 percent from the

sale of the campus property and the other 50

percent will go to the state.

Interstate Water Litigation. An Assistant

Attorney General presented an update on the

status of the Republican River litigation. He

stated that funds will be needed to

aggressively monitor the water model to

ensure that Kansas is getting the water it is

due; however, he could not provide the

Committee with an exact amount.

Referring to the lawsuit regarding the

Arkansas River, the Assistant Attorney

General stated that there are two remaining

issues: first, how to calculate the interest for

the years 1950-1994 and secondly, how the

Arkansas River Compact will be

administered. It is anticipated that the U.S.

Supreme Court will issue a final decision

around May or June 2004.

Implementation of 2003 SB 123. Staff

provided the Committee with background

information on 2003 SB 123, which provides

alternative sentencing procedures for certain

drug offenders. During the 2003 Session, the

Legislature enacted SB 123, which addresses

how the state treats drug offenders – moving

from a punishment model to a treatment

model. SB 123, effective November 1, 2003,

establishes a non-prison sentence of drug

abuse treatment of not to exceed 18 months,

amends the criminal statutes related to drug

possessions to reduce all criminal penalties

involving illegal drug possession regardless

of the second, third, or subsequent

possession conviction to a level 4 drug grid

offense. If a defendant violates the treatment

sentence, the defendant will be subjected to

a nonprison sanction which could include,

among other things, up to 60 days in the

county jail.

The cost for all drug abuse assessments

and certified drug abuse treatment programs

for any person are to be paid by the Kansas

Sentencing Commission from funds

appropriated for this purpose. The

sentencing court will determine the extent, if

any, that the offender is able to pay for such

assessment and treatment and these

payments may be used to offset costs to the

state. A total of $5.7 million from the State

General Fund was approved to fund the

provisions of the bill in FY 2004.

The Secretary of Corrections and the

Executive Director of the Kansas Sentencing

Commission also provided information on

the implementation of SB 123. The

Executive Director of the Sentencing

Commission noted that extra funding might

be needed in March or April 2004, because

of the large influx of offenders with the

implementation of the bill on November 1st.

The Secretary of Corrections explained

that the two agencies are still meeting to

work out the details of the funding sources

and accounting between the Department of

Corrections, Sentencing Commission and

Community Corrections programs around the

state.

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Kansas Legislative Research Department 2003 Budget Committee

As of September 2003, the Executive

Director of the Sentencing Commission

noted that 130 licensed treatment agencies

have been certified, a mental health

screening instrument has been chosen,

Community Corrections plans are being

received and a bill-paying process is being

implemented.

University Research and Development

Act (2002 HB 2690). The Chairperson of the

University Research and Development

Corporation gave a status report on the

University Research and Development Act

which authorized the issuance of not more

than $120.0 million in bonds to fund a

portion of the financing for research facilities

at the state universities. The bill also

directed the Board of Regents to form a

subsidiary corporation to oversee and

implement the projects.

The proceeds of the research bonds are to

be used for four specific projects:

!Constructing the Food Safety and

Security Research Facility at Kansas

State University;

!Constructing the Biomedical Research

Facility at the University of Kansas

Medical Center;

!Expanding the Aviation Engineering

Complex at Wichita State University; and

!Equipping the Biosciences Research

Building at the University of Kansas.

The Chairperson of the Research and

Development Corporation noted that

approximately $80.0 million of the bonds

have been issued to date and that architects

had been hired for all three building

projects. The project at Kansas State

University is in the design phase.

Construction at the University of Kansas

Medical Center is scheduled to begin in the

spring of 2004. The architect for the Wichita

State University project has just been

selected. The equipment for the University

of Kansas project has been procured, but the

major component will not be online for at

least one year.

Higher Education Coordination Act

(1999 SB 345). The President and Chief

Executive Officer of the Kansas Board of

Regents provided information on the

implementation of the Higher Education

Coordination Act. The Higher Education

Coordination Act transferred supervision of

community colleges, area vocational schools,

technical colleges, adult education programs,

and proprietary schools from the Department

of Education to the Board of Regents. The

responsibilities of the Board of Regents also

changed to include coordination of all

postsecondary education in the state

including Washburn University and private

colleges and universities.

The legislation also contained various

funding mechanisms including an operating

grant formula to provide state funding for the

community colleges and Washburn

University, faculty salary enhancements in

an amount equal to the community college

operating grant annual increase, and a

performance funding component through

which an institution could receive up to an

additional 2.0 percent of its State General

Fund appropriation. The testimony included

projections for full implementation of years

three and four of the Higher Education

Coordination Act.

KAN-ED Implementation. The President

and Chief Executive Officer of the Kansas

Board of Regents also gave a status report on

the implementation of KAN-ED which is a

broadband technology-based network to

which schools, libraries, and hospitals could

connect for broadband internet access and

intranet access for distance learning. He

reported that the KAN-ED project was within

budget and on time.

Department of Social and Rehabilitation

Services (SRS) Office Closures. The Deputy

Secretary for Integrated Service Delivery of

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Kansas Legislative Research Department 2003 Budget Committee

SRS, in compliance with a proviso contained

in 2003 HB 2444, presented the Committee

with regular updates on planned SRS office

closures. She provided an update on the

closure of twenty-eight offices and the

closure of an additional 22 offices between

January and June 2004. She stated that SRS

is continuing to improve customer access to

services in the areas where the offices have

been closed. Customers are able to use a

toll-free number and do not have to travel to

an office location. SRS has worked with the

staff of the closed offices to relocate to other

areas.

The Deputy Secretary also informed the

Committee that due to the timing of the

closures, FY 2003 estimated savings of

$200,000 related to the office closures were

not realized. She estimated total savings of

$500,000 in FY 2004 and $1.0 million in FY

2005.

Federal Penalties on the Food Stamp

Error Rate. The Deputy Secretary for

Integrated Service Delivery of SRS presented

an update on federal penalties on the food

stamp error rate. She stated that SRS has

completed a number of policy changes to

impact the error rate and continues to work

on other improvements to bring the error rate

within the federal guidelines. She indicated

that because a lot of the recipients are

minimum wage earners and their income

varies, the agency is going to a policy of six-

month income averaging to help reduce the

error rate. She noted that since it was too

late to correct FY 2003 reporting, the State

was given a one-year grace period to impact

the error rate. The agency is concentrating

its efforts on FY 2004 and FY 2005 to bring

the error rate below the national average.

Tour of EDS. The Committee toured the

EDS facility in Topeka. The State of Kansas

is contracting with EDS to process and verify

claims submitted by health care providers

within the state. Representatives of EDS

explained the software and the process used

to verify the claims.

Kansas Nursing Workforce Partnership.

A representative of the Kansas Nursing

Workforce Partnership presented testimony

on the nursing shortage in Kansas. Among

the proposals of the group are to exempt

licensed nurses who are KPERS retirees and

who return to work in certain institutions

from the $15,000 earnings cap. The group

also recommends increased funding for the

Kansas Nursing Service Scholarship Program

and the continued implementation of the

Higher Education Coordination Act (1999 SB

345).

Legislative Research Department Budget

Analysis. Staff of the Legislative Research

Department presented the Committee with

proposed changes in format to the

Department’s budget analysis. Generally,

those changes are designed to make the

analysis more concise, to create a more

logical flow from more general overview

information to a greater level of detail, and to

provide analysts with more flexibility to

adapt the analysis to specific agencies or

issues.

CONCLUSIONS AND RECOMMENDATIONS

After conducting its usual monitoring of

the state budget, the Committee makes no

recommendations on this topic.

JOINT COMMITTEES

Report of the

Joint Committee on Legislative

Educational Planning

to the

2004 Kansas Legislature

CHAIRPERSON: Senator Dwayne Umbarger

VICE-CHAIRPERSON: Representative Kathe Decker

RANKING MINORITY MEMBER: Senator Christine Downey

OTHER MEMBERS: Senators Robert Lyon, Lana Oleen, Mark Taddiken, and John Vratil;

Representatives Barbara Ballard, Carol Edward Beggs, Bill Mason, Eber Phelps, Larry

Powell, and Bill Reardon

STUDY TOPICS

Elementary and Secondary Education and Postsecondary Education

December 2003

Kansas Legislative Research Department 2003 LEPC

Legislative Educational Planning Committee

ELEMENTARY AND SECONDARY EDUCATION

POSTSECONDARY EDUCATION

CONCLUSIONS AND RECOMMENDATIONS

The Legislative Educational Planning Committee recommends 11 bills for introduction during

the 2004 Session. One bill would allow flexibility for school districts that are in the process of

consolidating, while retaining current deadlines that provide a financial incentive for districts

that consolidate prior to July 1, 2004. Under the proposal, districts that have initiated the

process, but do not complete it until July 1, 2005, still would qualify for the incentive, but for

a reduced period of time. Legislation is recommended that would increase funding for Smart

Start Kansas, from approximately $3.0 million to $10.0 million, by increasing the transfer of

tobacco revenues from the Kansas Endowment for Youth Fund to the Children’s Initiatives Fund.

Legislation concerning Learning Quest is recommended for introduction to increase the amount

of the income tax deduction for account owners from $2,000 to $4,000 for individual taxpayers

and from $4,000 to $8,000 for married couples filing jointly and to do other things recommended

by the State Treasurer. Legislation patterned after 2003 HB 2145, which would give

undocumented immigrants resident status for in-state tuition purposes, is recommended, with

provisions intended to eliminate some of the unintended consequences of the original bill.

(Introduction of this legislation is endorsed by the State Board of Regents.) Seven bills are

recommended for introduction at the request of the State Board of Regents. They would

authorize technical colleges to make mill levies for operating expenditures and adult basic

education (two bills); credit interest earned on the General Fees Fund and certain other special

revenue funds back to the fund that generates the earnings and not to the State General Fund;

authorize the State Board of Regents to charge a fee for activities related to approving private

degree granting institutions and repeal the registration requirement pertaining to out-of-state

schools that offer, in Kansas, fewer than 30 hours leading to a degree (two bills); authorize

Kansas State University to sell land to the K-State Foundation for the purpose of constructing

a hotel to serve as an on-campus laboratory for the hotel and restaurant management program;

and authorize expenditures from the General Fees Fund for capital improvements as well as the

current uses of salaries and wages and other operating expenditures.

Proposed Legislation: The Committee recommends 11 bills.

BACKGROUND

The Legislative Educational Planning

Committee (LEPC) is a statutorily-authorized

committee charged with jurisdiction over

preschool, elementary, secondary, and

postsecondary education. Its duties include

planning for public and private

postsecondary education in Kansas, including

vocational and technical education, and

monitoring the implementation and ongoing

operating of the Kansas Higher Education

Coordination Act. The Committee consists of

seven House members and six Senate

members appointed by the Legislative

Coordinating Council (LCC). The Committee

may initiate its own studies or may be

assigned proposals by the LCC. During the

2003 Interim, the LCC charged the Committee

with studying positive behavior supports.

All items considered by the Committee

during the 2003 Interim are reviewed in the

material that follows, along with Committee

recommendations and proposed legislation.

Kansas Legislative Research Department 2003 LEPC

ELEMENTARY AND

SECONDARY EDUCATION

Positive Behavior Supports

The Legislative Coordinating Council

assigned the Committee the topic of positive

behavior supports, a behavioral management

system characterized by strategies to reduce

inappropriate behavior, teach more

appropriate behavior, and provide supports

necessary to reward appropriate behavior.

The concept emerged out of a dissatisfaction

with traditional methods for addressing

serious behavior problems. A number of

conferees appeared in support of the concept,

including staff from the Beach Center on

Disability, University of Kansas, which has

been conducting research on positive

behavior support for the past 15 years.

Proponents of positive behavior supports

advocate proposed legislation which would

authorize the creation of an incentive

program for schools that wish to implement

school-wide positive behavior supports

programs. The bill would not impose a

mandate on schools and it would be up to the

school district to decide whether it wants to

implement the program and to determine the

specific curriculum.

According to proponents, the focus of

positive behavior supports is to teach new

skills and to change the school environment

so that behavior problems do not occur. One

result is more instructional time for teachers

because less time has to be spent on

disciplinary matters and a reduction in the

number of students who have to be referred

to school officials for disciplinary reasons.

The representative of Kansas Advocacy and

Protective Services, Inc., encouraged the

Committee to consider the savings to the state

in funding for correctional institutions and

programs as the result of bad behavior being

altered by positive behavior supports.

Conferees told the Committee that the

Individuals with Disabilities Education Act

(IDEA) references positive behavior supports

as a strategy for dealing with student

behavior and it is likely that there will be an

attempt in Congress to align the IDEA with

the No Child Left Behind Act so that positive

behavior supports will have broader

application to all students, not just children

in special education.

A school principal whose school uses

positive behavior supports management

techniques told the Committee that the

University of Kansas provided doctoral

students who came to the school to train

teachers in sessions that lasted one afternoon

for three weeks. As a followup, University of

Kansas students visited classrooms

periodically for several months. Staff from

the University of Kansas’ Beach Center said

that they would be happy to partner with

other universities to teach positive behavior

supports training models. Presently, the

University of Kansas has a five-year federal

grant to provide technical assistance to

schools to implement positive behavior

supports and other federal implementation

grants are available. The University of

Kansas website that provides assistance to

implement positive behavior supports also is

federally-funded.

Dr. Rud Turnbull, Co-Director of the

Beach Center, proposed to the Committee that

schools should make a one-year commitment

to implement positive behavior supports,

using resources from the University of Kansas

for training and resources of the individual

districts and the State Department of

Education.

Other conferees expressed concerns about

legislation authorizing an incentive grant

program for positive behavior supports. The

director of Special Education at the Southeast

Kansas Interlocal #637 questioned why

positive behavior supports is being singled

out as an exemplary program. He said there

are a number of methods and strategies being

used by schools that also obtain good results.

He estimated that it would cost his interlocal

$67,000 to pay for staff training to implement

positive behavior supports. He said an

incentive grant program would help schools

that want to implement the strategy, but he

urged the Committee not to impose a blanket

mandate on all districts using a single

Kansas Legislative Research Department 2003 LEPC

strategy such as positive behavior supports.

The director of ANW Special Education

Cooperative #603 questioned whether

adequate staff training can be provided

without extensive training sessions,

particularly considering that the children

being dealt with often are the hardest to

discipline or teach. He said Kansas schools

are a relatively safe environment in which to

learn and that Kansas can be a leader in the

nation in student attainment. He asked the

Committee not to endorse a single behavior

management strategy, but instead allow

schools the flexibility to select from among

the various strategies that are successful.

The representative of the Kansas

Association of School Boards opposed the

proposed bill for two reasons: First, he said

local boards of education are in the best

position to determine what strategies they

should implement, not the Legislature.

Second, the proposed bill says that positive

behavior supports in participating schools

will be implemented by a “behavior support

team” that includes parents and school

employees. The Association’s representative

said local boards and their employees are

legally responsible for the operations of the

school district and authority should not be

delegated to some other entity.

The representative of the State

Department of Education said that the State

Department of Education would need

additional money to assist schools in

implementing positive behavior supports.

Recommendation. Testimony before the

Committee indicates that some schools have

implemented positive behavior supports with

great success. Other testimony indicates that

some districts have chosen other systems or

programs and are equally pleased with the

results. The Committee notes that local

boards have the authority to select programs

they think are appropriate for their

communities. The Committee is impressed

with the benefits that have been realized

using positive behavior supports, but does

not believe it is appropriate to implement an

incentive grant program that promotes this

particular method over other, equally

successful, methods, particularly in a time of

scarce financial resources.

Property Tax Accelerator

The 2003 Legislature enacted HB 2397,

which gave the Governor the option to

accelerate the payment date for the second

half of the prior year’s property taxes from

June 20 to May 10. That option was

exercised, the effect on school districts being

that the second half of taxes, which currently

must be paid by June 20 and distributed to

schools July 20 (in the next fiscal year), will

be due May 10 and distributed to school

districts on June 5 (the current fiscal year).

The result is that, in the year in which the

bill is implemented (school year 2003-04),

school districts will receive approximately

one-third more property tax revenue than

usual, a “windfall” that will call for a

reduction of an estimated $154.8 million in

general and supplemental general state aid in

FY 2004, based on school finance estimates

made November 18, 2003.

This windfall is the result of districts

getting three major distributions of property

tax payments, not two. As is the case under

current law, they will get approximately 40

percent of property tax payments in July of

2003, (from the second half of payments due

June 20), 50 percent in January of 2004 (from

the first half of payments that would be due

December 20), and 40 percent in June of 2004

(from the second half of payments that would

be due under the accelerator May 10). Once

the transition year under the accelerator is

complete, the number of major payments

would revert to two: one in January and the

other in June.

These changes will impact school district

local option budgets. Districts will have

available in school year 2003-04 more

property tax revenues than normal to fund

their local option budgets, enabling them to

reduce their mill levies. However, after the

transition year, districts will have to increase

their mill levies again because only two major

property tax distributions would be made.

Kansas Legislative Research Department 2003 LEPC

A concern expressed during the meeting

by the representative of the State Department

of Education is that school districts in FY

2005 will not get a major property tax

distribution until six months into the fiscal

year. For some districts, this will present a

cash-flow problem and, in those districts that

derive most of their revenues from local

resources, could result in the State

Department of Education having to “loan”

them state aid, which would be returned to

the state as soon as local resources are

adequate.

School District Consolidation

The Committee received a staff report

entitled Unified School District Consolidation,

which described parallel findings of the 1999

study of school district consolidation

conducted by the consulting firm of

Augenblick and Myers (A&M) and

summarized five bills concerning

consolidation that were considered during

the 2003 Session.

Since the A&M report has been published,

two consolidations have occurred and one is

scheduled to occur next year:

!Effective July 1, 2002–USD 281 (Hill City)

and USD 280 (West Graham-Morland)

!Effective July 1, 2003–USD 317 (Herndon)

and USD 318 (Atwood) consolidated into

a new district, USD 105.

!Effective July 1, 2004–(USD 302 (Smoky

Hill/Ransom) and USD 304 (Bazine)

consolidated into a new district, USD 106.

Consolidation bills considered during the

2003 Session were:

!HB 2195–On July 1, 2005, all school

districts would dissolve except those in

Johnson, Sedgwick, and Wyandotte

Counties. Dissolved school districts

would become a county unit except for

the three exempted counties.

!HB 2209–A county with a population of

10,000 or less that has two or more school

districts within the county boundaries

would have to consolidate to form one

school district.

!HB 2210–School districts would be

required to consolidate certain services or

consolidate in their entirety.

!HB 2253–The State Board of Education

would be required to conduct a study of

all districts in Kansas with an enrollment

of 400 students or fewer and less than 200

square miles of territory.

!HB 2256–The State Board of Education

would be required to conduct a study of

all districts in Kansas to analyze the

feasibility of creating regional education

districts.

Dividing the state into 40 regional

education districts (REDS) was a specific

proposal by Dr. Sharol Little, Ken Kennedy,

Dr. Morris Reeves, and Dr. Gary Norris,

current or retired school administrators.

Specific components of the proposal are the

following:

!REDs should be formed in Kansas over

the next five to ten years, with governing

boards and attendance centers determined

by geographical needs, and curricula

determined so as to provide a suitable

education.

!Conversion to REDs should be phased in,

with consideration given to changing to

an equitable system of school finance

which funds necessary small schools,

reduced attendance centers as

appropriate, increases in teacher

compensation to the national average,

affordable health care, and provision for

large districts to petition the state to

separate into smaller districts.

!Many services should be provided in a

cooperative method in order to reduce

unnecessary duplication, improve

services, and reduce costs.

Kansas Legislative Research Department 2003 LEPC

!Cost savings that result from the regional

structures should be retained by the

regions and used to enhance educational

opportunities by, for example, expanding

offerings, reducing class size, or

increasing teacher salaries and benefits.

!Those communities that lose an

attendance center should be provided

financial compensation or community

development incentives to convert school

facilities to other uses, such as

community centers or senior citizen

centers, or to raze buildings if no other

uses can be determined.

The Committee also heard from Dee

McKee, Director of Special Education for USD

383 (Manhattan), who has developed the

following list of conditions that ought to exist

in order to make consolidation less painful

and more efficient:

!Financial incentives or support should be

provided for an auditor or accountant

who is neutral and acceptable to

participants who will help with planning,

analyze funding and expenditure

information, and develop an operational

budget.

!Funding should be provided for an

attorney experienced in Kansas school

restructuring laws and options. Each

board may need its own attorney.

!Funding should be provided for advisors

who are expert in conflict resolution,

interest-based bargaining, and other areas

of potential disagreement who would help

boards work through conflicts and help

“isolate” them from emotional

repercussions.

Rick Bowden, Kansas State High School

Activities Association, responded to concerns

that rules and regulations of the Association

may be a barrier to school district

consolidation. Mr. Bowden said the

controversy over the application of the

Association’s rules in a consolidation

situation usually centers around strong local

opposition to consolidation, not on the

particular rule. He said the rule usually

involved is Rule 29, the “cooperative

agreement rule,” which allows two member

schools to join to form a cooperative athletic

team or program. (More than two schools can

join for a non-athletic activity.) The

combined team cannot compete against a

team in a smaller enrollment classification.

Schools are classified on the basis of student

population so that schools compete against

schools with student bodies of comparable

size. Classifications are determined annually,

except in the case of football, which is

determined on a two-year basis in order to

accommodate the scheduling of football

games. Association rules also prohibit eight-

man football teams from competing in post-

season games if the school’s enrollment is

more than 100 students.

According to Mr. Bowden, controversy

about the Association’s rules in relation to

consolidation generally has to do with

combined schools being placed in a larger

enrollment classification.

Recommendation. The Committee

remains committed to the policy it enacted

during the 2002 Session, which provides an

incentive for school districts that merge prior

to July 1, 2004 (KSA 72-6445). While not

wanting to change the deadline, it wishes to

offer some flexibility for districts that might

not meet the present statutory conditions by

giving districts that are in the process of

consolidating until July 1, 2005, to actually

complete the process. However, a district

that does not complete the process until July

1, 2005, would forfeit one year of the

financial incentive afforded under current

law.

KSA 72-6445, enacted by the 2002

Legislature, provides that, effective with the

2001-02 school year and prior to July 1, 2004,

a school district which is enlarged due to

disorganization of one district and attachment

of its territory to the enlarged district is

entitled to State Financial Aid (school district

general fund budget) in the current school

Kansas Legislative Research Department 2003 LEPC

year equal to the State Financial Aid of the

districts as they were defined in the year

preceding the disorganization and

attachment. For the next three school years,

the district is entitled to the amount of State

Financial Aid it received in the preceding

year under this provision or the amount of

State Financial Aid the district would receive

under operation of the school finance formula

in that year, whichever is greater.

If the attachment occurs on or after July 1,

2004, the district receives the State Financial

Aid of the districts for the year in which the

attachment was implemented. For the next

school year, the State Financial Aid of the

district is the greater of the amount the

district received in the preceding year or the

amount the district would receive under

operation of the school finance formula in

that year. These provisions apply only when

all of the territory of the district being

disorganized is attached to one other district.

The Committee recommends the

introduction of legislation to modify

somewhat the financial incentive to school

districts to consolidate. The recommendation

would affect those districts which intend to

consolidate but cannot meet the July 1, 2004,

deadline. To qualify, school boards would

have to have taken official action to

consolidate by July 1, 2004, and the

consolidation process would have to be

completed by July 1, 2005. The districts shall

be considered to have completed the process

when the State Board of Education issues an

order approving the consolidation. Districts

that do not complete the process until July 1,

2005, would qualify for two additional years

to receive the amount of State Financial aid

they received in the preceding year or the

amount of State Financial aid they would

receive under operation of the school finance

formula in that year, whichever is greater. As

noted above, current law provides a financial

incentive for three years to districts which

have completed the consolidation process by

July 1, 2004.

The Committee continues to be concerned

about small districts that do not have the

resources to offer all of the courses that

comprise the Regents prescribed curriculum

for entrance into a state university and

considers the enrichment of curricular

offerings one of the possible benefits of

school district consolidation. Some of the

districts that do not have the resources to

offer the entire curriculum deliver courses

through distance learning, interactive video,

and other technologies. Other districts offer

courses in alternate years.

Implementation of 2003 SB 83

The Committee reviewed the

implementation of legislation enacted in 2003

(SB 83), which requires each school district,

effective July 1, 2004, to prepare a profile of

the school district budget. The profile is to

be based on the school district’s adopted

budget and must include any information the

State Department of Education specifies,

including information about the governing

body of the school district and an overview of

the school district budget. The profile must

be on file at the administrative offices of the

district and be made available upon request.

A statement that the profile is available must

be published along with the required notice

of the public hearing on the adopted budget.

Although the implementation date for the

school district budget profiles is not until July

1, 2004, the State Department of Education

made publication of a profile optional several

years ago and developed the capacity for

school districts to generate and print a profile

at the time they submit their approved

budgets to the State Department of Education.

For that reason, full implementation on a

statewide basis was possible in a relatively

short amount of time and all districts have a

budget profile for the current school year.

Also required by the legislation is the

“Budget at a Glance,” a condensed version of

the profile. Both documents are on the Kansas

State Department of Education Website and

contain other websites which link users to

information on school finance, building

report cards, and other elementary-secondary

statistics, including attendance, dropout

rates, crime and violence reports, assessment

results, and salary information about

personnel.

Kansas Legislative Research Department 2003 LEPC

Recommendation. The Committee

suggests that, in future profiles, any item that

shows a total expenditure also will show that

expenditure on a per-pupil basis.

Out-of-State Students

The House Committee on Education

directed the State Department of Education to

survey contiguous states to determine

policies relating to students enrolling in

school districts outside their state of

residence. Impetus for the survey was

concern during the 2003 Session about the

number of students from border states who

are being educated in Kansas school districts

at Kansas’ expense.

According to the survey, Colorado has no

law dealing with a student attending a school

district in another state. Missouri allows

students to cross the state line to attend a

Kansas school, subject to applicable Kansas

law. Nebraska requires students who live on

the Kansas-Nebraska border to get permission

from their home school district to attend

school in Kansas. Under certain conditions,

the board of education of the sending

Nebraska school district may, at its

discretion, pay tuition to the Kansas school.

Oklahoma counts students who attend school

in Kansas for payment to the Oklahoma

school district of residence, but does not pay

any aid to the Kansas district in which the

student is enrolled.

If a student comes from another state to

enroll, Colorado authorizes tuition to be

charged. (In 2002, 15 students from Kansas

were charged tuition by Colorado school

districts.) Missouri requires non-resident

students to pay tuition. Nebraska school

districts may admit residents of another state

and collect tuition at a rate determined by the

local board. Oklahoma school districts may

provide an education to non-residents,

pursuant to a contract. Such students are not

counted in the district’s enrollment nor does

the district receive Oklahoma state aid for

them.

Information on the number of students

attending Kansas schools who are residents of

other states is as follows:

School Year 2002-03 614

School Year 2001-02 675

School Year 2000-01 681

School Year 1999-00 627

School Year 1998-99 551

Kansas Children’s Campaign

Dick Bond, Chair of the Kansas Children’s

Campaign, and members Rochelle Chronister,

Pat Hurley, and Tim Emert met with the

Committee to describe various facets of the

Campaign. The Campaign, begun in October

2001, is a non-partisan network with the goal

of improving lives of children and families in

Kansas. The Campaign is an initiative of

Kansas Action for Children, which is a

private, nonprofit, citizen-based corporation.

The Campaign has identified the following

goals:

!Early Care and Education;

!Parent and Family Support Services; and

!Out-of School Programs.

A major initiative of the Campaign is

increased support for Smart Start Kansas.

Smart Start focuses attention on young

children, at the time in their lives when the

greatest brain development is occurring. The

fact that Smart Start is a framework within

which local communities can develop their

own programs means that each of the seven

Smart Start projects in Kansas is different and

geared to local needs. However, the need in

Kansas is not being met with the current level

of funding, which has been around $3.0

million per year. North Carolina, by contrast,

funds its Smart State Program in the range of

$200.0 million per year. As a result, in

Kansas, only 13,136 children are served in

Smart Start programs, of the 189,000 children

who are eligible.

Members of the Children’s Campaign told

the Committee that one positive result from

additional funding for early-childhood

programs is lower turnover rates for childcare

Kansas Legislative Research Department 2003 LEPC

workers as the result of better educated staff.

Other benefits of early-childhood programs

include lower expenditures for special

education as the result of early identification

of children with problems.

The Committee was told that the private-

sector is interested in early-childhood

intervention programs as a way of developing

a better educated workforce to meet business

needs. The fact that in ten years, 85 percent

of the workforce will be working parents

means that a large number of children will be

cared for by providers other than their

parents and if those child care facilities and

programs are substandard, the future

workforce will not be developing skills

workers need to succeed. According to the

Children’s Campaign, many child care

centers in Kansas only meet minimum

standards and an estimated one in three

children enter kindergarten without skills to

succeed. The Committee was told that

investments by business in early childhood

programs increase in the short term 400

percent, as measured by improvements in

attendance, turnover, productivity, and

commitment to the job. Investments increase

by 700 percent in the long term, as measured

by less reliance on social services, higher

salaries, lower crime rates, and fewer referrals

to special education.

The Children’s Campaign has a strategy

for funding its recommendations, with the

emphasis on increased funding for Smart

Start Kansas. The Campaign recommends that

funding for Smart Start be increased from

around $3.0 million per year to $10.0 million,

with funding to come from tobacco money

transferred to the Children’s Initiatives Fund

(CIF). Because available funding from the

CIF already is committed, the

recommendation would entail a

reexamination of currently-funded projects to

determine if they actually meet the criteria

envisioned when the CIF was created in 1999.

The intention of the Children’s Campaign

would be that CIF funding for programs that

should be funded from the State General

Fund would terminate, thus freeing money

for programs that more legitimately should be

funded from tobacco money, such as Smart

Start.

The Campaign has no specific

recommendation as to which programs

currently funded from the CIF would be

unfunded in order to generate additional

funds for Smart Start, except to say that

programs funded by the CIF should be those

that have been subjected to rigorous

evaluation.

Recommendation. The Committee

concurs with the policy that early childhood

programs should be a priority for state

funding because of the value of early

intervention. For that reason, the Committee

supports the recommendation that funding

for Smart Start Kansas be increased.

The Committee agrees with the

recommendation that existing programs

funded from the CIF be reviewed to

determine whether they meet the statutory

guidelines set forth for programs funded from

the CIF, which include that the programs

have a clearly articulated objective to be

achieved with any funds received, that they

are data-driven and outcomes-based, that data

are available to benchmark the program’s

desired outcomes, and that an evaluation and

assessment component is part of the program

design. The Committee agrees that any

program that does not meet the guidelines

should be considered for termination or for

more appropriate funding from some other

source.

The Committee supports the

recommendation that funding for Smart Start

be increased from approximately $3.0 million

to $10.0 million, with the additional funding

to come from increasing the transfer of

tobacco settlement payments in the Kansas

Endowment for Youth (KEY) Fund to the

Children’s Initiatives Fund (CIF). Transfers

from the KEY Fund to the CIF currently are

statutorily set at $45.0 million, plus an

annual inflationary increase. The effect of

the recommendation would be to increase the

transfer by approximately $7.0 million, with

a total of $10.0 million being appropriated

from the CIF for Smart Start.

Kansas Legislative Research Department 2003 LEPC

The Committee endorses this

recommendation because it will make more

funding available for early childhood

programs at the community level and is

recommending the introduction of legislation

to increase the transfer from the KEY Fund to

the CIF.

Joint Meeting with the State

Board of Education

Committee members met at the Office of

the State Board of Education for the purpose

of a joint meeting with State Board members.

Subjects considered include the following:

Update on Federal Legislation. Dr. Alexa

Pochowski discussed implementation of the

No Child Left Behind Act and pointed out

that the numbers of students who are

disadvantaged, disabled, who are minority-

group members, or who speak English as a

second language are increasing. These trends

have implications for the No Child Act

because the Act requires adequate yearly

progress by targeted subgroups.

Achievement in Kansas is improving in

all areas on the basis of state assessments and

Kansas consistently ranks in the top ten states

on the basis of the National Assessment of

Education Progress (NAEP). Nevertheless,

even though the achievement gap is

narrowing, there are gaps in the performance

of certain subgroups that are targeted by the

No Child legislation.

With regard to staff, the percent of highly

qualified educators is high, but the number of

people entering the field is declining and the

attrition rate for educators in the first five

years of practice is high. Teaching

requirements imposed by the No Child Act

include:

!All teachers of core academic subjects in

Title I schools hired after the first day of

2002-03 must be highly qualified.

!By the end of 2005-06, all teachers of core

academic subjects must be highly

qualified by demonstrating competence in

all academic subjects taught.

!Information on teacher qualifications in

Title I schools must be reported to parents

and included on building, districts, and

state report cards.

Teachers in Kansas must possess one of

the following in order to be considered

competent in their teaching assignment or

content area:

!Must have passed a content test;

!Must be endorsed in content area;

!Must have a major or its equivalent (30

hours);

!Must have an advanced degree in a

content area;

!Must have National Board certification; or

!Must have 100 points on the Kansas

rubric, a combination of points based on

experience, content coursework, awards,

and other items. (The rubric is serving as

a model for the nation.)

The No Child requirements for

paraprofessionals is that those who work in

Title I schools must have an associate’s

degree, two years of college, or pass a test of

their ability to help others learn reading,

math, and writing.

The Committee was informed that the

State Board has several concerns with the No

Child legislation. First, the law requires 100

percent proficiency, a goal that may be

impossible to attain, rather than “progress

made.” The Act makes no exception for the

proficiency requirement, even though some

children with disabilities may never be able

to attain proficiency. Second, the Act uses

only a single measure of improvement and

progress (state assessments) rather than

multiple measures that may be more

appropriate. The Act also would penalize a

school that fails to meet only one measure out

of 44. In addition, there are concerns that

federal funding is for the provision of

technical assistance to Title I schools only

and will not be available to help all schools

affected by the Act’s requirements.

Dr. Pochowski also reviewed action

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relating to the Individuals with Disabilities

Education Act, which likely will not be

reauthorized by Congress until spring of

2004. Both the House and Senate versions of

the bill include a focus on student

achievement over legalistic procedural

compliance; the goal of reducing paperwork;

promotion of full incorporation of special

education into the general curriculum;

alignment of special education with the No

Child Act; and allowance for new approaches

to determining learning disabilities.

State Board of Education FY 2005 Budget

Request. Major items in the State Board of

Education’s FY 2005 budget request are the

following:

!Increase in Base State Aid Per Pupil

(BSAPP). The State Department proposes

to increase BSAPP by $100 (from the

allotment rate of $3,863 to $3,963, or $73

over the statutory rate of $3,890), at an

additional cost of $58,026,000 from the

State General Fund. The total request for

general state aid in FY 2005 would be

$1,840,822,000.

!Fund Special Education at the 90 Percent

Rate. An additional $25,000,000 from the

State General Fund is requested to fund

special education excess costs at the 90

percent rate in FY 2005, for a total

appropriation of $276,016,845. In

addition, the State Board requests

authority to pilot a program to include

special education funding in BSAPP and

eliminate categorical aid.

!K-3 Reading and Mathematics Literacy

(New Program). $14,000,000 from the

State General Fund is requested to initiate

a program intended to increase reading

and math achievement for students in

grades K-3. Expenditures would be for

professional development, extended

learning time, and the implementation of

research-based reading programs.

Funding would equate to $114 per

students in grades K-3.

!Professional Support for Schools On

Improvement. $2,500,000 from the State

General Fund is requested to provide

professional support and assistance to

each school on improvement. Funding

would be for one professional support

person onsite no less than one day per

week.

!Four-Year-Old At-Risk Evaluation.

$100,000 to fund increased staffing,

training, and evaluation of the program.

Other Reports

Special Education. The Committee

received a report from Tammy Dickson, a

parent with a five-year old child with Down

Syndrome. Ms. Dickson emphasized the

importance of early intervention and made

several recommendations to the Committee,

including involving paraprofessionals who

will be involved with a special education

student on the individualized education

program team, allowing parents to meet with

staff and students to educate them about their

child’s disability or condition, and making

particular efforts to assist low income or

single parents who may feel intimidated or

stigmatized by the system.

Shared Services and Personnel. Jim

Hays, Kansas Association of School Boards,

gave the Committee information about how

school districts are cooperating. Presently,

there are 274.3 full-time equivalent (FTE)

superintendents for 302 school districts and

in about 60 percent of the districts

superintendents perform some other duty,

such as serving as a building principal or

director of some school program. An

informal survey of school districts indicates

that most engage in cooperative efforts with

other districts: 66.7 percent are in special

education cooperatives, 49.0 percent are in

purchasing cooperatives, and more than one-

fifth are in cooperative sports or activities

arrangements. Only 30 school districts are

not involved in either a cooperative or an

interlocal.

Early Childhood Standards. The staff

presented a memorandum entitled Early

Childhood Standards, which was in response

Kansas Legislative Research Department 2003 LEPC

to recent national studies showing that

Kansas is one of the few states in the nation

that has not developed such standards.

According to the State Department of

Education, such standards are being

developed in Kansas.

Performance of Kansas Students on

Various Measures. Data compiled by the

Kansas Association of School Boards based

on the National Assessment of Education

Progress (NAEP) shows that Kansas students

do well, but the Association’s spokesperson

said Kansas may be overtaken by states that

spend more on education. The data show

that the 17 states that rank significantly above

the national average on the fourth grade

NAEP reading assessment spent more per

pupil than did the 14 states that are at about

the national average and even more per pupil

than did the 12 states that were significantly

below the national average. The

Association’s position is that Kansas’ relative

standing among the states may change if per

pupil expenditures do not increase.

Recommendation. The Committee

encourages the Kansas Association of School

Boards to share its findings with business and

civic groups in order to make the public

aware of Kansas’ relative rank on national

assessments and to build support in the

business sector for an ongoing commitment to

educational excellence.

School District Employee Health

Insurance. The Committee received a report

from the State Department of Education on

school district employee health insurance

which indicated that the lack of availability

of reasonably-priced health insurance

coverage for school district employees is

becoming an increasingly serious problem.

Based on results of a survey of school

districts conducted by the State Department

of Education for school year 2003-04, 291

districts make health insurance programs

available and 11 districts offer no health

insurance program. School districts were

asked to report the highest monthly total cost

(employer and employee share) for single and

family memberships and the amount each

school district pays toward a single

membership. The highest monthly total cost

for single employee health insurance ranges

from a low of under $200 (two districts) to

more than $500 (seven districts). About half

of the districts are in the $300 to $400 range.

The highest monthly total cost for family

health insurance ranges from under $500 (one

district) to more than $1,300 (two districts),

with 190 districts in the $700 to $1,000 range.

The amount paid by school district boards for

single employee health insurance ranges from

none (13 districts) to more than $500 (one

district).

Some school districts participate in the

state employee health insurance plan, which

requires the employer to pay 95 percent of the

costs for single employee health insurance

and up to 35 percent for family health

insurance. (For FY 2004, the state pays, per

month, $330 for single health insurance and

that amount, plus $153 per dependent, for

family health insurance.) According to the

State Department of Education, while most

school districts are agreeable to paying the

amount for single employee health care

plans, many are afraid to commit to paying 35

percent of family insurance costs because

they do not know what rates will be in the

future. An option suggested by the State

Department’s representative would be to

allow districts to participate in the state plan

for single member insurance and to give the

district the option of deciding whether the

employer or the employee would pay for

family health insurance.

Flint Hills Job Corps Center. The

Committee received information about the

Flint Hills Job Corps Center from Gary Vesta,

Director. The Job Corps program, funded

through the U.S. Department of Labor, began

in 1964. There now are 118 centers whose

operations generally are contracted to private

operators. The program’s goal is to help

economically disadvantaged youth become

more productive by providing comprehensive

services in a residential setting, including

education, vocational skills training, and

counseling.

The Flint Hills Job Corps Center opened

in February 1992 in Manhattan and offers

Kansas Legislative Research Department 2003 LEPC

seven programs in vocational areas and

academic programs in ten areas, including

high school completion and preparation for

the General Educational Development (GED)

certificate. Students who enter the Job Corps

without a high school diploma or without a

GED certificate complete one or both before

leaving the program. Students also complete

a vocational program. Goals of the program

are that successful completers are expected to

be placed in a job within one year after

leaving the program and are expected to still

be working 12 months after initial placement.

The Flint Hills Job Corps Center has

attained a 99.1 percent rating on outcomes,

such as program completion, job placement,

and earnings of completers, and is ranked 26th

among 118 centers for the reporting period

July 1, 2003, to October 31, 2003. It currently

enrolls 270 students, which is 102 percent of

capacity, and has a waiting list.

A concern to the Center’s Director is the

fact the USD 383 (Manhattan) provides the

high school component of the Center’s

academic program and requires students to

complete a 24-unit requirement to graduate.

This requirement exceeds the 21 units

required by the State Board of Education,

with the additional hours being comprised of

academic requirements intended to better

prepare students to succeed in college. Mr.

Vesta said that he believes the school district

should offer an alternate graduation

requirement targeted at students who intend

to pursue a vocational track so that students

who have no intention of going to college will

be able to meet the graduation requirement

without having to take additional courses

designed for college-bound students.

Recommendation. The Committee

encourages the Director of the Flint Hills Job

Corps Center to work with the Manhattan

school district to see if an alternative high

school diploma could be developed which

meets the State Board of Education’s 21-unit

graduation requirement and tailors any

additional requirements imposed by the local

board of education to a vocational track for

students who do not intend to go to college.

The Committee recognizes the value of strong

academic preparation for students who intend

to pursue a college degree, but believes equal

recognition and preparation should be

afforded students who intend to pursue a

vocational path and enter the workforce upon

graduation from high school.

POSTSECONDARY EDUCATION

Learning Quest

The State Treasurer's Office provided the

Committee with several updates during the

interim on the Postsecondary Education

Savings Program, popularly known as

“Learning Quest.” The following points were

highlighted:

!More than 50,000 accounts had been

opened as of June 2003, of which almost

half belong to Kansans. 300 new

accounts are opened each week.

!As of June 2003, the program asset value

was $453 million, of which Kansas

residents accounted for more than $125

million (approximately 28 percent).

!The annual maintenance fee has been

eliminated for Kansas account owners

and reduced from $40 to $27 for out-of-

state account owners.

In order to make the program even more

attractive, the State Treasurer has a proposed

draft of legislation that will make the

following changes:

!Remove from the statute the basis for

determining the maximum account

balance (which is the average amount of

educational expenses for five years of

study at postsecondary education

institutions in the Midwest) and instead

allow the State Treasurer to set the cap,

which could not exceed educational

expenses for five years of undergraduate

study at the highest cost institution

eligible to participate in the program.

Kansas Legislative Research Department 2003 LEPC

!Increase the amount of the income tax

deduction for account owners from $2,000

to $5,000 for individual taxpayers and

from $4,000 to $10,000 for married

couples filing jointly.

!Delete the one-year waiting period

requirement for a qualified withdrawal.

!Continue the existing policy of exempting

Learning Quest accounts from bankruptcy

and garnishment procedures, but cross

reference the language granting such

exception in the Civil Code in the statute

books in the section of law that deals

specifically with Learning Quest.

Recommendation. The Committee

recommends introduction of legislation to do

the following:

!Remove the statutory formula for

determining the maximum account

balance and allow the State Treasurer to

set that maximum not to exceed

educational expenses for five years of

undergraduate study at the highest cost

institution eligible to participate in the

program.

!Increase the amount of income tax

deduction for account owners from $2,000

to $4,000 for individual taxpayers and

from $4,000 to $8,000 for couples filing

jointly.

!Include a cross reference in the Learning

Quest statutes to the Civil Code sections

concerning the exemption of Learning

Quest accounts from bankruptcy and

garnishment procedures.

The Committee does not recommend the

deletion of the one-year waiting period

requirement for a qualified withdrawal.

While deleting the waiting period might make

the program more attractive as a tax shelter,

in the Committee’s opinion it would change

the primary purpose of the program, which is

an educational savings incentive.

Washburn University

The Committee held a one-day meeting on

the campus of Washburn University, at which

time it toured the Living-Learning Center and

met with university officials. Washburn

University President Dr. Jerry Farley told the

Committee that the University has a record

fall enrollment of more than 7,000 students.

He said a deliberate effort has been made to

change the image of Washburn from a

commuter university with a large proportion

of non-traditional students who live and work

in the Topeka area to a university that offers

a residential college experience for students

away from home.

Dr. Farley discussed the general condition

of Washburn University and said the changes

brought about by the 1999 Higher Education

Coordination Act have been good. He said he

thinks Washburn benefits from having its

own governing board separate from the State

Board of Regents and said converting from

local resources derived mainly from property

taxes to sales taxes was beneficial, although

the economic downturn has affected the

institution in the areas of diminished sales

tax revenues and state support. He estimated

that full funding of the state aid formula

probably would require another $2.0 million

and that sales tax revenues are estimated to

be down by another $1.0 million in both FY

2003 and FY 2004. Washburn also lost

$500,000 due to the allotments imposed by

the Governor in FY 2003.

Kansas Nursing Workforce Partnership

The Kansas Nursing Workforce

Partnership is comprised of representatives of

state agencies and professional education

and health-related associations and was

created in response to an interim topic on the

nursing shortage in Kansas, which was before

the Legislative Budget Committee in 2002.

Representatives of the Partnership met with

the Committee and made the following

recommendations to address the nursing

shortage:

!The current $15,000 cap imposed by the

Kansas Public Employees Retirement

Kansas Legislative Research Department 2003 LEPC

System on state employees who retire and

want to return to their previous employer

should be lifted.

!Funding for the Kansas Nursing Service

Scholarship Program should be increased,

or at least be maintained. The program

requires a nursing student to obtain a

sponsor (a nurse employer) and requires

one year of service for each year of

scholarship. According to the State Board

of Regents, $422,250 was spent to serve

134 students in school year 2002-03. New

applications totaled 247 and 89 applicants

were placed on a waiting list.

!Kansas schools of nursing should be fully

funded because, without nursing

programs and adequate salaries for

nursing faculty, Kansas cannot educate

the nurses it needs.

Information also was presented to the

Committee about the high cost of nursing

programs to community colleges due to the

need for clinical facilities, equipment and

supplies, and the low student-teacher ratio.

Recommendation. The Committee

encourages the House Health and Human

Services Committee and the Senate Public

Health and Welfare Committee to continue

studying the issue of the nursing shortage in

Kansas. In addition, the Committee supports

additional funding for the Nursing Service

Scholarship Program to address the waiting

list for that scholarship.

Joint Program—Washburn University

and Kaw Area Technical School

The Committee received information

about the program Washburn University has

developed with Kaw Area Technical School.

Under the arrangement, students may take

technical courses leading to an associate

degree at the technical school and complete

their general education courses at Washburn.

Joint programs are offered in the following

areas: design technology, food service,

industrial technology, office administration,

purchasing, early childhood education, and

legal studies.

Western Kansas Degree Completion

Program

In an effort to provide place-bound

students in Western Kansas access to upper

division and graduate courses, the State

Board of Regents formed the Southwest

Kansas Access Group in June 2002. Programs

for which there is a particular need at the

baccalaureate and masters levels are

education, business, and nursing.

Programs are offered by the Regents’

University-Community College Partnership,

which includes Emporia State University,

Fort Hays State University, and Kansas State

University as well as all of the community

colleges in the region–Barton, Pratt, Garden

City, Dodge City, Liberal, and Colby

Community Colleges. There is a specific

process to be followed in approving courses

and programs to be offered (approval by the

President and Chief Executive Officer of the

State Board of Regents is required). In

addition, a university can be reimbursed up

to $100,000 a year if it loses money because a

new program loses enrollment. This

“guarantee” benefits both the university and

students in the program, who are assured that

the program will be continued and that they

will be able to complete it.

The new initiative features face-to-face

instruction and expands activities that

already are occurring. More than 1,200

students in Southwest Kansas currently are

enrolled in distance-learning courses that are

offered by one or more of the three

universities in the partnership. Participating

universities have staff members who are

located on community college campuses who

deal with matters relating to students and

programs. Current activities include an effort

to expand and redesign several programs and

to address admissions, business office, and

financial aid issues. In addition, partnership

members are working on ways to market

information about the programs being offered.

Future topics to be addressed include a

common pricing model, collaborative

degrees, a common student data base, and

Kansas Legislative Research Department 2003 LEPC

advising services for students who are taking

courses from two or more institutions.

According to conferees before the Committee,

except for the $200,000 appropriation to the

State Board for the low-enrollment guarantee,

the initiative has been accomplished at no

additional cost to the state.

In-State Tuition for Undocumented

Immigrants

The Legislative Educational Planning

Committee (LEPC) held a hearing at its

October meeting regarding the subject matter

addressed in 2003 Sub. SB 2145. Five

proponents and one opponent of permitting

certain undocumented immigrants to attend

Kansas institutions of postsecondary

education by paying in-state tuition presented

testimony at that hearing.

The bill currently is in the Senate

Committee on Education. As passed by the

House, the bill would allow undocumented

immigrants to attend Kansas colleges and

universities by paying in-state tuition under

certain circumstances.

With one exception, anyone who has

attended an accredited Kansas high school for

three or more years and who has either

graduated from an accredited Kansas high

school or obtained a general educational

development (GED) certificate in Kansas and

who has been accepted for admission at a

Kansas institution of postsecondary education

would be eligible to pay in-state tuition and

fees. An exception would apply to persons

who hold a valid student visa.

For purposes of the bill, "postsecondary

educational institution" would be defined as

in current law to include any public

university, municipal university, community

college, technical college and vocational

education school, and any combination of

such postsecondary educational institutions.

Policy questions raised during the

discussion were:

!Should students who have attended and

graduated from Kansas high schools be

eligible for in-state tuition rates regardless

of their residency status under federal

immigration law?

!What are the (possibly unintended)

consequences for residents of other states

who attend Kansas high schools of

adopting a policy that permits

undocumented immigrants to qualify for

in-state tuition?

!What, if any, specific criteria, e.g., Kansas

high school attendance, graduation from

a Kansas high school, acceptance at a

Kansas public institution of

postsecondary education, statement of

intent to pursue permanent US residency

and/or citizenship, payment of Kansas

resident taxes, holding a valid Kansas

drivers license, etc., should be included

in any law that expands the category of

persons eligible for in-state tuition rates?

During Committee consideration of the

issue in December, a representative of El

Centro presented proposed provisions to meet

Committee members’ concerns articulated

during the hearing. The policy positions

presented by El Centro were incorporated

into the Committee’s recommendation.

Recommendation. The Committee

recommends the introduction of legislation

which would include the provisions of HB

2145 plus language to:

!specify that the provisions of the bill do

not apply to students who are eligible for

in-state tuition in another state; and

!require that an affidavit of the student’s

intent to legalize his or her immigration

status be filed with the institution.

Postsecondary Education Data Base

Staff from the State Board of Regents

presented information about the

postsecondary education data base which

became a responsibility of the Board upon

passage of 1999 SB 345. A pilot run was

Kansas Legislative Research Department 2003 LEPC

made to test the system using data from fall

2002. Of the 37 campuses (state universities,

community colleges, technical colleges, and

area vocational schools), 28 submitted data.

Conversion problems prevented some

institutions from submitting their data.

Current activities involve addressing

security problems and redesigning a website.

Participating institutions will be able to

access a variety of data using a single sign-on

access code. The first collection of “real”

data will take place between November 15

and December 15 of 2003. The initial data

collection will contain student and

enrollment data for Summer and Fall of 2003,

but plans are to add a number of additional

reports over the next few years, including

federal vocational education program data,

reports on courses, student financial aid

information, faculty and staff data, financial

information, and information on

unemployment insurance in order to

determine the number of students who are

unemployed. There are also plans to add

information on proprietary schools and the

GED certificate and possibly data on

independent colleges and universities. The

anticipated completion date for the data base

is 2008.

Jones Institute for Educational Excellence

Staff from the Jones Institute for

Educational Excellence at Emporia State

University discussed some of the Institute’s

programs and activities including Reading

Recovery, National Board Certification, and

the Future Teacher Academy.

The Reading Recovery program is an

intensive reading program for first graders.

The program is short-term and involves one

teacher working with one student for about

30 minutes. Lessons are discontinued when

the student can read and write at grade level.

Approximately 1,200 students were served in

Kansas in the 2002-03 school year. The

number of reading recovery teachers is 149.

The teachers are trained by Reading Recovery

Teacher Leaders who complete a program at

the Jones Institute that lasts one year and

consists of graduate-level courses. There are

nine Teacher Leaders in Kansas presently,

who are counted as special education

teachers for purposes of special education

reimbursement to the employing school

district.

The National Board Certification Program

prepares teachers to qualify for certification

from the National Board for Professional

Teaching Standards. National Board certified

teachers in Kansas hold ten-year certificates

and are paid an annual bonus of $1,000 by

their employing school district for each year

their certificate is valid. The state also

provides a stipend to assist teachers who are

taking the program at the Jones Institute.

In order to participate in the program a

person must have been a teacher for three

years. The program includes a year-long

assessment of classroom practice and the

development of a portfolio that is assessed

nationally. The national certification rate for

applicants is about 50 percent and Kansas

generally exceeds that, with a certification

rate of about 60 to 65 percent. Current

activities include implementing a renewal

procedure for teachers who have held

National Board certification for ten years.

The renewal process will not be as extensive

as the program to initially qualify, but will be

rigorous. There are 109 teachers in Kansas

who hold National Board certification.

The Future Teacher Academy is a five-day

program that allows 50 high school students

who are interested in becoming teachers to

meet with extemporary teachers and other

speakers. The program, which was begun in

1989, is held in the summer at Emporia State

University and at a recently-added site in

Dodge City. Discussion is underway about

adding a third site in the Kansas City area

and about expanding the program to include

younger students.

Recommendation. The Committee

supports the continuation of funding for the

Jones Institute for Educational Excellence at

the level requested by Emporia State

University ($400,000 from the State General

Fund for FY 2005). The Committee notes that

if the programs administered by the Institute

Kansas Legislative Research Department 2003 LEPC

(Reading Recovery, National Board

Certification, and the Future Teachers

Academy) are not funded through state

dollars, the school districts or the individual

teachers must pay the additional costs

involved.

Postsecondary Student Tuition

The Committee received information

regarding recent increases in tuition and ten-

year trends in tuition at the state universities

and alternative pricing structures being

considered by universities in other states.

Reginald Robinson, President and Chief

Executive Officer, State Board of Regents, told

the Committee that, even though tuition rates

for the state universities have increased,

Kansas still is considered a low tuition state.

He said that, beginning in FY 2003 and FY

2004, the State Board of Regents allowed

institutions to propose tuition rates for each

individual institution to reflect institutional

roles and missions, rather than having the

rates set uniformly by the State Board.

However, Mr. Robinson pointed out that

increases in student assistance have not kept

pace with increases in tuition, leading to the

characterization of Kansas as a “low tuition,

low student assistance” state. Kansas ranks

34th among the states on the amount of need-

based student assistance it allocates and is

the lowest among the surrounding states,

except for Nebraska. He said that the state

universities have designated 20 percent of the

increase in tuition revenue for student

assistance.

Student government leaders who met with

the Committee expressed concern for

vulnerable students who may be priced out of

an education by tuition increases and the

failure of student assistance programs to

provide support to all the students who need

it. They also made the point that students are

more understanding of tuition increases when

they can see that the revenues generated are

being used for expenditures that directly

benefit students.

Recommendation. The Committee notes

that state-supported student assistance has

not increased along with rising tuition. In

effect, the students themselves are providing

additional funds for their fellow students

through a percentage of the most recent

tuition increase being set aside for student

assistance programs. The Committee believes

that, as tuition increases, the state must make

accommodations for students in need. In

addition, the Committee notes that the Higher

Education Reauthorization Act is currently in

Congress and encourages the House Higher

Education Committee and the Senate

Education Committee to closely monitor its

progress.

Community College Funding

Dr. Ed Berger, President of Hutchinson

Community College and Area Technical

School and Chair, Council of Presidents

Finance Committee of the Kansas Association

of Community College Trustees, presented

information about community colleges. He

said that enrollments in community colleges

are increasing, partly due to the downturn in

the economy. This is because in economic

bad times, students tend to live at home and

enroll in less expensive institutions, enroll in

job training programs in order to keep their

skills current, or go to school when they lose

a job in order to acquire new skills.

According to Dr. Berger, in spite of the

importance of the role community colleges

play, their activities are limited by the failure

of the Legislature to adequately fund 1999 SB

345. SB 345 established a new community

college funding formula that is tied to

funding for the regional state universities and

has as its goal state funding for community

colleges that is equal to 65 percent of funding

for lower division students at the regional

universities. The increase in state funding

was to have taken place over a four-year

period, but only the first two years have been

funded. Also halted at the end of the second

year was the four-year phase out of county

out-district tuition.

According to Dr. Berger, the failure of the

state to adequately fund community colleges

has resulted in an increased level of support

from local property taxes in those counties

Kansas Legislative Research Department 2003 LEPC

that have a community college. Even though

a feature of SB 345 is dedication of state

resources to the reduction of property taxes,

and even though property tax mill levies were

reduced in the first two years after passage of

the bill, mill levies have increased

dramatically in the last two years and now

are higher than they were before SB 345 was

implemented

On behalf of the Kansas Association of

Community College Trustees, Dr. Berger

made the following recommendations to the

Committee regarding community college

funding:

!Implement quality programming through

performance grants.

!Separate funding for business and

industry training.

!Recognize high cost programs that have

quality of life issues, such as nursing and

fine arts.

!Identify the role community colleges play

in economic development.

!Establish differential funding for

developmental programs.

!Establish a funding stream for crumbling

campuses.

Recommendation. The Committee

encourages the House Appropriations

Committee and the Senate Ways and Means

Committee to fully fund the Higher Education

Coordination Act. The lack of increased

funding in previous years has led to an

increase in property taxes in those counties

with a community college. In addition, the

Committee notes the role that community

colleges play in economic development and

recognizes that some high cost programs such

as nursing and fine arts have quality of life

issues for the state as a whole.

Implementation of SB 7

SB 7, enacted by the 2003 Legislature,

requires each governing board of a technical

college to develop a plan to replace the

existing board with an independent

governing board which is not a school district

governing board. The plans must be

developed and presented to the State Board of

Regents on or before July 1, 2005. Existing

statutory provisions for technical college

boards cease to be effective on July 1, 2009.

All plans must be approved by the Regents

and by the governing board of the technical

college. One impetus for the legislation is the

fact that technical colleges that do not have

an independent governing board are unable

to be accredited by the North Central

Association Higher Learning Commission.

Dr. Camille Kluge, President of the

Wichita Area Technical College, told the

Committee about progress her institution has

made under SB 7 and discussed some of her

concerns. She said a transition team worked

for months to develop a plan that will be

presented to the State Board of Regents for its

approval in December 2003. Dr. Kluge

estimated that, in total, the annual cost of

separate governance and accreditation by

North Central Association will be $3.0

million.

Concerns identified by Dr. Kluge are:

!Employee issues, including benefits and

the continuing contract law.

!Legal issues, including the territory

served and whether the board should be

appointed or elected.

!Funding issues, including tax authority

and full funding of the formula.

!Issues concerning facilities and asset

transfer.

!The cost of transfer and accreditation,

both short-term and ongoing.

Dr. Kluge told the Committee the

postsecondary aid formula for technical

colleges has been underfunded and, as a

Kansas Legislative Research Department 2003 LEPC

result, USD 259 (Wichita) has been

subsidizing the technical college in an

amount of about $3.0 million per year. That

subsidy could be justified when the technical

college was under the governance of the USD

259 board, but once the institution is under

the control of a new board, the responsibility

of USD 259 for paying the majority of the

tuition for postsecondary students who are

not enrolled in the school district will end.

As a result, the technical college will face a

shortfall of 30 percent, which would require

a 50 percent increase in tuition to offset or

will result in the closing of programs. Dr.

Kluge said for the six technical colleges

overall, their FY 2003 funding was below the

FY 1999 level.

Dr. Kluge made the following

recommendations to the Committee:

!Authorize an independent review and

analysis of higher education funding,

with an emphasis on identifying a new

approach to funding technical education.

!Until a better funding mechanism is in

place, fully fund the existing technical

funding formula for the technical

colleges, at a cost of $10.0 million.

!Authorize a property tax levy for

technical colleges, similar to community

college levies. As a first step, allow

technical colleges to make a levy for adult

basic education.

Dr. Duane Dunn, President of Manhattan

Area Technical College, presented

information about technical college

enrollments and funding. Dr. Dunn said the

Manhattan Area Technical College began to

seek North Central Association accreditation

as soon as it became a technical college in

1996. He said accreditation is important to

technical colleges because it places them on

an equal footing with other postsecondary

institutions and facilitates transfer of credits.

He said SB 7 removed obstacles in the way of

accreditation, but there still are concerns that

need to be addressed. Among them are the

following:

!Health insurance and benefits costs,

which will become higher as a result of

separating from the sponsoring school

district employee pool.

!Other employee costs, such as higher

salaries for technical college employees

and early retirement benefits.

!Financial assistance for employees who

seek to attain higher academic credentials

appropriate to a collegiate institution.

!Costs for additional staff, both because it

no longer will be possible to share

employees with the sponsoring school

district and because the staff has not

increased in the last decade to

accommodate enrollment growth.

!Lack of funds for facilities.

!Lack of funds for expensive programs,

such as nursing and electric power

distribution, and for program growth to

meet industry demands.

Dr. Dunn said growth of the institutions,

in terms of enrollment increases and

additional programs, has been limited to the

extent that institutions are being forced to cut

successful programs in order to keep

operating. He told the Committee that, unless

additional funding is forthcoming, in five

years his institution may not be able to

continue operating. Dr. Dunn told the

Committee it would benefit technical colleges

to have access to funding earmarked for

economic development.

Lee Alderman, President of Flint Hills

Technical College, told the Committee his

institution has hired consultants in health

insurance, human resources, and financial

operations as a consequence of separating

from the sponsoring school district. He said

he may have to cut three (out of 16) programs

at his institution in order to continue

operating and that, in order to make up the

loss in funding following passage of SB 345,

it would be necessary to increase student

tuition by up to 300 percent, since the

Kansas Legislative Research Department 2003 LEPC

technical colleges have no other major source

of revenues, other than state aid and student

tuition.

Recommendation. The Committee

requests that an independent review and

analysis of higher education funding be

conducted with an emphasis on identifying a

new approach to funding technical education.

In addition, legislation being introduced by

the Committee includes bills authorizing

technical colleges to make mill levies for

adult basic education and operating

expenditures.

Meeting with the State Board of Regents

The Committee continued its tradition of

holding a joint meeting with the State Board

of Regents. Janice DeBauge, State Board

Chair, described some of the Board’s most

recent accomplishments:

!Seamlessness. Easy transition from

community colleges and state universities

is virtually accomplished. A major

initiative in this regard is the

development of “core competencies,” a

project to ensure that similarly-named

courses offered at different institutions

contain similar content. The

implementation of SB 7, which would

remove barriers to technical colleges

receiving North Central Association

accreditation, would be a further step

toward seamlessness.

!Coordination. Representatives of the

various sectors meet together regularly to

help the Board develop policy that affects

all of the institutions under its

jurisdiction. Cooperative efforts among

institutions include the delivery of

programs to place-bound students in

Western Kansas and the Western Kansas

degree-completion program.

!Accountability. Implementation of

performance agreements will require each

institution to identify initiatives that will

enable it to attain statewide goals. The

goals have been identified on the basis of

various state assessment tools,

postsecondary education studies, and the

State Board’s State Comprehensive Plan.

!Issues Relating to Governed Institutions:

Tuition Ownership, Efficiencies, and

Research. Tuition ownership has been

beneficial to the state universities, which

are suffering from reduced funding in the

areas of faculty salaries and

administrative support. A major area of

concern is facilities, as evidenced by a

need for $700.0 million for deferred

maintenance.

!Advocacy. The State Board supports

independent studies, such as that

conducted by Citizens for Higher

Education, which shows a need for

continued support for higher education

and hopes to generate additional grass-

roots support for the higher education

system in the state.

!Funding Study. The Board considers the

completion of the second part of the

Northwest Education Research Center

(NORED) study one of its highest

priorities. That study would be a

comprehensive study of funding and

student financial aid.

At the joint meeting, the State Board

submitted the following list of requested

legislation:

!Authority for technical colleges to make a

levy for adult basic education so that they

are not dependent upon school districts to

make the levy and transfer the money to

them. The proposal would not affect the

authority of school districts to continue to

make a levy for adult basic education.

!Authority for technical colleges to make a

mill levy for operating expenditures.

!A request to remove a proviso which has

been included in appropriations to the

state universities, which limits

expenditures from the General Fees Fund

(mainly tuition revenues) to salaries and

wages and other operating expenditures.

Kansas Legislative Research Department 2003 LEPC

The effect of the request is that student

tuition could be used for capital

improvements and would not be limited

to operating expenditures.

!A request to require that interest earned

on the General Fees Fund and certain

other special revenue funds be credited

back to the fund that generates the

earnings and not to the State General

Fund.

!Authority to charge a fee for activities

related to approving private degree

granting institutions and to repeal the

registration requirement pertaining to out-

of-state schools that offer, in Kansas,

fewer than 30 hours leading to a degree.

!Authority for Kansas State University to

sell land to the K-State Foundation for the

purpose of constructing a hotel to serve as

an on-campus laboratory for the hotel and

restaurant management program.

In addition, the State Board supports 2003

HB 2145, which concerns undocumented

immigrants attending state universities at in-

state tuition rates.

The Board staff submitted the FY 2005

unified budget in compliance with SB 345.

The budget request includes funding for the

state university operating grant increases,

community college and Washburn University

operating grants, postsecondary state aid for

technical schools and colleges, and capital

outlay funding for community colleges,

Washburn University, and technical schools

and colleges. Also included is the funding

request for student assistance programs and

the Board Office.

Major components of the enhancement

request include:

!Funding to hire 6.0 FTE new employees

in the Board Office to work in the areas of

legal affairs, academic affairs, student

financial aid, external relations, and

finance ($319,283).

!Additional funding for the

Comprehensive Grant Program

($1,000,000), the Medical Student Loan

Program ($850,000), and the Osteopathic

Scholarship Program ($480,000).

!Third-year funding for community

colleges, as prescribed by SB 345 (an

increase of $22.9 million over FY 2004).

!Operating grant increases to the state

universities consisting of a 6 percent

inflationary increase ($32.6 million), an

additional 1 percent to be allocated

among the state universities to address

“equity” issues ($5.4 million), funds to

service new buildings ($989,612), and

faculty enhancement funding ($20.2

million).

!Area vocational school and technical

college funding amounting to a $4.5

million (16.1 percent) increase over FY

2004, consisting of $3.0 million, which is

the amount the institutions are

underfunded in FY 2004, another $1.5

million to provide a 6 percent base

increase in FY 2005, and $2.6 million for

capital outlay expenditures.

!Third-year funding for Washburn

University, as prescribed by SB 345 (an

increase of $2.5 million over FY 2004).

Recommendation. The Committee

recommends the introduction of legislation to

address the following:

!Authority for technical colleges to make a

mill levy for adult basic education.

!Authority for technical colleges to make a

mill levy for operating expenditures.

!A requirement that interest earned on the

General Fees Fund and certain other

special revenue funds be credited back to

the fund that generates the earnings and

not to the State General Fund.

!Authority for the Board of Regents to

charge a fee for activities related to

approving private degree granting

institutions and to repeal the registration

requirement pertaining to out-of-state

Kansas Legislative Research Department 2003 LEPC

schools that offer, in Kansas, fewer than

30 hours leading to a degree.

!Authority for Kansas State University to

sell land to the K-State Foundation for the

purpose of constructing a hotel to serve as

an on-campus laboratory for the hotel and

restaurant management program.

!Authority to expend funds from the

General Fees Fund for capital

improvements as well as the current uses

of salaries and wages and other operating

expenditures.

Other Reports

Reciprocal Agreements for Professional

Programs. State Board of Regents staff

presented information on reciprocal

agreements the State Board has negotiated

under which out-of-state tuition is waived for

Kansas students enrolled in certain

professional programs at Missouri institutions

and for Missouri residents enrolled in certain

programs in Kansas. Specifically, 80 Kansas

residents may enroll in the University of

Missouri Kansas City School of Dentistry, 20

Kansas residents may enroll in the University

of Missouri St. Louis School of Optometry,

and 491 Missouri residents may enroll in

architecture programs at the University of

Kansas and Kansas State University. The

dollar amount of tuition being waived is

roughly equivalent for each state due to out-

of-state tuition being higher for Kansas

residents attending school in Missouri than

for Missouri residents attending school in

Kansas, even though more Missouri residents

are attending Kansas institutions.

With regard to issues relating to the dental

agreement, officials in Kansas became aware

of the fact that, contrary to the agreement,

Missouri was granting waivers to students of

dental hygiene to attend the University of

Missouri Kansas City School of Dentistry,

even though Kansas has both dental assistant

and dental hygiene programs. In addition,

Kansas officials learned that not all of the 80

waivers were being awarded. The reciprocal

agreement was renegotiated to specify that all

of the slots have to be filled by dental

students. Kansas also has received assurance

that all 80 waivers will be awarded.

Student Assistance Programs

Administered by the State Board of Regents.

State Board of Regents staff reviewed the

student financial assistance programs

administered by the State Board of Regents.

Regarding two of the newer student

assistance programs, the Foster Care Tuition

Waiver and the Workforce Development Loan

Program, the former program was

implemented in FY 2003, but the Workforce

Development Loan Program has not been

implemented because final approval of

federal funding sources has not been received

from federal officials.

KAN-ED. Staff from the State Board of

Regents discussed ongoing implementation of

KAN-ED, the technology-based network that

links elementary-secondary and

postsecondary schools, libraries, and

hospitals. The Board is responsible for

operating and maintaining the network,

which provides Internet access and distance

learning capabilities for users. Phase I, which

involves linking hospitals, has been

completed. It is hoped that other health

facilities, such as clinics and mental health

facilities, can be added to the network.

The next step is to link educational

institutions. The goal of the network is to

make distance learning programs more

universally available. Toward that end, the

staff of the Board is working with the State

Corporation Commission to set a user rate

that represents true cost, not a cost with

additional charges added. Additional

features that will be added are access to

Internet 2, which is an information data base

for higher education that is accessible for a

charge of $38,000 per year.

Midwestern Higher Education Compact

Kansas is a charter member of the

Midwestern Higher Education Compact

(MHEC) which was established in 1990. The

newly-hired President of MHEC appeared

before the Committee to discuss various

initiatives of the organization both past and

Kansas Legislative Research Department 2003 LEPC

present. The conferee noted several cost

savings programs utilized by Kansas

including the Master Property Program, the

Student Exchange Program, and others.

During FY2003, Kansas and its residents

saved $3.4 million through these programs.

In addition, public policy is an area in which

MHEC will be focusing in the future. A new

website will be launched providing access to

information and statistics on higher

education in member states.

JOINT COMMITTEES

Reports of the

Joint Committee on Pensions,

Investments, and Benefits

to the

2004 Kansas Legislature

CHAIRPERSON: Representative John Edmonds

VICE-CHAIRPERSON: Senator Dave Kerr

RANKING MINORITY MEMBER: Representative Geraldine Flaharty

OTHER MEMBERS: Senators Jim Barone, Anthony Hensley, Stephen R. Morris, and Ruth

Teichman; Representatives Ray L. Cox, Vaughn L. Flora, Margaret Long, Bill McCreary,

Melvin Neufeld, and Clark Shultz

STUDY TOPICS

KPERS Long-Term Funding Study Assigned by LCC

Statutory Studies

December 2003

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

Joint Committee on Pensions,

Investments, and Benefits

KPERS LONG-TERM FUNDING STUDY

ASSIGNED BY LCC

CONCLUSIONS AND RECOMMENDATIONS

The following contains the recommendations of the Joint Committee on Pensions, Investments,

and Benefits. (See Note regarding a subsequent meeting January 7, 2004.)

! The Committee recommends favorably to the State Finance Council the issuance of $500

million in pension obligation bonds authorized by Section 16 of Chapter 155, 2003 Session

Laws of Kansas. This recommendation fulfills the provision of Section 16(f) of Chapter 155

that “No bonds shall be issued pursuant to this section prior to the review and

recommendation to the State Finance Council of such issuance by the Joint Committee on

Pensions, Investments and Benefits.”

! The Committee recommends the following items be included in a bill to be introduced for

consideration by the 2004 Legislature:

" Changing the actuarial cost method for all three plans—regular KPERS, KP&F, and Judges;

" Modifying the asset smoothing method;

" Reamortizing the unfunded actuarial liability if and when deemed prudent by the KPERS

Board of Trustee;

" Modifying the statutory contribution caps for local employers; and

" Separating the state and school group into two groups for actuarial purposes in calculating

individual contribution rates for the state group and for the school group.

! Regarding a long-range funding plan, the Committee regrets that a comprehensive package

was not developed during the 2003 interim. The Committee believes that HB 2014 from the

2003 Session was one step in solving the KPERS long-term funding issue. Additional steps

must be taken, including the disposition of recommendations regarding issuance of $500

million in bonds and introduction of a new bill modifying actuarial methods and KPERS

groups. Depending upon the disposition of these two recommendations, further steps will

be required in developing a comprehensive plan during the 2004 interim.

Proposed Legislation: The Committee recommends one bill on this topic.

Click here for the Revised Version of this Study

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

BACKGROUND

For the 2003 Interim, the Legislative

Coordinating Council (LCC) assigned one

study topic: to develop a long-range

comprehensive funding plan to address the

unfunded liability of the Kansas Public

Employees Retirement System (KPERS). The

study would include incorporation of the

latest KPERS actuarial projections, an

evaluation of how the increased employer’s

contributions and the potential issuance of

pension obligation bonds (both authorized

by the 2003 Legislature) and any changes in

non-financing elements, such as a change in

actuarial methodology, would affect the

KPERS unfunded liability.

KPERS provides retirement, disability,

and survivor benefits to more than 240,000

members and includes 1,450 participating

employers. According to the most recent

actuarial valuations, KPERS is not in

actuarial balance, creating long-term funding

concerns. In August of 2003, KPERS

presented a report titled “Long-Term

Retirement Funding Plan” which was

intended to help develop an understanding

of the problem and possible solutions. A

“Long-Term Retirement Funding Plan: A

Progress Report” was presented in October of

2003 in order to explain technical aspects of

the long-term funding situation and more

detailed options for addressing the issue.

According to the KPERS actuary, the

areas for review should include:

!Changing the actuarial cost method;

!Modifying the asset smoothing method;

!Reamortizing the unfunded actuarial

liability, including the reset date,

amortization method and period; and

!Modifying the statutory caps, especially

for local employers since no change has

been made.

COMMITTEE ACTIVITIES

Recent Legislation and Actuarial

Projections of Fiscal Impact. KPERS staff

and the KPERS actuarial consultant provided

long-term funding projections for the state

and school group in order to estimate the

fiscal impact of 2003 legislation enacted last

session, plus other alternative options with

financial and non-financing elements. The

projections were included in a report of

“Long-Term Retirement Funding Plan: A

Progress Report.”

Projections were based on a number of

assumptions and are intended to portray

long-term trends. It was noted that the most

significant variable in the projections is

investment performance, which tends to be

volatile and not a constant amount.

However, the model incorporates an

assumed rate of return equal to 8.0 percent

each year, and as actual investment returns

vary from the constant rate, the variance has

a significant impact on the model’s

projections. For the projections provided in

reviewing fiscal impacts, it was assumed that

the first year’s earnings were 12.0 percent,

based on the rate of returns this year (and

not the 8.0 percent assumed rate that is used

in subsequent years).

Legal Rights of Employees. Revisor of

Statutes staff provided a legal briefing on the

contractual rights of KPERS members. It was

explained that the Kansas Supreme Court

has found that the relationship of KPERS to

its members falls under the contractual

guarantees of the U.S. Constitution, thus

limiting unilateral modification in the

agreement to “reasonable changes” to

maintain the integrity of the system. It also

was noted that any such changes which

result in disadvantages to employees must be

accompanied by offsetting or

counterbalancing advantages. Noting the

paucity of case law on the subject, the

briefing concluded that:

!There is a contract for pensions between

the State and its employees which

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

creates rights protected from unilateral

modification under the U.S. Constitution.

!Reasonable modification is allowed

based on Supreme Court decision;

!Reasonable modification may be made if

resulting disadvantages to employees are

counterbalanced by offsetting

advantages;

!Case law clearly states that the State

cannot increase employee contributions

without providing offsetting benefits;

!To justify an increase in employee

contributions to bolster the financial

future of the plan, there must be

evidence that the employer cannot meet

its obligations in the future and the

employees’ pensions are in jeopardy; and

!The employer may provide a new system

for new employees and may provide

options for existing employees to keep

what they have or opt into new

provisions.

KPERS State and School Group

In this section, the focus is on the state

and school group of KPERS. A later section

addresses the local group of KPERS.

Option A—Current Enhanced Contribution

Rates. The 2003 Legislature in HB 2014

authorized that the statutory cap on the

employer contributions for the KPERS state

and school group will increase from 0.2

percent to 0.4 percent in FY 2006, to 0.5

percent in FY 2007, and to 0.6 percent in FY

2008 and subsequent fiscal years. The

projected employer contributions from FY

2004 to FY 2033 would total $13.3 billion

without the statutory cap increase, and the

higher caps will yield almost an additional

$9.3 billion, according to KPERS projections.

Revenues totaling $22.6 billion would be

generated for long-term funding of the

KPERS state and school group. Under this

projection (Option A), the KPERS state and

school group would have an unfunded

actuarial liability of $802 million in FY 2033,

with a funded ratio of 96 percent.

Contribution rates would rise to 18.44

percent in FY 2030, then decline until 2033.

Projected Fiscal Impact of HB 2014

on State Employer Contributions

(Option A): FY 2004 to FY 2033 for

State and School Group (In Billions)

Pre-HB2014

Contributions

Additional

Contributions

Authorized by HB 2014 Total

Contributions

$13.338 B $9.271 B $22.609 B

A series of policy options are available to

help shape a core set of variables that might

comprise a long-term plan in order to

augment the enhanced employer

contributions authorized in the 2003

legislation. The first

component—bonding—was authorized by

that legislation.

Pension Obligation Bonds. The 2003

Legislature authorized in HB 2014 the

issuance of up to $500 million in pension

obligation bonds. The projected impact of

infusing $500 million in bond money into

KPERS for investment could be improved by

paying principal and interest from non-

KPERS funds rather than paying principal

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and interest from KPERS funds (including

contribution increases). The 2003 legislation

did not direct which source of money

(KPERS or non-KPERS) should be used to

make the bond payments. This policy

decision would require adding an average of

$39 million annually if payments were made

from non-KPERS money rather than KPERS

money. The benefits would be realized in

the latter part of the 30-year period and in

the subsequent years after FY 2033.

Possible Actuarial Changes. A

consideration of non-financing elements,

such as actuarial changes, also were

incorporated into KPERS projections. Some

statutory changes would be required to

implement these possible actuarial changes.

All three of the following changes were

recommended by the KPERS actuary and

approved by the KPERS Board of Trustees for

legislative consideration. These actuarial

changes include modification of the actuarial

cost methods, of the asset valuation method,

and of the amortization period for the

unfunded actuarial liability. The Board has

recommended authorization be granted to

change the actuarial cost methods to the

entry age normal method for all plans; to

change the asset valuation method from a

three-year to five-year asset valuation

method for all plans; and to plan for

reamortization of the KPERS state and school

group’s unfunded actuarial liability at some

date in the future, depending upon a review

of the actual conditions in selecting the

optimal date for the change.

Actuarial Cost Method. By changing all

plans (KPERS, KP&F and Judges) to the entry

age normal (EAN) method, actuarial

valuations will become more comparable

and there is no material impact on long-term

funding for the other plans. Currently, each

plan uses a different method that makes

comparisons among the KPERS, KP& F and

Judges plans less meaningful. For the KPERS

state and school group, changing to the EAN

method would have an immediate impact on

funding projections that could be estimated

for December 31, 2003.

Fiscal Impact of Modifying Actuarial

Cost Method on State Contributions

State and

School Group Old

Method New

Method

Unfunded Actuarial Liability (UAL) $2.7 B $3.6 B

Funded Ratio 71% 66%

Employer Normal Cost Rate 5.28% 3.71%

Employer UAL Cost Rate 4.77% 6.19%

Total Employer Rate 10.05% 9.90%

A change in actuarial cost method will

require legislation for KPERS, including the

state, school and local groups. The Board

has statutory authority to change methods for

the Judges and KP&F plans which the KPERS

actuary also recommends in making

consistent methods apply to all KPERS plans.

Asset Valuation Method. By changing

the asset valuation method to spreading

gains and losses evenly over a five-year

period, there is no material impact on long-

term funding. The current method

calculates the expected value using the 8.0

percent assumed rate of return, then adds

one-third of the difference between actual

market and expected values. The new

method would simplify calculations and be

more easily understood.

The Board has statutory authority to

change methods for the KPERS, Judges, and

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

KP&F plans, thus no legislation is required.

The KPERS actuary recommends all KPERS

plans use the same asset valuation method.

Amortization Period. Unfunded actuarial

liabilities (UAL) are amortized over a forty-

year period from June 30, 1993, for all three

KPERS plans. A thirty-year maximum

amortization period was incorporated into a

new rule by the Governmental Accounting

Standards Board in 1996. Reamortization

does not reduce ultimate costs, but it does

extend the time period and tends to level out

payments to make annual contributions more

affordable. However, total costs are

increased with reamortization by extending

payments over a longer time period. The

KPERS actuary recommends that

reamortization for the state and school group

be undertaken at the appropriate time,

probably about FY 2015. All three KPERS

plans should conform to the same

amortization period.

The KPERS actuary’s recommendation, as

adopted by the Board of Trustees, states:

“Given the magnitude of KPERS’ funding

shortfall and the benefits of potential

reamortization, it merits additional

consideration as part of the long-term

funding plan for the state and school group.

There are various options for length of

period and fixed versus rolling amortization

period. The optimal reamortization date will

vary depending on the funding alternative

selected; there is not one optimal date.”

Legislation will be required to change the

statutory amortization period which is

currently set at 40 years for all three plans.

Option B—Recommended Actuarial

Changes. The fiscal impact of making all

three actuarial changes (Option B) was

modeled, based on the assumptions that the

UAL is reamortized in FY 2015 to a fixed

period of 30 years, with a floor of 10 years;

the asset valuation method is changed to

five-year averaging; the actuarial cost

method is changed to entry age normal;

investment returns are 12 percent for

calendar year 2003; and investment returns

average 8.0 percent after 2003.

The projected state employer payments

from FY 2004 to FY 2033 would total $13.3

billion without the statutory cap increase,

and the higher caps will yield almost an

additional $5.2 billion, according to KPERS

projections. Revenues totaling $18.5 billion

would be generated for long-term funding of

the KPERS state and school group.

Projected Fiscal Impact of HB 2014

on State Employer Contributions

(Option B): FY 2004 to FY 2033 for State

and School Group (In Billions)

Pre-HB2014

Contributions Additional Contributions

Authorized by HB 2014 Total

Contributions

$13.338 B $5.193 B $18.531 B

Under this projection (Option B), the

KPERS state and school group would have an

unfunded actuarial liability of $7.4 billion in

FY 2033, with a funded ratio of 69 percent.

Contribution rates would rise to 12.91

percent in FY 2024, then gradually decline

by 2033 to 12.65 percent. Option B would

cost approximately $4.1 billion less than

Option A by making the actuarially

recommended changes.

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

Projected Fiscal Impact of HB 2014

on State Employer Contributions (Option A)

and on State Employer Contributions After

Reamortization (Option B): FY 2004 to FY 2033

State and

School Group Option A Option B

Equilibrium

(Contribution) Rate 18.31% 12.67%

UAL FY 2033 $802 M $7,409 M

Funded Ratio

FY 2033 96% 69%

State Payments $22,610 M $18,531 M

Option B reduces state payments by

almost $4.1 billion over the 30-year period

when compared with Option A. The period

for amortization is extended beyond FY

2033, however. There will be additional

costs not reflected in these comparisons.

The savings should be viewed as short-term

savings because the total cost to the state will

be higher, assuming all assumptions are met,

since payments are extended beyond FY

2033. The KPERS actuary points out that

this method tends to flatten out contribution

rates earlier and make employer payments

more affordable. Nearly all retirement plans

reamortize, especially when the remaining

amortization period becomes very short. In

the case of the KPERS state and school

group, the KPERS actuary recommends

consideration of implementing this option at

some future date.

Combining Alternatives into New

Options. The options considered for the

state and school group previously included:

!Option A: Current Law for Contributions,

No Bonds.

!Option B: Current Law for Contributions,

No Bonds, with Reamortization.

The projected impact of infusing $500

million in bond money into KPERS for

investment was considered without

reamortizing and with reamortizing, as well

as by repaying bonds with KPERS money

and with non-KPERS money. Four

alternatives were presented, two that include

bonds with Option A and two that include

bonds with Option B (and reamortization):

!Option J: Current Law for Contributions,

with Bonds and KPERS Repayment.

!Option K: Current Law for Contributions,

with Bonds and non-KPERS Repayment.

!Option H: Current Law for Contributions,

with Bonds, KPERS Repayment,

Reamortization.

!Option I: Current Law for Contributions,

with Bonds, non-KPERS Repayment,

Reamortization.

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

Projected Fiscal Impact of HB 2014 plus Reamortization on State Employer

Contributions (Option A) and on State Employer Contributions, with Bonds

(Option J & K): FY 2004 to FY 2033

State and

School Group Option A Option J Option K

Equilibrium Rate 18.31% 19.98% 14.76%

UAL FY 2033 $0.8 B $1.2 B $0.6 B

State Payments $22.6 B $23.3 B $21.4 B

Compared with Option A, state payments

would increase under Option J and a modest

decrease of $1.2 billion in state payments is

noted in Option K which also produces a

lower equilibrium rate. Without

reamortization, none of these alternatives

reduce state payments more than $1.2 billion

over the 30-year period. Contribution rate

increases average $37.9 million to $55.8

million annually with these three

alternatives.

Two other bond options, when

augmented by the enhanced employer

payments, include reamortization (Options H

and I) and may be contrasted with Option B

that relies only on increased employer

payments plus reamortization.

Projected Fiscal Impact of HB 2014 plus Reamortization on State Employer

Contributions (Option B) and on State

Employer Contributions plus Bonds (Option

H & I): FY 2004 to FY 2033

State and

School Group Option B Option H Option I

Equilibrium Rate 12.67% 12.65% 11.13%

UAL FY 2033 $7.4 B $6.6 B $5.9 B

State Payments $18.5 B $18.4 B $17.8 B

The comparison of options indicates that

each alternative has the potential to reduce

the amount of state payments by $4 billion to

almost $5 billion in the period ending with

FY 2033. Reamortization causes an increase

in unfunded liability by extending the period

beyond FY 2033. However, it reduces the

average annual increase required in state

payments to between $29.0 million and

$33.0 million annually.

Other Alternatives. In addition, there

were other alternatives that included such

elements as additional employer

contribution rate increases, employee

contribution rate increases with enhanced

benefits, lower benefit tiers for future

employees, self-funded cost of living

adjustments for future retirees, and cost of

living adjustments for current retirees. None

of these alternatives is addressed in this

analysis in order to initially focus on the

core options that may be addressed in any

long-term plan. These other alternatives may

be added to a core plan.

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

Summary and Conclusions for KPERS

State and School Group. KPERS listed a

number of factors to consider in evaluating

the options: funded ratio, UAL amount,

contribution rate, equilibrium date/rate,

increase in annual contributions, total

contributions for multiyear period, and

present value of multiyear contributions.

The following table summaries some of the

factors in conjunction with certain options.

Comparison of Options for KPERS

State Employer Payments and Contributions

State and

School Group Option A Option J Option K Option B Option H Option I

Equilibrium Rate 18.31% 19.98% 14.76% 12.67% 12.65% 11.13%

UAL FY 2033 $0.8 B $1.2 B $0.6 B $7.4 B $6.6 B $5.9 B

Funded Ratio FY 2033 96% 95% 98% 69% 73% 76%

FY 2033 Rate 17.71% 20.16% 13.81% 12.65% 12.47% 10.87%

Total State Payments $22.6 B $23.3 B $21.4 B* $18.5 B $18.4 B $17.8 B*

Net Difference to A -- $ 0.7 B $ (1.2) B $ (4.1) B $ (4.2) B $ (4.8) B

Bonds No Yes Yes* No Yes Yes*

Reamortize No No No Yes Yes Yes

*assumes non-KPERS repayment of bonds with those funds included in state payments.

First, the six options may be contrasted

in terms of contributions (state payments)

over the 30-year period. Option A is current

law, with an estimated cost of $22.6 billion

without reamortization and without issuing

any pension obligations for long-term

funding. Bonds without reamortization add

$700 million to state payments (Option J),

while bonds repaid with non-KPERS funds

and without reamortization (Option K)

produce $1.2 billion in state contribution

savings. Reamortization produces $4.1

billion in savings for state payments without

issuing bonds (Options B), and extends the

time period for payments beyond 30 years.

When reamortization is combined with

bonds paid by KPERS funds (Option H),

savings in state payments total $4.2 billion.

A combination of bonds paid with non-

KPERS funds and reamortization (Option I)

produces the greatest savings with $4.8

billion less in state payments over the 30-

year period.

Option I has the greatest savings potential

over the 30-year period. It also minimizes

the future state payments after FY 2033. The

contribution rate for Option I is 10.87

percent, which is 1.6 percent less in FY 2033

than the next lowest rate of 12.47 percent for

Option H. The difference in cost to the state

is approximately $102 million for one year in

FY 2033. In order to implement Option I, the

state would have to make bond payments for

principal and interest with non-KPERS funds

for 30 years. The total non-KPERS

expenditures would be approximately $1.108

billion over 30 years. Even with making the

bond payments with non-KPERS funds,

Option I costs less in terms of total state

payments than any other option over the

same 30-year period, with estimated

expenditures of $17.8 billion.

The other evaluation factors indicate

Option I makes a positive contribution

toward a long-term funding plan. The

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

funded ratio never drops below 60 percent

over the 30-year period, and rises to 76

percent in FY 2033. The UAL amount rises

from $2.2 billion to slightly less than $6.5

billion, but begins to decline after 2025. The

contribution rates flatten out after

reamortization in FY 2015, generally in the

11 percent range before starting to decrease

in the 2030s. No other option produces

lower contribution rates. The equilibrium

date occurs in FY 2018, the earliest of any

option. The increases in annual state

payments average $29.0 million per year for

Option I, while the next lowest average is

found in Option H with $32.5 million annual

increased payments. Current law (Option A)

will require average annual increased state

payments of $48.4 million.

Options B and H each produce more than

$4 billion in potential state contribution

savings over the 30-year period. The

difference in savings added by bonds is $88

million for Option H. The average annual

increase in state payments in Option H with

bonds is $32.5 million, while the average

increased amount for Option B is $33.0

million. Option H improves the long-term

funding for KPERS state/school more than

Option B when evaluated by the funded

ratio, UAL amount, FY 2033 contribution

rate, and equilibrium date/rate. Paying for

bonds with KPERS funds reduces the

additional positive fiscal impacts noted in

Option I. The FY 2033 contribution rate for

Option H requires $102 million in additional

state payments than Option I. With

reamortization, each option will have

continuing payments in FY 2034 and beyond

for normal cost and unfunded liability

associated with the KPERS state and school

plan.

Separating the State and School Group.

KPERS presented information about the

fiscal impact of reestablishing a state group

and a school group. Prior to 1987, there

were separate nonschool and school groups.

Included in the nonschool group until 1988

were the local units of government. A local

group was established in 1988, the year after

the school group was added to the nonschool

group in 1987.

The KPERS actuary prepared the

December 31, 2002, valuation with

information about separate state and school

groups. That information is extended in the

KPERS report that separates state and school

into separate groups for other comparative

purposes.

Projected Fiscal Impact of HB 2014 on State and School Combined

(Option B) and on a Separate School Group and State Group

(Option S): FY 2004 to FY 2033 (In Billions)

Pre-HB 2014

Contributions

Additional

Contributions

Authorized by

HB 2014 Total

Contributions

State and School Group $13.338 $5.193 $18.531

School Group $9.981 $5.141 $15.122

State Group 3.357 (0.011) 3.346

TOTAL $13.338 $5.130 $18.468

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

The marginal difference in costs for

reamortization of the State and School Group

(Option B), compared with a reamortized

School Group and a State Group without

reamortization (Option S), is shown. Savings

of $63 million in state contributions over the

30-year period appear possible when

separating the state and school groups.

Projected Fiscal Impact of HB 2014 in Option B for State/School

Group and After Split of the State Group and School Group

in Option S: FY 2004 to FY 2033

Option B Option S

Equilibrium (Contribution) Rate 12.67%

State/School 8.96% State

14.31% School

UAL FY 2033 $7,409 M

State/School $70 M State

$7,878 M School

Funded Ratio FY 2033 69%

State/School 99% State

58% School

Additional comparisons between options

are presented in terms of equilibrium rate,

unfunded actuarial liability, and funded

ratio. When considered as a separate group,

the state component would reach

equilibrium at 8.96 percent under current

law, and by FY 2033 have an unfunded

actuarial liability of $70 million, with a

funded ratio of 99 percent. The School

Group would fare much worse by itself and

not part of the combined group.

KPERS Local Group

The KPERS local group has a lesser

problem in long-term funding than the

KPERS state and school group. The 2003

Legislature took no action to increase

employer contributions or to raise an

existing statutory cap on contribution

increases. The KPERS actuary noted that the

same problem of long-term funding, only to

a lesser degree, impacts the KPERS local

group. A need to confront the unfunded

actuarial liability applies to the local group

of KPERS, and the KPERS actuary

recommended that the Legislature also

address this issue.

A statutory cap limits annual local

contribution rate increases to no more than

0.15 percent. The KPERS actuary

recommends an adjustment or elimination of

the cap since the model (Option L1) that is

based on current law does not produce an

equilibrium contribution rate in the next 30

years. No modification of the local cap was

adopted last Session when the KPERS state

and school group‘s cap was changed in HB

2014. The KPERS actuary reviewed three

alternatives (Options L2, L3, L4).

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

Projected Fiscal Impact on Local Employer Contributions (Option L1)

Compared with Modifications of Contribution Rates

(Options L2, L3, L4): CY 2003 to CY 2032

Local Group Option L1 Option L2 Option L3 Option L4

Equilibrium Rate None 5.44% 8.32% 7.60%

Equilibrium Date None CY 2005 CY 2013 CY 2009

UAL FY 2033 $2.6 B None $32 M $12 M

Funded Ratio FY 2033 65% 100% 100% 100%

Each of the alternatives would produce a

fully funded local plan by CY 2032. Option

L2 would raise the contribution rate

immediately to the actuarially required

amount. Over 30 years Option L2 requires

the least amount of average annual increase

(after the first year spike) and of total

contribution increase, but has higher

contributions required for the first four to six

years. Option L3 has the same scheduled

increases that was adopted for the state and

school group last year. Option L4 is an

accelerated version of L3.

The Committee recognizes there has been

no testimony from local units as to which

alternative option would be preferred. There

are variances in one-time and in annual cost

increases that when spread across all local

participating governments may or may not be

considered significant impacts. Further

hearings will be require during the 2004

Session to determine the option preferred by

local units of government.

CONCLUSIONS AND RECOMMENDATIONS

The Joint Committee on Pensions,

Investments, and Benefits makes the

following recommendations.

!The Committee recommends favorably to

the State Finance Council the issuance of

$500 million in pension obligation bonds

authorized by Section 16 of Chapter 155,

2003 Session Laws of Kansas. This

recommendation fulfills the provision of

Section 16(f) of Chapter 155 that “No

bonds shall be issued pursuant to this

section prior to the review and

recommendation to the State Finance

Council of such issuance by the Joint

Committee on Pensions, Investments and

Benefits.”

The Committee in this recommendation

stresses the fact that this is only one piece of

the ultimate solution dealing with the

unfunded actuarial liability. The

Committee’s recommendation was adopted

in conjunction with materials provided by

the Kansas Development Finance Authority

dated November 25, 2003, with specific

reference to the amortization schedule on

pages 10-11 of that document that includes

capitalized interest for three years preceding

payments of both principal and interest. The

net proceeds to KPERS would be

approximately $455 million in this schedule,

with the capitalized interest taken out of the

par amount of $500 million in bonds. Under

this option, it was not anticipated that

KPERS would be responsible for repayments.

The burden would fall to the State General

Fund or some other funding source. The

Committee considered tobacco revenues as

an alternative source, but that funding plan

did not gain approval.

!The Committee recommends the

following items be included in a bill to

be introduced for consideration by the

2004 Legislature:

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

"Changing the actuarial cost method

for all three plans—regular KPERS,

KP&F, and Judges.

"Modifying the asset smoothing

method.

"Reamortizing the unfunded actuarial

liability if and when deemed prudent

by the KPERS Board of Trustee.

"Modifying the statutory contribution

caps for local employers.

"Separating the state and school group

into two groups for actuarial

purposes in calculating employer

contribution rates separately for the

state group and for the school group.

Regarding the statutory contribution cap

increase for local employers, the Committee

recognizes there has been no testimony from

local units as to which alternative option

would be preferred. There are variances in

one-time and in annual cost increases that

when spread across all local participating

governments may or may not be considered

significant impacts. Further hearings will be

require during the 2004 Session to determine

the option preferred by local units of

government.

!Regarding a long-range funding plan, the

Committee regrets that a comprehensive

package was not developed during the

2003 interim. The Committee believes

that HB 2014 from the 2003 Session was

one step in solving the KPERS long-term

funding issue. Additional steps must be

taken, including its recommendations

regarding issuance of $500 million in

bonds and introduction of a new bill

modifying actuarial methods and KPERS

groups. Depending upon the disposition

of these two recommendations, further

steps will be required in developing a

comprehensive plan during the 2004

interim.

The fiscal note on issuing bonds and

passing proposed new legislation must be

considered before those next steps are taken

because one action without the other one has

consequences in the billions of dollars. The

30-year fiscal note on the recommended

bond issue includes both revenues and

expenses that cannot be computed until

bonds actually are issued. The estimated

fiscal note for $500 million in bonds has a

cost of approximately $1.133 billion in

principal and interest payments, and a net

present value benefit to KPERS of

approximately $455.4 million. The

recommended actuarial changes over the

same 30-year period have the potential of

saving the state more than $4.0 billion in

contributions. Bonding and paying for the

bonds with non-KPERS funds could save an

additional $500 to $700 million in state

contributions to KPERS over 30-years,

offsetting in part the costs for principal and

interest.

Note: The Chairperson scheduled a special Committee meeting for January 7, 2004,

with a single agenda topic: reconsideration of the Committee recommendation that

pension obligation bonds should be repaid with non-KPERS money. The issue to be

discussed is whether bond principal and interest should be paid from KPERS

employer contributions. That issue was raised in conjunction with the scheduling of

a State Finance Council meeting, and the Committee’s reconsideration of its

recommendation has been suggested as a step to precede a State Finance Council

meeting.

Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

Joint Committee on Pensions,

Investments, and Benefits

STATUTORY STUDIES

CONCLUSIONS AND RECOMMENDATIONS

The Joint Committee on Pensions, Investments, and Benefits makes the following recommendations.

!Pursuant to KSA 46-2201, the Committee interviewed Doug Wolff, a gubernatorial nominee to

the KPERS Board of Trustees, and recommends the nomination favorably when considered by

the Senate Ways and Means Committee during the 2004 Session.

!Concerning statutory restrictions and a salary cap of $15,000 for KPERS members who return

to work for the same participating employer after retirement, the Committee recommends

introduction of a bill to exempt public school teachers and nurses at state institutions from the

current law if returning to hard-to-fill positions.

!Regarding death and disability funding, the Committee plans to monitor this issue as additional

information is received from KPERS, including a study due in early 2004 about changes in

program administration.

!In regard to carry over legislation that is already assigned to legislative committees for the 2004

Session, the Committee reviewed a number of bills: SB 60, HB 2127, HB 2225, HB 2012, and HB

2124. The Committee takes no further action on these bills, with the exception of HB 2012

which it recommended for introduction last year. The Committee reiterates its support of HB

2012.

!The Committee recommends two bills be introduced for changes requested by the KPERS Board

of Trustees:

"Modifying the statutory 5.0 percent limitation on alternative investments.

"Allowing decisions on real estate investments without the requirement that the KPERS Board

of Trustees must specifically approve or disapprove each transaction.

Proposed Legislation: The Committee recommends three bills on this topic.

BACKGROUND

The Joint Committee on Pensions,

Investments, and Benefits is directed by

KSA 46-2201 to monitor, review, and make

recommendations relative to investment

policies and objectives formulated by the

Kansas Public Employees Retirement

System (KPERS) Board of Trustees; to

review and make recommendations related

to KPERS benefits; and to consider and

make recommendations on the

confirmation of members nominated by the

Governor to serve on the KPERS Board of

Trustees.

Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

In addition, both the Legislature and its

committees may assign other specific topics

for the Committee to review.

KPERS administers three statewide

coverage groups: KPERS state, school, and

local (for regular state and local public

employees, school and community college

employees, and state correctional officers);

the Kansas Police and Firemen’s (KP&F)

Retirement System; and the Kansas

Retirement System for Judges (Judges). All

coverage groups are defined benefit,

contributory retirement plans, and have as

members most public employees in Kansas.

KPERS also administers several other

employee benefit and retirement programs:

a public employee death and long-term

disability benefits plan for active

employees; an optional term-life insurance

program; a Kansas City, Kansas annuitant

program; and a closed legislative session-

only employees retirement program.

COMMITTEE ACTIVITIES

The Committee met on August 27-28,

September 23, October 28-29, and

December 1-2, 2003. The minutes and

attachments for all meetings are available

from the Division of Legislative

Administrative Services.

Governor’s Nominations. There was

one vacancy on the KPERS Board of

Trustees that required the Committee to

review a gubernatorial nominee pursuant to

KSA 46-2201. The Committee interviewed

Doug Wolff at its meeting of December 1,

2003, and recommends the nomination

favorably when considered by the Senate

Ways and Means Committee during the

2004 Session.

KPERS Investment Performance. For

the period ending June 30, 2003, total

portfolio performance was 4.0 percent. For

the past five years, the cumulative results

for the total portfolio reflect a gain of 3.1

percent. The total portfolio value on June

30 was $8.89 billion. Positive investment

performance was reflected for the Treasury

Indexed investments that returned 19.4

percent and for the fixed income

investments that returned 14.0 percent

during the period ending June 30, 2003.

Other investments generally had positive

returns for the most recent fiscal year,

except for the international equity and cash

equivalent sectors that had negative

returns.

KPERS Actuarial Valuation. The

KPERS actuary presented the annual

valuation report. The process used to

quantify the assets and liabilities of the

KPERS plans was reviewed. The actuary

explained that there is not enough money

coming in to fund benefits over the long-

term and that action needs, and that

additional measures need to be taken to

enhance long-term funding. Although the

legislation passed by the 2003 Legislature

made improvements, a long-range plan

with additional measures needs to be

developed. The unfunded actuarial

liability increased from $1.780 billion on

December 31, 2001, to $2.829 billion on

December 31, 2002, for all KPERS plans.

The funded ratio for all plans, a more

meaningful measure of the health of a

retirement plan, according to the actuary,

decreased from 84.8 percent to 77.6 percent

over the same one-year period. Projections

indicate further decreases in the funded

status to 55 percent in 2012 and 57 percent

in 2022, absent any substantial changes in

KPERS plan funding for the state, school

and local KPERS groups.

The KPERS state and school portion of

the unfunded actuarial liability is the single

Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

largest component of the unfunded liability,

increasing from $1.506 billion in 2001 to

$2.239 billion in 2002 on December 31. A

statutory provision that limits the rate of

increase in employer contributions to 0.2

percent in any given year will begin

increasing in FY 2006 under a change in

law passed by the 2003 Legislature. The

actuarial calculations would require a

contribution rate increase to 9.141 percent

at a cost of more than $150 million in FY

2006 to address the long-term funding

issue. Current law caps the employer

contribution rate at 4.78 percent in FY

2005, and allows it to rise to 5.27 percent in

FY 2006 in order to address the unfunded

actuarial liability.

The actuary also noted that calculations

do not reflect $1.5 billion of deferred

investment loss that is part of the

smoothing method used in the actuarial

valuation. The difference in actuarial and

statutory contribution rates will result in

increases of the unfunded actuarial liability

each year, the actuary noted, with regard to

the KPERS state and school group, as well

as the KPERS local group. The other plans

will experience increases in employer

contribution rates in FY 2006, but since

they do not have statutory caps, KP&F will

rise from 9.47 percent to 11.63 percent and

Judges from 18.67 percent to 21.97 percent.

The KPERS actuary was asked to divide

the state and school group for informational

purposes. The state portion of the

unfunded actuarial liability is estimated to

be $106 million, while the school portion is

estimated to be $2.133 billion. The

actuarial contribution rate for state only

would be 5.89 percent and the rate for

school only would be 10.18 percent in FY

2006.

The KPERS local group also has a long-

term funding problem. The KPERS actuary

recommended that the employer

contribution rates be allowed to rise more

rapidly by increasing the statutory cap of

0.15 percent currently in effect. The

unfunded actuarial liability for the local

group was $340 million on December 31,

2002, up from $185 million the previous

year. The funded ratio was 81.7 percent.

The actuarially required FY 2006

contribution rate is 5.44 percent, with the

current cap limiting the statutory rate to

3.41 percent in FY 2006.

In conclusion, the actuary stressed that

the KPERS groups (state, school and local)

are not in actuarial balance. A change in

funding plan is needed to meet the

challenges posed by the current

contribution shortfall, deferred investment

losses, and the negative investment

experience.

Death and Disability Funding Issue. A

report on the status of the Death and

Disability Fund was presented by KPERS

staff. This fund provides death and

disability benefits for active KPERS

members. Recent contribution

moratoriums have reduced revenue by an

estimated $100.3 million through FY 2004

and investment losses have reduced assets

by an additional $19.9 million. As of June

30, 2003, the assets were valued at

approximately $73.1 million and the fund

had outstanding actuarial liabilities of

$163.6 million. The fund balance is

estimated at the end of FY 2004 to be $27.3

million. An independent review of the

death and disability program is underway,

and a report is expected prior to the 2004

Legislature in order to present

recommendations about the future

administration of the program. KPERS staff

provided several updates during the interim

review.

Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

Earlier Vesting under KPERS Issue. HB

2225 (assigned to House Pensions

Committee for 2004) reduces vesting under

KPERS from ten years to five years,

effective July 1, 2005. The bill would

reduce the length of time new members

must wait before being entitled to a KPERS

retirement benefit. Under current law,

most employees must work at least 10 years

before being entitled to a retirement benefit.

There are a few exceptions, such as new

employees who are within a few years of

retirement eligibility or employees who are

able to acquire prior service credits that

count towards 10-year vesting.

A number of conferees testified in

support of the bill. HB 2225 will carry over

to the 2004 Legislature.

Working After Retirement Issue. Two

bill were reviewed that will carry over to

the 2004 Legislature. SB 60 (assigned to

Senate Education Committee for 2004)

permits retired teachers to be employed by

a district with hard-to-fill positions and for

those teachers returning to the district from

which they retired to not be subject to the

$15,000 earnings limitation. The bill

exempts retired teachers who return to

work from the teacher due process

procedures in current law. The bill also

directs the State Board of Education to

determine and make available a list of hard-

to-fill teaching disciplines in which there is

a critical shortage of teachers. This

exemption applies only from July 1, 2003,

to June 30, 2007.

HB 2127 (assigned to House Pensions

Committee for 2004) eliminates the

earnings limitation after retirement under

KPERS. The bill would delete a $15,000

statutory cap on the amount of earnings

allowed if a KPERS employee returns to

work after retirement for the same

participating employer. Under current law,

if a retired KPERS member returns to work

for the same participating employer, when

calendar year earnings reach $15,000, the

employee must either stop working, or

KPERS will cut off the retirement benefit

payments for the remainder of the calendar

year.

Representative Ray Cox, addressing a

statutory problem, noted that retired school

teachers are prohibited from making more

than $15,000 annually if they return to

teach in the district from which they

retired, but there is no salary cap if they

return to teaching in a neighboring school

district. Representative Cox recommended

statutory changes in a proposed bill draft

which would allow retirants to return to

work for the employer from which they had

retired to teach in hard-to-fill positions as

would be defined by the State Board of

Education. Nurses at state institutions also

were included in the bill draft.

Representative Cox said the proposed

legislation would sunset on June 30, 2007.

KP&F Retirement Issue. HB 2012

(assigned to House Pensions Committee for

2004) allows Tier I KP&F members to retire

with unreduced benefits after 32 years of

service regardless of age. The bill was

introduced by the Joint Committee on

Pensions, Investments and Benefits in order

to allow Tier I KP&F members with 32

years of credit service to retire before age

55, with no reduction in benefit. Tier II

KP&F members may retire at age 50 with no

reduction in benefit. Retirement benefits

for members retiring prior to that age are

reduced on an actuarial basis.

A number of conferees testified in

support of HB 2012 that will carry over to

the 2004 Legislature.

KP&F Membership for State Employees

Issue. HB 2124 (assigned to House

Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

Pensions Committee for 2004) expands

membership in KF&P to include certain law

enforcement personnel of the Kansas

Department of Revenue, Department of

Wildlife and Parks, Department of

Corrections, Highway Patrol, Office of the

State Fire Marshal, Securities Commission,

and Racing and Gaming Commission.

Both agency representatives and

individual employees testified in support of

the bill. Several concerns were raised

about excluded groups of state employees

with law enforcement duties.

KPERS Legislative Requests. Pertaining

to proposed 2004 legislation, the KPERS

Board of Trustees requests two bills be

introduced. The KPERS Chief Investment

Officer reviewed two KPERS legislative

proposals.

The first proposal is the elimination of

the statutory 5.0 percent limitation on

alternative investments. Alternative

investments are considered any non-real

estate investment not traded on a public

exchange. The Committee discussed

another method that would limit or cap the

amount of alternative investments that

could be acquired in any given year to not

more than 1.0 percent of the total market

value of investments.

The second proposal is a statutory

change that to allow decisions on real estate

investments without the requirement that

only the Board must receive final due

diligence information and specifically

approve or disapprove each transaction.

CONCLUSIONS AND RECOMMENDATIONS

The Joint Committee on Pensions,

Investments, and Benefits makes the

following recommendations.

!Pursuant to KSA 46-2201, the

Committee interviewed Doug Wolff, a

gubernatorial nominee to the KPERS

Board of Trustees, and recommends the

nomination favorably when considered

by the Senate Ways and Means

Committee during the 2004 Session.

!Concerning statutory restrictions and a

salary cap of $15,000 for KPERS

members who return to work for the

same participating employer after

retirement, the Committee recommends

introduction of a bill to exempt public

school teachers and nurses at state

institutions from the current law if

returning to hard-to-fill positions.

Participating employers would be

required to pay KPERS an amount

equivalent to the total employee and

employer contributions that normally

would be due on the salary paid a

retired member. A sunset on the

exemption is included for June 30, 2007.

!Regarding death and disability funding,

the Committee plans to monitor this

issue as additional information is

received from KPERS and a study due in

early 2004 about changes in program

administration. The Committee

reviewed the projected financing in FY

2005, and the evolution of the program

to pay-as-you-go by FY 2006, if the

present trends and benefits continue

without modification. A financing

shortfall is projected by FY 2006 that

will require an increase in the statutory

contribution rate of 0.6 percent to

approximately 1.0 percent for

Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

participating employers (state and local

governments). The FY 2006 cost

increases are estimated at $15.8 million

for state and $4.4 million for local units

of government, if no changes are made

in the death and disability benefits

program. The state currently pays the

employer cost for school districts and

community colleges.

!In regard to carry over legislation that

will be subject to action in the 2004

Session, the Committee reviewed a

number of bills: SB 60, HB 2127, HB

2225, HB 2012, and HB 2124. The

Committee decided to take no further

action on these bills since they are

assigned to legislative committees for

the 2004 Session, with the exception of

HB 2012 which it recommended for

introduction last year. The Committee

reiterates its support of HB 2012 and

decided not to introduce a Senate bill

this year dealing with the same subject.

!The Committee recommends two bills

be introduced for changes requested by

the KPERS Board of Trustees:

"Modifying the statutory 5.0 percent

limitation on alternative

investments.

"Allowing decisions on real estate

investments without the

requirement that the KPERS Board of

Trustees must specifically approve

or disapprove each transaction.

The Committee adopted the Board’s

specific request on real estate and approved

a different method for alternative

investments that would replace the current

5.0 percent limit with an annual cap of not

more than 1.0 percent of the total market

value of investments.

JOINT COMMITTEES

Report of the

Select Joint Committee on School Finance

to the

2004 Kansas Legislature

CHAIRPERSON: Representative Kathe Decker

VICE-CHAIRPERSON: Senator Dwayne Umbarger

OTHER MEMBERS: Senators Christine Downey, Jay Emler, Janis Lee, Jean Schodorf,

Mark Taddiken, Ruth Teichman, and John Vratil; Representatives Lana Gordon, Gary

Hayzlett, Don Hill, Everett Johnson, Mary Kauffman, Bruce Larkin, Ray Merrick, Doug

Patterson, Bill Reardon, Tom Sawyer, Sue Storm, and Valdenia Winn

STUDY TOPICS

2003 Report

December 2003

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Kansas Legislative Research Department 2003 School Finance

Select Joint Committee on School Finance

2003 REPORT

CONCLUSIONS AND RECOMMENDATIONS

The Legislative Coordinating Council created the Select Joint Committee on School Finance

to conduct a comprehensive review of K-12 education finance during the next two years. The

Committee is to make recommendation on potential improvements to the current formula or

develop a new formula that would strengthen K-12 education; however, at this time, the

Committee wishes to report on the progress it has made but does not make any

recommendations.

Proposed Legislation: None

BACKGROUND

The Legislative Coordinating Council

created the two-year Select Joint Committee

on School Finance to conduct a

comprehensive review of K-12 education

finance, including the impact of federally

mandated programs, geography, population

density, and distance learning on the current

school finance system. In addition, the

Committee is to make recommendations to

the 2005 Legislature on potential

improvements to the current formula or

develop a new formula that would

strengthen K-12 education in Kansas.

COMMITTEE ACTIVITIES

Overview of Kansas School Finance

At its October meeting, Committee staff,

and Dale Dennis, Deputy Commissioner,

State Department of Education, conducted a

basic review of the current school finance

formula. The presentation included an

explanation of how various school district

funds are computed for state aid purposes

and a description of specific school district

funds, including their sources of revenue

and how money from the fund can be spent.

According to Mr. Dennis, implementation

of the No Child Left Behind Act has put

increasing pressure on school districts to

provide services for students who are lagging

behind. He told the Committee there is not

enough money to serve all at-risk students

and, in some cases, districts are funding

programs with money that could be used for

other purposes, or districts are not able to

serve some students at all. It was noted that

Kansas’ at-risk weight is relatively low

among the states and that the consulting firm

of Augenblick and Myers (A&M)

recommended at-risk weightings ranging

from 0.22 for small districts to 0.51 for large

districts.

Report on No Child Left Behind

Act Implementation

Dr. Andy Tompkins, Commissioner of

Education, presented information on Kansas’

progress to implement the No Child Left

Behind Act. Dr. Tompkins told the

Committee it is unrealistic to expect that all

subgroups will be able to overcome barriers

to achievement, although results on Kansas

assessments indicate that the state is making

progress. He said the larger districts tend to

have more student groups that are harder to

educate.

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Kansas Legislative Research Department 2003 School Finance

Dr. Tompkins noted that the No Child

Act has pushed states to focus on students

who need more help and has caused districts

to target the No Child goals. Although Dr.

Tompkins said the goals of the No Child Act

are worthwhile, the cost to school districts of

implementing the provisions, the cost of

sanctions for failure to attain goals, and the

higher standards imposed on teachers and

paraprofessionals are presenting problems to

states, particularly since it appears at this

point that federal funding will not be

forthcoming to help implement the act. Dr.

Tompkins told the Committee there are

approximately 680 paraprofessionals who

work with disadvantaged children in Title I

programs and another 11,000 who work with

special education children in Kansas. He

said school districts are working to assist

paraprofessionals in meeting the No Child

requirements, which mandates either a two-

year degree or qualifying on the basis of a

local assessment.

Report on Reauthorization of The

Individuals with Disabilities

Education Act (IDEA)

Staff informed the Committee that the

United States House of Representatives has

passed legislation to reauthorize the IDEA.

The House limited the number of

amendments that could be added to the bill

to three. According to staff at the National

Conference of State Legislatures, states

should have few concerns about the House

version of the act, except that the act

imposes the same increased requirements for

teachers and paraprofessionals as does the

No Child Left Behind Act. The House bill

also would cap the number of special

education students who are eligible for

funding under IDEA to 12 percent of the

student population.

The Senate version of the reauthorization

bill is on Senate General Orders and is

limited to six amendments. One component

of the bill would provide for an increase in

federal funding to 40 percent of special

education excess costs over the next seven

years. (Current federal funding under IDEA

accounts for approximately 16 to 17 percent

of the cost of special education in Kansas,

according to the State Department of

Education.) Other provisions would require

more paperwork for states, place a limit on

how much federal funding can be used for

administrative expenses, and require that, in

order to receive reimbursement from

Medicaid for medical services for special

education students, school districts must

itemize the services instead of combining

them based on the child’s particular

handicapping condition (a practice known as

“bundling”). Kansas presently receives

approximately $25 million a year in

Medicaid reimbursement for services

provided by school districts for special

education students.

In addition, the Senate bill would impose

the No Child Left Behind Act requirements

on teachers and paraprofessionals. Another

component of the Senate bill concerns the

state’s immunity from suit under federal law.

Like the current law, the Senate

reauthorization would mean that states are

not immune from suit in federal court, but,

unlike current law, which lists in the law

itself terms and standards which could form

the basis for litigation, the new law would

leave it up to the U.S. Secretary of Education

to define terms over which states could be

sued in federal court. Furthermore, the

Senate version of the reauthorization would

require states to fund protection and

advocacy agencies whose purpose would be

to provide legal assistance to parents who are

interested in filing lawsuits against state

agencies and school districts. Finally, staff

informed the Committee that so little time

remains for the Senate to take action on its

bill that it is unlikely that the bill will be

acted on this year.

Constitutional Provisions Relating

to School Finance

Bill Rich, Professor of Law at Washburn

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Kansas Legislative Research Department 2003 School Finance

University, provided a context in which

school finance litigation will be decided by

describing the parameters set by the

constitutions of the United States and

Kansas. Professor Rich told the Committee

that, in general, the United States Supreme

Court has provided minimal guidance to

states with regard to school finance,

primarily because it is state constitutions

that deal with the responsibility for

providing for a public education.

He did, however, refer to two U.S.

Supreme Court decisions—San Antonio

School District v. Rodriguez (411 U.S. 1, 42

(1973)) and Plyler v. Doe (457 U.S. 202

(1982))—which deal with education. In

Rodriguez, the Supreme Court articulated the

principle that school finance decisions most

properly should be decided at the state level,

not by federal courts, and that within the

limits of rationality, “the legislature’s efforts

to tackle the problems should be entitled to

respect.” In Plyler, the U.S. Supreme Court

held that a state [Texas] could not withhold

funds for the education of children who were

not legally admitted into the United States or

deny enrollment to those children. The

decision was made on the basis of the Equal

Protection Clause of the Fourteenth

Amendment to the Constitution of the United

States.

Professor Rich turned his attention to the

Kansas Constitution and referenced the

obligation for the Legislature to “make

suitable provision for finance of the

educational interests of the state.” He said

he believes the Kansas Supreme Court

generally will defer to the Legislature to

define “suitable,” and noted that the Court

will use the “rational basis” test to decide

whether, in fact, the Legislature has fulfilled

its obligation. In addition, the Court will

consider equity and the extent to which

Kansas school children have equal

educational opportunities.

Professor Rich elaborated by explaining

that, in order to provide equal educational

opportunities to some children, greater

expenditures may need to be made.

However, the Court likely will require that

differences in funding be legitimate—that is,

that they be based on some valid educational

reason and not just on a political expedient.

Further, the Court will consider the state’s

school funding formula in light of the

varying abilities of school districts to

generate local resources. According to

Professor Rich, “. . . inequality may fail the

test for legitimacy if it results from lack of

resources in different parts of the state.”

Professor Rich also discussed adequacy

in the context of the litigation and said that

adequate resources for one community may

not be adequate for another. Therefore, the

Court may look at outcomes and try to

determine whether lack of resources is

resulting in noticeable differences in

achievement among students. Finally, he

said that the matter of financing public

education is not static, but is subject to

changing conditions that must be

continuously monitored.

Report on School Finance Litigation

Dan Biles, Attorney for the State Board of

Education, and Scott Hesse, Office of the

Attorney General, provided an update on

school finance litigation. Mr. Biles and Mr.

Hesse are representing the state in two

school finance cases that currently are

pending: one in Shawnee County District

Court and one in the United States District

Court. Trial in the state case was completed

October 1, 2003.

Mr. Biles explained that school finance

generally is an issue in state, not federal,

courts because it is primarily state

constitutions that deal with the

responsibility to provide for public

education. Because state constitutions vary

among the states, it is most instructive to

look at the history of litigation in each state,

not to compare case law from one state to

another.

Recent history of school finance litigation

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Kansas Legislative Research Department 2003 School Finance

in Kansas goes back to the 1970s, when the

prior school finance act, the School District

Equalization Act (SDEA), was enacted in

1973 in response to a district court decision

which found the prior act deficient because

the state had not provided enough aid to

offset disparities among school districts in

taxing efforts and per-pupil expenditures.

The SDEA was challenged in 1990 and 1991

in lawsuits that were consolidated in

Shawnee County District Court before Judge

Terry Bullock. Judge Bullock announced a

series of principles he would apply in

deciding the pending case and the

Legislature responded by enacting a new

school finance act in 1992, the current

School District Finance and Quality

Performance Act.

The new law was immediately

challenged and, in an opinion issued in

December 1993 by Shawnee County District

Court Judge Marla Luckert, was found to

have two constitutional infirmities:

!The uniform school district general fund

tax levy was construed to be a state

property tax and, as such, subject to a

constitutional provision which limits

such levies to two years in duration; and

!The low enrollment weight was found

constitutionally deficient because it

perpetuated inequities caused by the

previous school finance law and the

enrollment eligibility was set at too high

a level.

The decision was appealed to the Kansas

Supreme Court, which, in December 1994,

overruled Judge Luckert’s finding that the

low enrollment weight was constitutionally

deficient and upheld the constitutionality of

the act. (The property tax provision had

been corrected by the Legislature, which, in

1994, began the practice of subjecting the tax

to renewal every two years.)

Mr. Biles told the Committee that the

1994 decision is the only school finance case

that has been decided by the state’s highest

court and that, generally, the courts have

been reluctant to make educational

decisions, preferring instead to leave

educational policy to local boards of

education and the Legislature.

Discussing the most recent litigation, Mr.

Biles told the Committee that the cases have

been brought by essentially the same parties

and are represented by the same attorneys.

The federal case, Robinson, et. al v. State of

Kansas, et. al, was filed May 21, 1999, by 32

students from USD 305 (Salina) and USD 443

(Dodge City) who represent various protected

groups. They argue that mid-sized school

districts do not receive the same amount of

school funding per student as the smaller

enrollment school districts, a fact that has a

discriminatory impact on minority and

disabled students in larger districts.

The state court case, Montoy, et. al v.

State of Kansas, et. al, was filed December 14,

1999, by USD 305 (Salina) and USD 443

(Dodge City) and by 31 students from those

districts who represent various protected

classes, including African-American,

Hispanic, Asian-American, students with

disabilities, and those of non-United States

origin. The plaintiffs bring all of their claims

under the Kansas Constitution, including a

challenge as to whether the Legislature has

made “suitable provision for finance of the

educational interests of the state as required

by Article 6.

When Montoy first reached his court,

Judge Bullock determined that there was no

issue for the court to decide, because

educational interests properly were in the

jurisdiction of the Legislature and the State

Board of Education. The Kansas Supreme

Court disagreed and remanded the case to

him. In a pretrial memorandum, Judge

Bullock told the parties that he would base

his decision on equity, which concerns

whether each child has been provided with

equal educational opportunities, and on

suitability, which concerns whether the total

amount of money available for education is

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adequate to provide educational

opportunities. Final oral arguments before

Judge Bullock in the state case are scheduled

for November 25, and it is expected that a

decision will be reached in six to eight

weeks. Mr. Biles told the Committee it is

almost certain that the decision will be

appealed to the Kansas Court of Appeals and

that the Kansas Supreme Court will take

jurisdiction. If so, a decision by the Supreme

Court likely would not be reached until after

the 2004 Legislature has adjourned.

Regarding the case in federal court, Mr. Biles

said no trial date has been set, and there is

speculation that the federal district court

may decide to wait until a final ruling has

been made on the state case before

proceeding.

Mr. Biles summarized the issues from the

perspective of plaintiffs in the case. Mr.

Biles said the main points are the following:

!Does the overall level of funding for

school finance meet constitutional

standards? Mr. Biles noted that the

plaintiffs point to the Augenblick and

Myers study which concluded that, in

order to provide a “suitable” education in

Kansas, much more money would need

to be added to school finance.

!What is the effect of the achievement gap

on subgroups? Mr. Biles said it is a fact

that there is an achievement gap and the

question before the Court is whether the

effect of the gap on subgroups will cause

the funding scheme to be considered

unconstitutional.

In addition, Mr. Biles said the plaintiffs

contend that the low enrollment weight is

too high and that not enough money is

allocated to urban school districts. Other

components of the plaintiffs’ arguments are

that local option budgets are not equalized

sufficiently, the result being that funding

local option budgets is too dependent on

local wealth. Plaintiffs also make the

argument that the capital outlay levy is

disequalizing, particularly since the four-

mill levy limit has been removed. Mr. Biles

said it will be for the Court to decide the

extent to which the Kansas Constitution

requires that all components of funding for

schools be equalized.

The local sales tax was included in the

items the Judge would consider in reaching

his decision, but the issue was not discussed

at length during the trial. (One of the

plaintiffs, the Salina school district, benefits

from a local sales tax for schools.)

Presentation of School

Finance Proposals

The November 20th Committee meeting

was devoted to the presentation of school

finance proposals. The following is a

description of each proposal presented to the

Committee.

Representative Jim Yonally's Proposal

Under the proposal Representative

Yonally has devised, income would be

considered part of district wealth (which is

similar to the School District Equalization

Act, which preceded the current school

finance formula) and relatively poorer

districts would receive a greater proportion

of state aid, enabling them to spend as much

per pupil as wealthier districts. Major

principles contained in his plan are the

following:

!All school districts will make a 30 mill

property tax levy for schools. This levy

would replace the current 20 mill levy,

plus any additional levy made for local

option budgets (LOBs). In some districts,

this would result in a mill levy

reduction. Under Representative

Yonally’s proposal, there would be no

LOB. The 30 mill requirement could be

modified so that a district could opt to

levy a different amount. However, if a

district chose to levy less than 30 mills,

state aid would be paid as if the district

were levying 30 mills and would not

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Kansas Legislative Research Department 2003 School Finance

increase to make up the difference. If a

local board chose to levy more than 30

mills after Year Two (see below), state

aid would be paid on the increase in the

same proportion as would be paid if the

levy were 30 mills.

!The 30 mill levy on state assessed public

utility property would go to the state and

be redistributed as state aid through the

formula.

!Resident individual income would be

assessed at 5 percent and be counted as

part of district wealth in the district in

which the taxpayer resides.

Representative Yonally gave examples of

the estimated effect of this component of

his proposal: A family with a gross

annual income of $100,000 with a

current tax liability of $4,680 would pay

an additional $243 as a result of the 5

percent school finance assessment. A

family with a gross annual income of

$50,000 and a current tax liability of

$1,500 would pay an additional $75. It is

part of Representative Yonally’s plan

that, if an individual lives in another

state and pays Kansas taxes on income

earned in Kansas, the Kansas-earned

income would be assessed for school

finance purposes. Assessments on

individual incomes of non-residents

would be credited to the state and

distributed through the equalization

formula.

!Taxes on corporate earnings would be

assessed at 5 percent and be credited to

the state to be distributed through the

equalization formula.

!YEAR ONE: School districts would be

placed in enrollment categories with

similar-sized districts. Districts that are

above the median in their enrollment

category may increase per pupil

expenditures by 1 percent; those below

the median may increase by 3 percent.

Districts could use the current or prior

year’s enrollment for purposes of setting

their budget authority. In the transition

year, districts could carry forward any

amount of unexpended balances.

!YEAR TWO: Districts that are above the

median in their enrollment category may

increase per pupil expenditures by 2

percent; those below the median may

increase by 4 percent. Any amount of

carry-forward balances that exceeds 5

percent of the total operating budget will

be deducted from state aid the district is

due to receive. According to

Representative Yonally, at some future

time, budget limitations might be

removed entirely so that districts would

be able to spend whatever they wish.

However, during the first two years of the

proposed plan the per-pupil budget

limitations would apply.

!State aid would be calculated as follows:

For each district, determine “local effort”

defined as the amount of revenue derived

from the 30 mill property tax and the 5

percent assessment on individual

income. The difference between local

effort and a district’s adopted budget

would be made up with state aid. State

aid would be “power equalized” to the

100th percentile.

!School district transportation would be a

separate, categorical aid program.

!There would be no separate, identifiable,

funding for special education.

Representative Yonally acknowledged

that his proposal does not take into

account special funding needs of districts

that have a large number of special

education students or which have special

education students who are especially

expensive to educate. He told the

Committee that he is open to suggestions

about how to deal with special education

funding and that this is one area of his

proposal that might be changed.

Representative Yonally said his actual

preference is for 100 percent funding of

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Kansas Legislative Research Department 2003 School Finance

special education excess costs.

!Other currently authorized levies that are

outside the school finance formula, such

as capital outlay, would be retained.

Representative Yonally pointed out that,

in the initial years of his proposed plan,

there would be budget limitations that would

curb the extent to which wealthy districts

could increase their budgets and would

allow poorer districts a higher percentage by

which they could increase their budgets.

Furthermore, the plan is equalized, which is

to say that state aid will compensate for low

district wealth so that all districts would

have equal spending power. Representative

Yonally also noted that the concept of

“equal” is misleading in the sense that,

whatever the funding formula, children will

continue to have different educational

experiences due to differences in curricula,

teacher qualifications, communities, and so

forth.

Representative Yonally pointed out that

the proposal assumes the same amount of

money (general, supplemental general, and

special education state aid, minus

transportation aid) as is available for FY

2004. (No estimates were given for

successive years under the plan.) In

conclusion, he said his main goals are to

allow local boards of education to determine

how much they will spend and to implement

an equalization formula which will provide

state aid in inverse proportion to district

wealth so that poorer districts can spend as

much as wealthier districts. To achieve

those goals, he said he was prepared to alter

his proposal, as necessary.

Tim Rooney's Proposal

Tim Rooney, Manager of Budget and

Finance, USD 512 (Shawnee Mission),

presented his school finance plan, which is

intended to give local boards of education

the flexibility to determine spending levels.

Major components of Mr. Rooney’s plan are

as follows:

!In the implementation year, a “hold

harmless” provision would allow all

districts to retain their current budget

authority. In addition, current tax rates

would remain constant. This feature of

the plan would mean that a new funding

formula could be enacted without a

significant increase in state funding in

the initial year.

!In future years, all budget increases

would result from increases in assessed

valuation and increases in property tax

levies. Local boards of education would

not be limited in the amount of property

taxes they levy. According to Mr.

Rooney, this feature of the plan would

allow local boards to increase their

budgets to meet the needs of their

communities and to address inflationary

increases. The Legislature could initially

establish annual growth caps to limit the

state's contribution to a manageable

level.

!A “guaranteed wealth factor” would

provide that state aid would be paid to

all school districts that are at the 95th

percentile or below, based on assessed

valuation per pupil. The effect of this

would be that poorer districts would

receive a greater proportion of state aid

than wealthier districts. No district

above the 95th percentile would receive

state aid, the result being the “wealthier”

districts could increase their levies as

they see fit at no additional expense to

the state. Each school district at or

below the 95th percentile could raise a

given amount per pupil for the same

increased mill rate.

!Under the proposal as submitted, a

number of funds that now are separate

would be combined. For example, the

general and supplemental general funds

would be combined so that there is one

fund for operations. Weights in the

current formula would be eliminated,

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Kansas Legislative Research Department 2003 School Finance

except that the effect of the current

weightings would be locked in place by

the hold harmless provision. According

to Mr. Rooney, it would be up to the

school district to determine how much to

spend in those areas that, under the

current formula, receive additional

funding through a weight, such as

bilingual education.

!Low performing districts, based on scores

in reading and mathematics on the state

assessment, that also are low spending

districts would be required to increase

their mill levy to the state average.

According to Mr. Rooney, this feature of

the plan addresses the concern that an

achievement gap would form among

districts, based on expenditures. Under

the proposal, districts that spend below

the state average and also score below

the state average, based on the states

assessments in reading and mathematics,

would have to increase their mill rate to

the average of all districts until the

district performance is at or above

average.

!Other Programs. Special education

would continue to be a separate

categorical aid program and is not

included in the proposed funding plan.

Mr. Rooney told the Committee he has

included transportation funding in the

current hold harmless amount, but it

could be separated if the Legislature

desired.

Mr. Rooney summarized his presentation

by saying that the current school finance

formula allows no flexibility for school

districts to determine their own level of

expenditures. He argues that the current

weightings are a powerful component of the

current formula and result in state

prescribed limits for all districts. These

budgetary caps result in discrepant funding

between districts of $5,000 to $15,000 per

student. He also argues that the factors and

the weighting for each factor are not based

upon empirical data, but are the result of

political compromise. The weightings also

unnecessarily complicate budgets.

Mr. Rooney envisions that school districts

could begin preparing their budgets in

advance of the legislative session. A

district's budget would be based upon the

assessed valuation average for the last four

years times the district's mill rate times the

anticipated number of students. The

Department of Education would collect

information about each of these factors to

calculate the required state commitment.

Assuming the state is able to appropriate

enough to cover the additional cost, each

district could then finalize its budget for the

ensuing year. Currently districts do not

receive any preliminary budget targets until

the base aid per pupil is set by the

Legislature. According to Mr. Rooney, a

proration provision would apply in years in

which appropriations are not sufficient to

fully fund the formula. In a year in which

the state was not able to fully fund the

formula, school districts would not be

allowed to increase their levies.

Mark Tallman's Proposal

Mark Tallman, Kansas Association of

School Boards, made a presentation on

behalf of the following groups: Kansas

Association of School Boards, Kansas-

National Education Association, Kansas

Association of Retired School Personnel,

Kansas School Public Relations Association,

United School Administrators of Kansas,

Kansas Education Coalition, Schools for

Quality Education, South Central Kansas

Education Service Center, Kansas Families

United for Public Education, and USDs 500

(Kansas City), 233 (Olathe), 501 (Topeka),

and 259 (Wichita). Mr. Tallman told the

Committee that the groups he represents

support the concepts contained in the No

Child Left Behind Act and the strategic goals

of the Kansas Board of Education. He said

the shared vision of the groups is the

following:

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Kansas Legislative Research Department 2003 School Finance

!Increased student achievement and

success for all students;

!High quality schools for every

community;

!Attainment of national and state

standards; and

!Rising expectations.

Mr. Tallman told the Committee he

believes there is a connection between

funding for schools and educational quality

and that Kansas students rank among the

highest performing students nationwide.

However, he warned that failure to maintain

adequate funding could cause Kansas to fall

behind other states in student achievement.

In support of his point, Mr. Tallman noted

that the current school finance act,

implemented in FY 1993, coincided with

increases in ACT/SAT and state test scores in

the mid-1990s. He also cited the Augenblick

and Myers study, which concludes that

significant additional resources are needed

to adequately fund a “suitable” education.

Mr. Tallman expressed several concerns

about the current level of funding. First, he

noted achievement gaps among students,

with minority group students and students

with disabilities being among those who are

less likely to succeed. Second, he discussed

the fact that school districts are having to

rely more and more on property tax increases

for local option budgets or on revenue

sources “outside the formula,” such as sales

taxes, fund raisers, and increased fees. In

addition, Mr. Tallman noted the problem

many districts have recruiting and retaining

qualified staff, a situation that will only get

worse when higher standards are imposed by

the No Child Left Behind Act.

The following recommendations were

made to address the above-mentioned

concerns:

!Help students start school on a more

equal basis by funding preschool and all-

day kindergarten.

!Make more time available (day and year)

for students who need more help.

!Fund the costs of special education.

!Increase base funding so that all districts

can offer competitive salaries.

!Ensure that all district employees have

appropriate benefits, especially health

insurance.

!Fund professional development based on

best practices for all teachers and school

leaders.

!Increase the base budget per pupil to

reflect actual costs ($4,650 in 2001, based

on the Augenblick and Myers study) and

reduce reliance on local revenues.

!Adjust the base annually to reflect actual

changes in costs.

Mr. Tallman acknowledged that new

revenues would be needed to adequately

fund schools and said that it will take a

number of years for concerns of the groups

he represents to be addressed. He said it is

not possible to increase expectations,

without being prepared to make a

commitment to increase resources. In

addition, the groups supporting this proposal

are committed to pupil weights and are more

interested in fully funding the existing

formula than in changing it. Finally, Mr.

Tallman indicated the top priority of

members of his organization are concerned

about fully funding school finance and that

local control is not an issue.

Steve Rose's Proposal

Steve Rose, Chairman of Sun

Publications, told the Committee that

Johnson County often is viewed as “living on

an oasis” and fails to take into account

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Kansas Legislative Research Department 2003 School Finance

problems in the rest of the state. The

situation is compounded, because some

residents resent that much of the state’s

wealth is in Johnson County and much of the

tax dollars of county residents go to other

parts of the state. Finally, many residents of

the county resent the fact that the current

school finance funding formula puts a limit

on how much a district can spend, meaning

that even though residents of Johnson

County may be willing to pay higher taxes to

benefit their schools, they are prevented

from doing so.

Mr. Rose said he believes all Kansans

should support the following goals:

!A quality education for all students;

!The ability of local boards to fund

education without lids on what they may

spend;

!A funding plan that does not require a

substantial increase in taxes;

!A reduction in waste and inefficiencies;

and

!A funding system that will work for a

long period of time.

To achieve these goals, Mr. Rose

proposed the following funding scheme:

!Fund schools solely with income and

sales taxes and eliminate all statewide

property taxes for education. Mr. Rose

said he realizes that Johnson County

would bear the brunt of supporting the

educational system in Kansas because of

its wealth, as measured by sales and

income, but he said he thinks a dramatic

gesture of this magnitude would earn

Johnson County the right to fund its own

schools at whatever level it chooses and

not be subject to a state-imposed limit.

!Define a suitable education that is

realistic. Mr. Rose said any plan that

calls for hundreds of millions of additional

dollars is not realistic.

Implement a plan that requires, in the

immediate future, a minimal amount of tax

increases.

Implement a plan that features an annual

inflationary increase.

!Phase in over the next ten years a

requirement that no school district could

enroll fewer than 1,000 students.

According to Mr. Rose, the consolidation

of small school districts would save the

state hundreds of millions of dollars

annually. (Mr. Rose’s basis for this

statement is the proposal by several

school district superintendents for

dividing the state into 40 regional

education districts.)

!Allow school districts to exceed the

statewide standard for suitable or quality

education without restraint. Mr. Rose

said his intent is that local boards could,

subject to a protest petition and vote of

the people, generate additional revenues

for their districts by whatever means they

choose—property, income, or sales taxes.

!Prohibit school districts from increasing

their local taxes above the prior year in

any year in which the Legislature fails to

provide an inflationary increase to

school districts. Mr. Rose said this

feature of his plan is intended to address

a possible lack of motivation of Johnson

County residents to support additional

state funding for education–if there is not

enough state aid for all districts to get an

inflationary increase, then school boards

in Johnson County cannot raise local

taxes.

Mr. Rose said the elimination of property

taxes for education under his plan would be

a strong incentive to close small schools. He

said the majority of people in Kansas do not

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Kansas Legislative Research Department 2003 School Finance

think there is a crisis in education and they

certainly do not want to pay more taxes. Mr.

Rose also indicated that savings due to

school consolidation and a more realistic

definition of "suitable education" will offset

some of the increase required under his

proposal.

Pat Terry's Proposal

Pat Terry, Superintendent of USD 385

(Andover), presented testimony on behalf of

United School Administrators. Mr. Terry

took exception to the following concepts

proposed by Mr. Rooney, which he described

as “equity concerns:

!Defining “wealth” as assessed valuation

per pupil is not always an accurate

picture of the wealth of a district.

According to Mr. Terry, the definition

omits other relevant measures of wealth,

such as income, and can distort a picture

of a district’s wealth when, in an area of

declining enrollment, the property tax

base is divided by a small and declining

number of students.

!The Rooney plan builds on existing per

pupil budget amounts and would

perpetuate existing inequalities in the

proposed new plan.

!The Rooney plan has no limits on what a

district may spend, likely resulting in an

increasing gap between rich and poor

districts.

Mr. Terry recommended that the

Legislature rely upon the Augenblick and

Myers study to provide funding for a suitable

education, fund a guaranteed inflation factor,

and equalize school district capital outlay

funds.

Rob Balsters' Proposal

Rob Balsters, Assistant Superintendent

for Business, USD 345 (Seaman), said his

proposal was developed by a committee

composed of representatives from school

districts of various sizes and locations. The

main components of the proposal are the

following:

A “guaranteed base per pupil” would be

established. The new base would be arrived

at by starting with the current base state aid

per pupil amount ($3,863), as adjusted by the

existing enrollment weighting. This figure

would be increased by 25 percent, which

represents the current amount of the

maximum local option budget. (There would

be no local option budget under the

proposed plan.) The new base per pupil

would be further adjusted by new enrollment

weights and also would include an amount

for capital outlay. An example provided by

Mr. Balsters is that, in a district of 100

students, the existing base state aid per pupil

of $3,863 would increase to $8,273 due to the

existing low enrollment weighting, would

increase by an additional $2,068 (25 percent)

due to incorporating local option budget

authority, would increase by an additional

amount due to new enrollment weights, and

finally would increase by a per pupil capital

outlay amount of $101, for a new grand total

“guaranteed base per pupil” of $10,442.

There would be a uniform mill levy for

all districts. Mr. Balsters estimated that the

new levy would be 36.5 mills, based on the

existing 20 mill school district levy and an

estimated 16.5 mills for local option budgets.

!Local districts would have authority to

increase their budgets by 5 percent or 10

percent, using the same equalization

formula proposed by Mr. Rooney, which

provides that state aid would be paid to

all school districts that are at the 95th

percentile or below, based on assessed

valuation per pupil.

!New enrollment weights would be

determined, based on the new plan.

!There would be a guaranteed inflation

factor based on the Consumer Price

Index.

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Kansas Legislative Research Department 2003 School Finance

!The current three-year declining

enrollment provision would be replaced

with a five-year declining enrollment

provision.

!Additional capital outlay (above the

uniform amount built into the guaranteed

base per pupil) would be raised by

locally levied property taxes, as presently

is the case.

Dale Dennis, State Department of

Education, made a rough estimate that the

cost of Mr. Balsters’ plan would exceed $100

million.

CONCLUSIONS AND RECOMMENDATIONS

The Legislative Coordinating Council

created the Select Joint Committee on School

Finance to conduct a comprehensive review

of K-12 education finance during the next

two years. The Committee is to make

recommendation on potential improvements

to the current formula or develop a new

formula that would strengthen K-12

education; however, at this time, the

Committee wishes to report on the progress

it has made but does not make any

recommendations.

JOINT COMMITTEES

Report of the

Joint Committee on State-Tribal Relations

to the

2004 Kansas Legislature

CHAIRPERSON: Senator Lana Oleen

VICE-CHAIRPERSON: Representative Bill Mason

RANKING MINORITY MEMBER: Senator Mark Gilstrap

OTHER MEMBERS: Senators David Adkins, David Haley, and Nancey Harrington;

Representatives Becky J. Hutchins, Doug Patterson, Tom Sawyer, and Bonnie Sharp

NON-LEGISLATIVE MEMBERS: Governor’s Representative—Matt All; Attorney General’s

Representative—Julene Miller

STUDY TOPICS

Fifth Annual Report (2003)

December 2003

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Kansas Legislative Research Department 2003 State-Tribal Relations

Joint Committee on State-Tribal Relations

FIFTH ANNUAL REPORT

(2003)

CONCLUSIONS AND RECOMMENDATIONS

The Joint Committee on State-Tribal Relations make the following recommendations.

!Regarding the tribal law enforcement issue, the Joint Committee recommends that the

House Committee on Federal and State Affairs continue to work 2003 House Sub. for SB 9.

!The Joint Committee, with the approval of the Legislative Coordinating Council, has sent

a letter to the members of the Kansas Congressional Delegation seeking their support in

establishing a Congressional Inquiry or GAO Audit into certain actions of the U.S.

Department of Interior which resulted in the Wyandotte Tribe of Oklahoma operating a

gaming casino in downtown Kansas City, Kansas.

!The Joint Committee will continue to monitor the controversy over the South Lawrence

Trafficway and its possible impact on the Baker Wetlands and Haskell Indian Nations

University.

!The Joint Committee will continue to monitor the status of tribal-related litigation. The

Joint Committee has requested expenditure information relative to these tribal cases.

Proposed Legislation: None

BACKGROUND

The Joint Committee on State-Tribal

Relations was created through the enactment

of 1999 HB 2065. The responsibilities and

organization of the Joint Committee are

summarized below.

The Joint Committee is authorized by

statute to:

!establish and transmit to the Governor

proposed guidelines reflecting the public

policies and state interests that the Joint

Committee will consider in reviewing

proposed compacts;

!recommend to the Governor that any

gaming compact provide for the

imposition and collection of state sales

and excise taxes on sales of nongaming

goods and services to persons other than

tribal members and imposition and

collection of state income tax on

revenues derived from sales of

nongaming goods and services;

!hold public hearings on proposed gaming

compacts submitted to the Joint

Committee by the Governor;

!recommend modification of proposed

gaming compacts submitted by the

Governor and introduce resolutions

approving proposed gaming compacts

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Kansas Legislative Research Department 2003 State-Tribal Relations

and recommend that such resolutions be

adopted or be not adopted, or report such

resolutions without recommendation,

and notify the Governor, in writing, of

the Joint Committee’s action;

!meet, discuss, and hold hearings on

issues concerning state and tribal

relations;

!make recommendations on issues of

state-tribal relations; and

!introduce such legislation as deemed

necessary in performing its functions.

Six members of the Committee constitute

a quorum, however, actions of the

Committee regarding approval of state-tribal

gaming compacts require the affirmative vote

of at least eight members, at least four

senators, and four representatives. The

Committee could report a compact without

recommendation on the affirmative vote of

any five legislative members.

Annually, the Committee elects its

chairperson and vice-chairperson. The

chairperson alternates between the House

(even years) and Senate (odd years). The

ranking minority member is from the same

chamber as the chairperson. The Committee

is authorized to appoint subcommittees and

members may be paid and reimbursed for

travel and subsistence for attendance at

subcommittee or full Committee meetings.

COMMITTEE ACTIVITIES

The Joint Committee met for four days

during the 2003 Interim. Two of the

meetings were held in Topeka. One meeting

was held at Haskell Indian Nations

University in Lawrence. One meeting was

held in the Holton City Hall, and also

included a tour of the Prairie Band

Potawatomi Nation Reservation. The Joint

Committee received input on various issues

from the four resident Kansas Tribes, and

from state and federal officials who are

involved in state-tribal matters.

The Joint Committee reviewed the status

of tribal-related bills considered by the 2003

Legislature. The Joint Committee also was

given updates on the status of tribal-related

litigation in Kansas by Steve Alexander and

Brian Johnson, representatives of the

Attorney General’s Office. The updates

reviewed the litigation involving the

Wyandotte Tribe of Oklahoma’s casino

operation in Kansas City, the issuance of

tribal license plates, and the taxation of

tribal gasoline sales.

The Executive Director of the Kansas

Office of Native American Affairs, Gail

DuPuis, also provided updated information

on the activities of that agency, including

developments related to the Governor’s

Interstate Indian Council and the National

American Indian and Alaska Native Heritage

Month celebration.

A representative of the National

Conference of State Legislatures (NCSL),

Andrea Williams, reviewed the current joint

project of NCSL and the National Congress of

American Indians (NCAI) which focuses on

promoting intergovernmental cooperation

between states and tribal governments.

The Executive Director of the Kansas

State Historical Society, Mary Allman, and

other interested conferees reviewed the

history of the state historical marker

program. Some tribal members had

expressed objections to the language used on

some of the markers. At the request of the

Joint Committee, the interested parties

agreed to meet jointly to seek a resolution to

the issue. The Joint Committee also received

testimony from a representative of the State

Historical Society, Christy Davis, on the

impact of historic preservation laws on the

new casino operation in Kansas City.

The Joint Committee also received

testimony from representatives of the Haskell

Wetland’s Preservation Organization relative

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Kansas Legislative Research Department 2003 State-Tribal Relations

to the proposed new South Lawrence

Trafficway (SLT), including Nicholas Luna,

Monette Terry, and Yulburton Sandcrane.

Some members of the Joint Committee

toured the wetlands acreage. The Chief

Counsel for the Kansas Department of

Transportation, Sally Howard, reviewed the

history of the proposed South Lawrence

Trafficway project from 1986 to the present.

She advised the Joint Committee that on

December 12, 2003, the Corps of Engineers

released its Record of Decision for the final

section of the SLT and a final alignment of

the project along 32nd Street.

The Joint Committee also received

testimony from various persons associated

with the Lewis and Clark Bicentennial

Commission, including Chris Howell, Karen

Seaberg, and Sheri Wilson. This celebration

will occur mostly in the spring and summer

of 2004.

The Joint Committee also was given a

review by Brent Widick of the various

programs of the Department of Social and

Rehabilitation Services (SRS) which impact

the Native American Tribes. The Joint

Committee also was given an update from

the Kansas Arts Commission Director David

Wilson. Kim Qualls of the Travel and

Tourism Division of the Kansas Department

of Commerce reviewed efforts and other

programs to promote Native American

heritage and culture.

The Joint Committee also attended a

national conference hosted by the Haskell

Indian Nations University relating to “Indian

Records for the 21st Century and Beyond:

Creating a Tribal/Federal Vision.”

The Joint Committee received input on

various issues from the four resident Kansas

tribes: the Prairie Band Potawatomi Nation of

Kansas; the Kickapoo Tribe; the Sac and Fox

Nation of Missouri in Kansas and Nebraska;

and the Iowa Tribe of Kansas and Nebraska.

The members of the Joint Committee

applaud the decision by Chairperson Oleen

to invite representatives of the tribal

governments to sit at the Committee table

and participate in Committee discussion.

Tribal representatives who sat with the

committee included: Louis DeRoin, Iowa

Tribe; Zach Pahmahmie, Prairie Band

Potawatomi Nation; Emily Conklin and John

Thomas, Kickapoo Tribe; and Don Pilcher,

Sac and Fox Nation.

In addition to its usual review of tribal-

related issues, the Joint Committee was

charged by the Legislative Coordinating

Council (LCC) to review the issue of placing

lands into trust.

The charge from the LCC is as follows:

Placing Land into Trust. Study how land

is placed in a trust and how that action

impacts Kansas with regard to sovereignty

issues, the Kansas Act of Admission, the

Tenth Amendment to the U.S. Constitution

and ongoing litigation with Native American

tribes.

In conducting this review, the Joint

Committee heard testimony from Steve

Alexander of the Attorney General’s Office;

several Jackson County Commissioners,

including Brad Hamilton and Lois Pelton;

representatives of the resident tribes, as

noted above; and officials with the Bureau

of Indian Affairs, including Galen Hubbard

of the Horton Office.

The Joint Committee discussed the

possibility of contacting the Kansas

Congressional Delegation to request that a

Congressional inquiry or an audit by the

General Accounting Office (GAO) into the

actions of the U.S. Department of Interior

which led to the Shriner tract in Kansas City,

Kansas being taken into trust in such a short

time frame. The Joint Committee approved

a motion which directed the Chairperson to

request the approval of the LCC to authorize

the Joint Committee to make such a request

of the Kansas Congressional Delegation. The

LCC approved the request of the Joint

Committee under LCC Policy 33. At its

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Kansas Legislative Research Department 2003 State-Tribal Relations

December 15th meeting, the Joint Committee

approved the letter to be sent to the Kansas

Congressional Delegation.

The Joint Committee decided to revisit

the issue of enhancing the powers and

responsibilities of the tribal police officers

and tribal police departments. The Joint

Committee strongly believes that legislation

is needed to improve law enforcement

efficiency in those counties which have

resident tribal reservations located in the

county. The Joint Committee has

recommended such legislation for the past

four Legislative Sessions. Bills have passed

the Senate on at least three occasions, only

to fail in the House of Representatives. The

Joint Committee again heard testimony from

tribal police (J. T. Scott and Sam Grant,

Prairie Band Tribal Police Department);

county sheriffs (Bruce Tomlinson of Jackson

County and Lamar Shoemaker of Brown

County); Jackson County commissioners

(Brad Hamilton and Lois Pelton); and

interested legislators (Representative Becky

Hutchins). The Joint Committee is aware

that 2003 H. Sub. for SB 9, concerning this

issue, has passed the Senate and is currently

in the House Committee on Federal and State

Affairs.

The Joint Committee received a

presentation by representatives of the

Intertribal Gaming Management Consortium,

including Whitney Damron and Emily

Conklin, regarding the proposed new casino

project. This is a joint project of the

Kickapoo Tribe in Kansas and the Sac and

Fox Nation to construct a new casino in the

Village West development in western

Wyandotte County.

CONCLUSIONS AND RECOMMENDATIONS

The Joint Committee believes that more

open communication and cooperation

between the state and the tribes is the key to

improving the state-tribal relationships. The

members believe that the Joint Committee is

a useful forum to allow for improved

communication and cooperation.

Tribal Law Enforcement. As noted

above, the Joint Committee held considerable

discussion on the tribal law enforcement

issue, and reviewed a proposed balloon

amendment to 2003 H. Sub. for SB 9. The

Joint Committee reached a consensus that

the House Committee on Federal and State

Affairs continue to work H. Sub. for SB 9

during the 2004 Session. The Joint

Committee continues to support legislation

to improve the cooperative efforts of the

tribal law enforcement departments and the

local police and sheriff’s departments and

would like to have statutory language in this

area. The Joint Committee was favorably

impressed by the level of professionalism of

tribal police officers.

Letter to Kansas Congressional

Delegation. As discussed above, the Joint

Committee, with the approval of the

Legislative Coordinating Council, has sent a

letter to the members of the Kansas

Congressional Delegation seeking their

support in establishing a Congressional

Inquiry or GAO Audit into certain actions of

the U.S. Department of Interior which

resulted in the Wyandotte Tribe of Oklahoma

operating a gaming casino in downtown

Kansas City, Kansas.

Baker Wetlands and South Lawrence

Trafficway. The Joint Committee heard

testimony regarding the controversy over the

South Lawrence Trafficway and its possible

impact on the Baker Wetlands and Haskell

Indian Nations University. The Committee

members visited the Baker Wetlands site and

received input from members of the

Wetlands Preservation Organization.

Although the members believe that this is

largely a federal issue. The Joint Committee

will continue to monitor developments in

this area.

Tribal-Related Litigation. The Joint

Committee received updates on the status

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Kansas Legislative Research Department 2003 State-Tribal Relations

tribal-related litigation currently ongoing.

Due to the expenses, lengthy time frame and

topic of litigation involved in these cases, the

Joint Committee urges the use of alternative

dispute resolution or arbitration to expedite

settlement of these issues.

At its meeting on December 15, the Joint

Committee requested expenditure

information relative to these tribal-related

lawsuits. Staff has requested this

expenditure information from the Office of

the Attorney General and the Department of

Revenue. Staff will provide this information

to the Joint Committee as it becomes

available.

JOINT COMMITTEES

Report of the

Workers Compensation Fund Oversight

to the

2004 Kansas Legislature

CHAIRPERSON: Leon Lungwitz

VICE-CHAIRPERSON: Paula Greathouse

OTHER MEMBERS: Senators Jay Emler, and Anthony Hensley; Representatives Larry

Campbell, and Donald Dahl

NON-LEGISLATIVE MEMBERS: Julie Bachman, Christie Chamber, J. Phillip Davidson,

Philip Harness, and Bryce Hayes

STUDY TOPICS

Annual Report

December 2003

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Kansas Legislative Research Department 2003 Workers Compensation

Workers Compensation Fund

Oversight Committee

ANNUAL REPORT

CONCLUSIONS AND RECOMMENDATIONS

The Workers Compensation Fund Oversight Committee did not conduct meetings during the

2003 Interim.

Proposed Legislation: None

WORKING GROUP

Report of the

Health Insurance Issues Working Group

to the

2004 Kansas Legislature

CHAIRPERSON: Senator James Barnett

RANKING MINORITY MEMBER: Senator Janis Lee

OTHER MEMBERS: Senator Ruth Teichman; Representatives Rob Boyer, Nancy Kirk, and

Jim Morrison

NON-LEGISLATIVE MEMBERS: Robert Day, Linda DeCoursey, Sandy Praeger, and Robert

St. Peter

STUDY TOPIC

A Comprehensive Study of Health Insurance Affordability and Availability to the

Citizens of Kansas

December 2003

Health Insurance Issues Working Group

A COMPREHENSIVE STUDY OF HEALTH INSURANCE AFFORDABILITY

AND AVAILABILITY TO THE CITIZENS OF KANSAS

CONCLUSIONS AND RECOMMENDATIONS

!Regarding HRAs, since no statutory changes are required for the marketing and sale of the

product, the Working Group has no recommendation for legislative action. However, the

Group recommends that the Department of Administration, the State Employee Health Care

Commission, and the Kansas Public Employees Retirement System explore further the

many features of HRAs, both for health insurance purposes as well as for retirement

benefits for state employees.

!Concerning the purchase of insurance by small employers, the Working Group encourages

the Business Health Partnership to continue exploring ways to structure policies and

benefits in order to make health care coverage available to their employees.

!The Working Group recommends that no further action be taken on Association Health

Plan legislation, unless it can be demonstrated by proponents that such plans would have

no negative impact on the existing small group marketplace.

!On the issues of smoking and obesity, the Working Group recommends that the interested

parties continue their collaborative efforts on the development of statewide programs that

will have positive impacts on the two health issues. Especially, the Working Group

commends the Department of Health and Environment for its work in the area of chronic

diseases and the Kansas Sunflower Foundation for its investment in programs and studies

aimed at addressing the health concerns associated with both smoking and obesity. The

Legislature should be informed of the results of the collaborations and the findings of

studies and programs conducted by both the private and public sectors. Particularly, the

Group recommends that the interested parties explore methods for financing programs,

including the possibility of raising the necessary program funds through the issuance of

bonds that would be redeemed at those time intervals when the greatest return on the

original investments is received.

!Community health care centers can make health care both available and affordable for

many Kansans. The Working Group recommends that the Department of Health and

Environment, the Kansas Association for the Medically Underserved, the Sunflower

Foundation, the United Methodist Ministries, and the Kansas Health Institute continue to

explore ways of assisting local communities in becoming eligible for consideration for

federal funding for additional centers. The Working Group encourages the stakeholders

to participate in the informational and training meetings that are planned for early in 2004

and work toward a plan that can be brought to the Legislature for consideration in the 2004

Session.

!Long-term care insurance has some potential for reducing the state’s Medicaid expenditures

for nursing home care, albeit over an extended period of time. To remove any impediments

to the purchase of such insurance, and to remove confusion that might exist in the

marketplace, the Working Group recommends that the Insurance Commissioner modify

existing rules and regulations to require that potential purchasers of the insurance be

provided a Kansas specific shoppers guide.

Further, the Group recommends that the Department of Social and Rehabilitation Services

and the Legislature review existing Medicaid program laws to assure that the law serves to

encourage Kansans to purchase long-term care insurance rather than serving to encourage

reliance upon the state for the future payment of long-term care. Additionally, the Group

Kansas Legislative Research Department 2003 Health Insurance Issues

recommends that the tax committees of the Legislature explore tax incentives that would

include a deduction for premium payments made for long-term care insurance, as well as

other tax incentives that might be offered to encourage the purchase of long-term care

insurance.

!Educating consumers about health care costs and their role in generating those costs need

to be continued. Health insurers, health plans and governmental agencies are encouraged

to continue their efforts with their subscribers and clients and with the public at large in

informing consumers of the cost of health care and of the most appropriate usage of that

care.

!The Health Insurance Issues Working Group recognizes the critical role health data play

in making public policy, and realizes that Kansas policymakers are at a significant

disadvantage because of the lack of usable data and personnel to process existing data into

useful information. The Group recommends that the Kansas Data Governing Board review

its role in order to be more current and more proactive in assisting policymakers in the

health care arena. That review should include an assessment of the current laws that

create the Board, establish the method of data collection, and provide the funding for the

Board’s collection activities. The goal of the review should be to identify the types of data

to be collected and the barriers to the collection of that data and its conversion to useful

information, The Department should report the results of its review along with its

recommendations for change, including a fiscal note identifying the cost of the proposed

changes.

!The Working Group requests that the Director of the Governor’s Office of Health Planning

and Financing keep the Legislature informed of that office’s activities through reports to the

appropriate standing committees during the 2004 Session. Included in that report should

be an update on the implementation of the Maine program.

!In the course of its studies, the Working Group was reminded of legislation enacted some

time ago that would assist in providing health care coverage for children of state employees

who met all the qualifications for coverage under the HealthWave program, but were

excluded solely because of state employment. The Working Group reviewed the report on

that legislation required by the law and recommends that it be shared with the appropriate

standing committees during the 2004 Session.

!The Working Group was informed that Kansas’ ranking among the states for immunization

of children has slipped considerably. One reason for that slippage, perhaps, is the manner

in which many Kansas children receive those immunization. Since many immunizations

are provided through local health departments, there is a greater likelihood that they are

not reported. The Working Group recommends that the Department of Health and

Environment and local health departments review where immunizations are provided and

how those can be included in the count of Kansas children who have received age

appropriate immunizations. Upon the completion of the agency review, a report should

be made to the appropriate standing committees of the Legislature during the 2004 Session.

Finally, the Working Group learned at its last meeting that the federal government has

enhanced enforcement of the immunization programs it funds. As a consequence, there

may fewer federal dollars available for immunizations that are generally provided through

local health departments. The Group anticipates that the Department of Health and

Environment will keep the appropriate committees of the Legislature apprised of the

consequences of the federal action.

Proposed Legislation: None

Kansas Legislative Research Department 2003 Health Insurance Issues

BACKGROUND

The focus of the Health Insurance

Issues Working Group was to do a

comprehensive study of health insurance

affordability and availability to the citizens

of Kansas. The study included, but was not

limited to:

!Consideration of Health Reimbursement

Accounts (HRAs) for Kansas citizens,

including state employees;

!Review of a possible state Medicaid

waiver for low wage employees wherein

the employer would pay the state match;

!Consumer education—Statewide

educational program to address

healthcare expenditures;

!Value-based purchasing—Directing

dollars for optimum outcomes for

disease or illness and quality of care;

!Long-term care insurance tax

incentives—Study what kind of tax

incentives might further enhance the

sale of long-term care insurance; and

!Investigate the state’s ability to leverage

market forces in purchasing health care

insurance, including consideration of

changing the membership structure.

The Working Group was composed of

three members from each house of the

Legislature, the Insurance Commissioner,

the President of the Kansas Health Institute,

the State Health Benefits Administrator, and

the Director of the State Medicaid Program.

COMMITTEE ACTIVITY

At the outset of its deliberations, the

Working Group recognized that the

underlying issue affecting the affordability

and availability of health insurance was the

cost of health care, which includes both the

unit cost and utilization. Consequently, the

Working Group decided to focus primarily

on those issues that might more directly

impact the cost of care and, thereby

indirectly affect the insurance issues.

However, the Working Group did review

each of the insurance topics assigned, noting

that health plans that emphasize consumer

awareness and participation can impact the

cost of those plans to employers, employees,

and the state.

Health Reimbursement Accounts (HRAs)

HRAs refer to defined contribution

health plans in which the employer

contributes an amount of money for the

health care costs of its employees and

usually includes a high deductible health

plan purchased at a lower premium rate.

Recent decisions of the Internal Revenue

Service allow both the contributions paid by

the employer and the benefits received by

the participant to be excluded from the

taxpayer’s gross income. Also, unused

dollars allocated to employees can be rolled

over from year-to-year. An added benefit is

that the use of monies available is placed in

the hands of the employee who is exposed to

the high cost of health care and, therefore,

encouraged to be a wiser consumer of that

care.

Additionally, HRAs may have a

component part that allows employees to

convert unused sick and vacation leave

upon retirement into a HRA for the purpose

of paying health care costs into retirement.

The Working Group was advised that such a

use of HRAs has been marketed in several

public employee settings and that a Kansas

company, Security Benefit Group, has

developed plans for this market.

Apparently, no contact has as yet been made

between the Department of Administration

responsible for employee benefit options and

the insurance industry on this type of

coverage. The Working Group realizes that

no legislation is necessary for the marketing

Kansas Legislative Research Department 2003 Health Insurance Issues

and sale of HRAs in the Kansas marketplace.

HRAs refer to defined contribution

health plans in which the employer

contributes an amount of money for the

health care costs of its employees and

usually includes a high deductible health

plan purchased at a lower premium rate.

Recent decisions of the Internal Revenue

Service allow both the contributions paid by

the employer and the benefits received by

the participant to be excluded from the

taxpayer’s gross income. Also, unused

dollars allocated to employees can be rolled

over from year-to-year. An added benefit is

that the use of monies available is placed in

the hands of the employee who is exposed to

the high cost of health care and, therefore,

encouraged to be a wiser consumer of that

care.

Additionally, HRAs have a component

part that allows employees to convert

unused sick and vacation leave upon

retirement into a HRA for the purpose of

paying health care costs into retirement.

The Working Group was advised that such a

use of HRAs has been marketed in several

public employee settings and that a Kansas

company, Security Benefit Group, has

developed plans for this market.

Apparently, no contact has as yet been made

between the State Employees Health Care

Commission responsible for employee plan

options and the insurance industry on this

type of coverage. The Working Group

realizes that no legislation is necessary for

the marketing and sale of HRAs in the

Kansas marketplace. Moreover, the State

Employee Health Care Commission has the

statutory authority to offer HRAs as part of

the employee benefit plan.

Association Health Plans

In the 2003 Session of the Legislature,

the Senate Committee on Financial

Institutions and Insurance was asked to

consider legislation to allow the Kansas

Grain and Feed Association to form an

association health plan (AHPs) for it

members. Current Kansas law prohibits

such plans. Proponents of the plan

indicated it was difficult to obtain affordable

coverage for small businesses. Amending

Kansas law to allow AHPs, they argued,

would allow the membership to retain

savings in their plan rather than to have to

share those dollars with other small

employer groups that have not had the same

good use experience as the Association.

Further, authorizing self-funded AHPs

would allow Associations to take advantage

of their individual unique characteristics in

the development of coverages for their

members.

At the federal level, the National

Federation of Independent Business has

lobbied for a national exemption from

insurance regulation for association health

plans. That legislation has been heard in

committee, but no action has been taken to

move the legislation to passage. Locally, the

NFIB representative spoke in favor of the

Kansas bill to allow such self-funded plans

to develop in Kansas.

The insurance industry, represented by

Blue Cross and Blue Shield of Kansas,

pointed out that the net effect of AHP

legislation is to deregulate the insurance

marketplace for associations. Insurers

subject to all the state laws regulating the

sale of insurance would be at a distinct

disadvantage in the marketing of their

products.

Finally, the Insurance Commissioner

spoke strongly against the authorization of

AHPs, not just in Kansas, but as the

spokesperson for the National Association of

Insurance Commissioners. She indicated

that further segmenting the market

undermines state reforms, especially for

small groups, as well as the reforms put in

place by the Health Insurance Portability

and Accountability Act. As a regulator, she

concluded, concern must be given to

protecting consumers. Pooling, whether

through associations or otherwise, may no

longer be the best way to deal with health

insurance availability or affordability issues.

Kansas Legislative Research Department 2003 Health Insurance Issues

Any legislation to increase affordability and

the number of choices must meet these

criteria, she said: higher risk employee must

not be forced out of the market; consumers

must be protected from plan failures and

fraud; and patient rights must be preserved.

Business Health Partnership

The Business Health Partnership was

created by the Legislature to assist low wage

employees of small employers in the

purchase of health insurance. Central to the

idea was the availability of money to

subsidize the cost of that insurance. Since

the creation of the Partnership, however, no

funds have been available for subsidizing

such plans. Nevertheless, the Partnership

has continued to work with employers and

insurers to develop plans that make health

insurance available and affordable to both

employers and employees. To date, plans

are being marketed, without subsidy, to

small employers. The current plan available

provides multiple benefits, a fixed

deductible, varying copayments, calendar

year maximum benefit caps, and maximum

lifetime benefits. Other plans are in the

developmental stage that would provide

only basic physician services coverage

exclusive of major medical expenses.

Discussions also have been held with

interested insurers regarding plans that

might be constructed with none or a limited

number of the benefits mandated under

current Kansas law.

Medicaid

Waiver. During the last days of the 2003

Legislative Session, an informal group

working on health issues learned of an

Arkansas proposal to use employer dollars

as the state match for Medicaid and thereby

make employees of small employers eligible

for coverage under the state Medicaid

program. By the time the Working Group

began to meet, it was known that the federal

Department of Health and Human Services

had rejected the Arkansas proposal. Based

on that information, the Working Group

chose not to pursue the issue further at this

time.

On a related matter, the Group learned of

recent legislation enacted in Maine, that has

a similar funding mechanism to the

Arkansas plan. The plan, referred to as

Dirigo, is now in the implementation phase

and has not yet received federal approval.

Long-Term Care Insurance. One issue

before the Working Group was whether

offering tax incentives for the purchase of

long-term care insurance will have a

favorable financial impact on the state, i.e.,

reduce the number of persons who become

clients of the state Medicaid Program. Some

highly speculative calculations were

provided based on the usage rate of state

employees and data used by the Department

of Revenue in drafting fiscal notes on bills

proposing tax deductions for premiums paid

for such insurance. The data indicate that,

after a lengthy period of time, that is from

the date of purchase to the date of use, the

state might save approximately $9.3 million

in the Medicaid Program for nursing home

care, and $1.5 million in the Home and

Community Based Services/Frail Elderly

(HCBS/FE) waiver program.

The Working Group asked staff to

continue exploring options that might

minimize the loss to the state on the tax

incentive side and maximize Medicaid and

HCBS/FE waiver savings.

A second issue reviewed was the idea of

the Silver-Haired Legislature to create a

consumer guide patterned after the

Insurance Department’s Kansas Medicare

Supplement Insurance Shopper’s Guide. The

Working Group recognized that the federal

government has standardized the policy

provisions for “Medigap” insurance and that

no such standardization exist for long-term

care insurance. While attempting some

standardization in one state might drive

insurers out of the Kansas market, the

confusion over long-term care insurance

benefits still must be addressed.

Kansas Legislative Research Department 2003 Health Insurance Issues

Having reviewed the issues associated

with health insurance and insurers, the

Working Group concentrated the remainder

of its time on ways to provide care to those

who are uninsured and on those issues that

might impact health care costs directly.

Community Health Centers

A September 2003 survey of Kansans

sponsored by the Kansas Health Institute

found that 40 percent of people without

insurance did not get the care they needed

within the last year compared with nine

percent for those with insurance.

Additionally, 45 percent of the uninsured

reported difficulty in paying their medical

bills compared with 14 percent of those with

insurance. These data translate into over

100,000 Kansans who either do not receive

care or have difficulty paying for the care

received. And, the statistics highlight the

importance of insurance and illustrate the

overall high cost of medical care and the

difficulties Kansans experience in accessing

that care.

Representatives of the Kansas

Association for the Medically Underserved

commented that Kansas has a weak safety

net. The uninsured in Kansas tend to be

chronically uninsured and are less likely to

have a usual source of health care. Some of

the health centers that make up the safety

net receive neither state nor federal funding.

Existing federally qualified health centers

serve 36 communities in only 23 counties,

barely one quarter of the state. These clinics

serve only one in four of the uninsured.

Three out of four of the uninsured cannot

access any type of clinic because it is either

not geographically available or the clinic in

their area is at capacity.

Staff of the Department of Health and

Environment identified for the Group the

various types of entities in Kansas

communities that provide health care for

persons who reside in underserved areas

and who are uninsured or vulnerable. The

federal Consolidated Health Center Program

includes Community Health Centers (CHCs),

Migrant Health Centers, Health Care for the

Homeless, Public Housing Primary Care, and

School Based Health Centers. Additionally,

there are state-funded primary care clinics

created to supplement local community

initiatives to establish and operate clinics or

health centers for low-income, uninsured,

and underserved Kansans.

While pleased to hear of the state and

federal programs currently providing

funding for services, the Working Group was

somewhat frustrated in the efforts to expand

services to address the large unmet need for

care. Particular attention was called to the

federal Community Health Center Program.

Kansas currently participates in that

program with eight CHCs in operation and

receiving $5 million in federal grants to

support provision of health care in 21

locations. Knowing that federal funds in the

amount of $1.6 billion were available

nationwide, and recognizing a substantial

unmet need for health care, the Working

Group was interested in learning how the

program could be expanded.

KDHE officials assured the Working

Group that it shared the frustration related to

expansion activities; however, they said

every effort was being made to find ways to

bring a larger share of the dollars available

to Kansas. The Department, and its private

sector partner, the Kansas Association for

the Medically Underserved, are working to

identify underserved areas, unmet medical

needs, and community organizations that

might be in a position to obtain funding for

new CHCs. Much of what needs to be done

rests with local communities and their

willingness to do the things necessary to

satisfy the requirements for participation in

the program. Not every community is

comfortable with all of the conditions and

requirements. Nevertheless, all the

interested parties, the state, the Kansas

Association for the Medically Underserved,

and the United Methodist Health Ministry

Fund pledged their resources and energies

toward supporting efforts to expand CHCs in

Kansas.

Kansas Legislative Research Department 2003 Health Insurance Issues

Consumer Education

A briefing paper prepared by the Kansas

Health Institute revealed there are three

major areas in which consumer education

can assist in reducing health care costs:

appropriate use of the health care system,

financially wise decisions regarding use of

services, and lifestyle choices that promote

health and prevent disease. To explore these

areas, the Working Group called on

representatives of several insurance,

education, and governmental entities in

order to identify what each might be doing

to educate consumers of health care as to

their role in controlling health care costs.

Representatives speaking for the State

Employees Health Care Commission noted

that the state plan encompasses the largest

group in Kansas covering 95,000 lives by the

end of FY 2004. The Commission defines

and tracks quality measures related to the

performance of providers and health plans

that are a party to the state plan. The plan is

revisited every three years and new

methods of assuring patient safety and

continued quality and cost effectiveness are

incorporated. Further, the Commission

provides employees annually and during the

open enrollment period information on

fitness campaigns, special training, e.g.,

smoking cessation, health risk appraisals,

and disease management programs. Finally,

the Commission has taken actions to

structure the plan to include more co-

insurance rather than co-payments in an

effort to inform the employee of the true cost

of care. The point of all this is to help plan

participants become better consumers of

health care by encouraging them to engage

their health care providers in conversations

about quality and cost.

Spokespersons for Blue Cross and Blue

Shield of Kansas indicated the company

provides education at two levels: for

providers who are part of the Blue Cross

network of providers and for subscribers of

Blue Cross plans. On the first point, for

example, provider profiles are developed to

ensure accurate payment of claims, but also

to enable practices to review patterns which

can be compared to peer groups and thereby

provide an opportunity to compare the

relative efficiency of the provider’s practice

as well as discrepancies in practice from

their peer group. Recent efforts also have

been made to provide information regarding

pharmacy utilization and demand for brand

name drugs.

If providers are the educators of

consumers of health care, the Working

Group was interested in determining what,

if any, education and training providers

received to make them aware of the costs of

their services. The Vice Dean and Senior

Associate Dean for Educational and

Academic Affairs of the Kansas University

School of Medicine, noted that the School is

in the early stages of a comprehensive

review and revision of its undergraduate

medical education curriculum. Students

become familiar with the socioeconomic

impact of the health care system. Their

experiences include discussions of the direct

costs of care as well as of the indirect cost of

restricted access to care. At the graduate

level, the core curriculum is being expanded

to include teaching sessions and discussions

focusing on the economic, social, and legal

considerations arising in medical practice.

Today, all physicians upon completion of

training, must be able to assess the quality,

efficiency, and cost effectiveness of the care

they provide.

The Chairperson of the Department of

Health Policy and Management, Kansas

University School of Medicine, informed the

Working Group that since this Department

has been relocated to the medical center, the

faculty is redesigning its curriculum

centering it on a broad model of health and

health care. For example, a course on the

social basis of medical practice will include

topics such as reimbursement, patient safety

and systems thinking, and health policy. In

a more informal way, the faculty is working

with medical students to provide

Kansas Legislative Research Department 2003 Health Insurance Issues

information about and an awareness of the

health care system and their future role in it.

A private physician speaking on behalf

of the Kansas Medical Society discussed the

disconnect between perception and reality –

what the patient expects and what the

patient needs. He commented that, from his

training, most diagnosis could be made from

the patient’s history and that tests were used

to confirm the examination findings. Now,

he said, tests are used to make the diagnosis

and to make the patients feel that progress is

being made in their care and treatment.

Patients tend to feel as if nothing is being

done if tests are not run, leading to increased

health care costs.

A physician speaking for the Kansas

Association of Osteopathic Physicians

commented on the “use it or loose it”

attitude of some. Since patients receive care

through an employer policy or government

program, they want to utilize it to its full

potential, regardless of cost considerations.

She noted that patients who do not adopt

healthy lifestyles or are noncompliant with

medical advice, typically are not concerned

about utilizing the health care system in a

cost effective manner. The most difficult

question for policymakers, she suggested, is

whether health care is a right or a privilege.

The representative of the Kansas

Pharmacists Association explained that

pharmacists spend a great deal of time

explaining drug plans to patients, in

addition to educating them about their

prescriptions. He briefed the members on

collaborative drug therapy management,

which enables pharmacists and physicians

to jointly manage a patient’s drug therapy.

Kansas allows such interaction albeit as a

delegation from the physician to the

pharmacist. That type of drug management

is routine practice in hospitals.

The Kansas State Nurses Association

executive director emphasized that patient

education is a major function of nursing.

Nurses work with physicians and

pharmacists regarding medicines and

treatment plans while encouraging patient

compliance with provider directives. Since

chronic care patients tend to communicate

more often with nurses, nurses are in an

especially advantageous position to

implement educational and motivational

practices to promote compliance. She noted

that numerous patient and consumer

pamphlets are available through the

Association to educate the public.

The Insurance Commissioner reported

that the Insurance Department employees 23

persons who are the heart of the consumer

education program of the Department. The

staff of the Consumer Assistance Division

works on a case-by-case basis with Kansans

who have questions, concerns, or complaints

regarding their insurance coverages.

Further, the Department publishes several

shoppers guides which offer consumers the

basic information they need to choose health

insurance coverage, whether in group plans

or individual insurance products. Finally,

the Commissioner noted that the

Department shortly would be unveiling a

new Take Control campaign for health care

and health insurance costs. The campaign

will be directed at everyone who uses health

care services and will provide information

explaining why costs are increasing and how

each person can help to take control of those

costs.

The Secretary of the Department of

Health and Environment (KDHE) and his

program staff explained what the

Department was doing to educate consumers

regarding its role in generating and

controlling health care costs. Health

promotion programs at KDHE are primarily

targeted at the leading causes of chronic

disease and injury. Chronic diseases

account for approximately 75 percent of

health care costs each year. Further, 33

percent of all deaths are attributable to three

modifiable behaviors – tobacco use, lack of

physical activity, and poor eating habits.

However, he noted that a majority of funding

goes to intervention and service and much

less on prevention. Financial resources

available are used to mobilize communities

Kansas Legislative Research Department 2003 Health Insurance Issues

to promote healthy behaviors.

From that discussion, the Working

Group focused more narrowly on those

programs aimed at smoking cessation and

obesity.

The Cost of Tobacco Use. Data

presented by the Department of Health and

Environment indicate that the direct medical

costs of tobacco are staggering. Smoking is

the largest cause of preventable death and

disease in Kansas causing an estimate 3,800

deaths from disease, including cancer,

stroke, and chronic obstructive pulmonary

disease.

Several states have implemented

comprehensive tobacco use prevention

programs, including Florida, Massachusetts,

and California, states that have

demonstrated significant reduction in

tobacco use. Department staff pointed out

that Kansas, too, could quickly reduce

smoking by making relatively modest

investments in new statewide efforts to

prevent and reduce tobacco use. As a result

of such an investment, Kansas could see a

reduction in smoking-caused health costs

saving millions of dollars.

If the Legislature were to invest the

minimum annual tobacco control

expenditure recommended by the United

States Center for Disease Control, $18.1

million annually for five years, the following

results could be expected. About 98,700

adults would quit smoking; 35,600 young

people would be prevented from addicted

use; and 33,100 early smoking deaths would

be prevented. Direct health care lifetime

savings would be $1.241 billion and total

future Medicaid savings would be $141.5

million. Less than the minimum

expenditure would generate results less than

projected as outcomes are not directly

proportional to the expenditures.

Obesity. In the last decade, there has

been a steady increase in the prevalence of

obesity up from 13 percent in 1992 to 23

percent in 2002. More than 40 percent of

adults in the age group 45-64 years, and in

the age group 65 plus, are overweight.

The issue is not isolated to Kansas;

rather obesity and overweight are chronic

health conditions nationwide. In that

regard, the costs of obesity also are

staggering. In 2000, the total cost of obesity

in the United States was estimated at $117

billion. Included in that estimate was $14

billion in Medicaid expenditures and $23.5

billion in Medicare expenditures.

In addition to information from the

Department of Health and Environment on

this issue, the Committee received

significant testimony from the Kansas Public

Health Association, the American Cancer

Society, and the Kansas Sunflower

Foundation. Representatives of the

Foundation described its strategic approach

to obesity prevention through collaboration

with other stakeholders. Most importantly,

they identified several grants that have been

made to entities interested in addressing the

health implications associated with obesity.

One grant was of particular interest as it

funds a project at a school district that is

working to restructure the school day to

increase the level of physical activity.

In addition to making grants, the

Foundation is serving as a convener of

interested parties to develop a state plan for

obesity prevention to address the growing

burden of health disease related to obesity

and being overweight. The planning process

will draw on the expertise of a broad range

of stakeholders with the resulting plan being

offered to policy makers at all levels. The

effort is envisioned to take 12 to 18 months.

Health Care Data. From the outset of

the Working Group’s hearings and

deliberations, it became clear that very little

data pertinent to Kansas is available. Absent

that data, policymakers, including the

Legislature, have interpreted data and based

decisions on information gathered by other

states and the federal government.

The Kansas Data Governing Board

Kansas Legislative Research Department 2003 Health Insurance Issues

collects and manages health care data

currently being collected. Representatives of

the Department noted that the Board was

formed at a time much different from now

and when decision-making also was

different. They believed it was time that the

Board review its role in order to be more

current and more proactive and able to assist

policymakers to make better decisions.

Since the Board is a creature of state statute,

the Legislature also may need to ensure that

the law is broad enough to collect and

analyze the data received. The Director of

the newly created Governor’s Office of

Health Planning and Finance concurred in

the need for data that can be transformed

into useful information; however, the

Department probably lacks sufficient

resources to obtain the appropriate

technology for effective data collection.

Asked what he would least like to do in

the 2004 Legislative Session, ask for funding

for prevention programs, i.e., smoking and

obesity, or for data collection, the Secretary

of Health and Environment replied that his

concern is that the Department not have to

grovel for resources because the Legislature

would be aware of all of those needs.

Value-Based Purchasing/ Leveraging

Market Forces in Purchasing

Health Care

The issues of value-based purchasing

and leveraging market forces in purchasing

health care were the last topics considered

by the Working Group. While the

discussion time was short, the Group

became aware early in the interim of the

major issue implicit in the topics—quality

care. The issue of the quality of care being

purchased ran through nearly all of the

topics considered by the Group in that poor

quality costs a lot of money, whether that

care is paid for by private insurance, out of

pocket resources, or state and federal

programs. Clearly, the cost of care and the

quality of the care purchased are linked and

any policy initiative focused on cost also

must look at quality. From the perspective

of the state, the question of quality has great

relevance as the state purchases about $2

billion in health care every year.

Indicators of poor quality include

medical errors, inconsistent treatment

practices or low utilization of recommended

guidelines, and under use of medications.

Since quality outcomes are not consistently

emphasized in health care purchasing,

purchasers of health care will need to

change how they do business, i.e., not just

look at cost, but at performance as well.

Insurers and federal health care programs

are beginning to look at ways to reimburse

providers based on the quality of care they

provide under a “Pay for Performance”

model.

In part, success in this area will depend

on good data as discussed earlier.

Consumers must have good information

about the products and services they

purchase in order to make informed

decisions. The Working Group was told that

the Governor’s Office of Planning and

Finance has a goal to work with providers

and stakeholders in developing quality

measures that can be used in guiding the

state’s purchase of health care for its

employees and for Medicaid clients.

CONCLUSIONS AND RECOMMENDATIONS

The Working Group was pleased to be

informed of the current activities in the

insurance marketplace.

!Regarding HRAs, since no statutory

changes are required for the marketing

and sale of the product, the Working

Group has no recommendation for

legislative action. However, the Group

recommends that the Department of

Administration, the State Employee

Health Care Commission, and the Kansas

Public Employees Retirement System

explore further the many features of

HRAs, both for health insurance

Kansas Legislative Research Department 2003 Health Insurance Issues

purposes as well as for retirement

benefits for state employees.

!Concerning the purchase of insurance by

small employers, the Working Group

encourages the Business Health

Partnership to continue exploring ways

to structure policies and benefits in order

to make health care coverage available to

their employees.

!The Working Group recommends that no

further action be taken on Association

Health Plan legislation, unless it can be

demonstrated by proponents that such

plans would have no negative impact on

the existing small group marketplace.

!On the issues of smoking and obesity,

the Working Group recommends that the

interested parties continue their

collaborative efforts on the development

of statewide programs that will have

positive impacts on the two health

issues. Especially, the Working Group

commends the Department of Health and

Environment for its work in the area of

chronic diseases and the Kansas

Sunflower Foundation for its investment

in programs and studies aimed at

addressing the health concerns

associated with both smoking and

obesity. The Legislature should be

informed of the results of the

collaborations and the findings of studies

and programs conducted by both the

private and public sectors. Particularly,

the Group recommends that the

interested parties explore methods for

financing programs, including the

possibility of raising the necessary

program funds through the issuance of

bonds that would be redeemed at those

time intervals when the greatest return

on the original investments is received.

!Community health care centers can

make health care both available and

affordable for many Kansans. The

Working Group recommends that the

Department of Health and Environment,

the Kansas Association for the Medically

Underserved, the Sunflower Foundation,

the United Methodist Ministries, and the

Kansas Health Institute continue to

explore ways of assisting local

communities in becoming eligible for

consideration for federal funding for

additional centers. The Working Group

encourages the stakeholders to

participate in the informational and

training meetings that are planned for

early in 2004 and work toward a plan

that can be brought to the Legislature for

consideration in the 2004 Session.

!Long-term care insurance has some

potential for reducing the state’s

Medicaid expenditures for nursing home

care, albeit over an extended period of

time. To remove any impediments to the

purchase of such insurance, and to

remove confusion that might exist in the

marketplace, the Working Group

recommends that the Insurance

Commissioner modify existing rules and

regulations to require that potential

purchasers of the insurance be provided

a Kansas specific shoppers guide.

Further, the Group recommends that the

Department of Social and Rehabilitation

Services and the Legislature review existing

Medicaid program laws to assure that the

law serves to encourage Kansans to purchase

long-term care insurance rather than serving

to encourage reliance upon the state for the

future payment of long-term care.

Additionally, the Group recommends that

the tax committees of the Legislature explore

tax incentives that would include a

deduction for premium payments made for

long-term care insurance, as well as other

tax incentives that might be offered to

encourage the purchase of long-term care

insurance.

!Educating consumers about health care

costs and their role in generating those

costs need to be continued. Health

insurers, health plans and governmental

agencies are encouraged to continue

their efforts with their subscribers and

Kansas Legislative Research Department 2003 Health Insurance Issues

clients and with the public at large in

informing consumers of the cost of

health care and of the most appropriate

usage of that care.

!The Health Insurance Issues Working

Group recognizes the critical role health

data play in making public policy, and

realizes that Kansas policymakers are at

a significant disadvantage because of the

lack of usable data and personnel to

process existing data into useful

information. The Group recommends

that the Kansas Data Governing Board

review its role in order to be more

current and more proactive in assisting

policymakers in the health care arena.

That review should include an

assessment of the current laws that

create the Board, establish the method of

data collection, and provide the funding

for the Board’s collection activities. The

goal of the review should be to identify

the types of data to be collected and the

barriers to the collection of that data and

its conversion to useful information.

The Department should report the

results of its review along with its

recommendations for change, including

a fiscal note identifying the cost of the

proposed changes.

!The Working Group requests that the

Director of the Governor’s Office of

Health Planning and Financing keep the

Legislature informed of that office’s

activities through reports to the

appropriate standing committees during

the 2004 Session. Included in that

report should be an update on the

implementation of the Maine program.

!In the course of its studies, the Working

Group was reminded of legislation

enacted some time ago that would assist

in providing health care coverage for

children of state employees who met all

the qualifications for coverage under the

HealthWave program, but were excluded

solely because of state employment. The

Working Group reviewed the report on

that legislation required by the law and

recommends that it be shared with the

appropriate standing committees during

the 2004 Session.

!The Working Group was informed that

Kansas’ ranking among the states for

immunization of children has slipped

considerably. One reason for that

slippage, perhaps, is the manner in

which many Kansas children receive

those immunization. Since many

immunizations are provided through

local health departments, there is a

greater likelihood that they are not

reported. The Working Group

recommends that the Department of

Health and Environment and local

health departments review where

immunizations are provided and how

those can be included in the count of

Kansas children who have received age

appropriate immunizations. The review

should include changes in federal law

that appear to make could include

revisiting the idea of a mandatory state

agency review, a report should be made

to the appropriate standing committees

of the Legislature during the 2004

Session.

Finally, the Working Group learned at its

last meeting that the federal government has

enhanced enforcement of the immunization

programs it funds. As a consequence, there

may fewer federal dollars available for

immunizations that are generally provided

through local health departments. The

Group anticipates that the Department of

Health and Environment will keep the

appropriate committees of the Legislature

apprised of the consequences of the federal

action.

TASK FORCE

Report of the

Long-Term Care Services Task Force

to the

2004 Kansas Legislature

CHAIRPERSON: Representative Bob Bethell

VICE-CHAIRPERSON: Senator Larry Salmans

OTHER MEMBERS: Senators Paul Feleciano, Jr., Janis Lee, Chris Steineger, and Susan

Wagle; Representatives Patricia Barbieri-Lightner, Nancy Kirk, Jim Morrison, and Judy

Showalter

NON-LEGISLATIVE MEMBERS: Mark Bailey, Evie Curtis, Janis DeBoer, Linda Lubinsky,

Charles Moore, Carol Moore, Bob Smith, Beth Stover, Ray Vernon, and Margaret Zillinger

STUDY TOPICS

Year Four Report

December 2003

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Kansas Legislative Research Department 2003 Long-Term Care

Long-Term Care Services Task Force

YEAR FOUR REPORT

CONCLUSIONS AND RECOMMENDATIONS

The Task Force reaffirms the six broad goals and the policy directions and strategies adopted

in its first year of existence. The Task Force believes progress is being made on providing

greater freedom of choice for recipients of long-term care services. Year four stands out as a

year where major progress was made on compiling needed demographic and other statistical

information for informed decision making regarding long-term care services.

In addition, the Task Force makes recommendations in the following areas: use of Civil

Monetary Penalty funds; mandatory vaccinations; shifting from case management to care

management; expansion of the Home and Community-based Services (HCBS) waivers;

insurance risk pools for nursing facilities; provider rates for nursing facilities; nursing facility

inspections; workforce issues in long-term care; re-entry of older persons into the workforce;

flexibility of long-term care services and responsibilities; and foreign pharmaceuticals.

Proposed Legislation: None

BACKGROUND

Long-Term Care Task Force Created

HB 2780 enacted by the 2000 Legislature

and codified at KSA 65-6206 created a 20-

member Task Force on Long-Term Care

Services to study: “. . . state and federal laws

and rules and regulations which impact on

the services provided by the government and

the private sector to citizens who are

consumers of long-term care services, the

financing of these services, both public and

private, the effectiveness of partnering

activities between state agencies and long-

term care providers, and such other matters

as relating thereto the Task Force deems

appropriate.”

The bill later defines long-term care as

including a broad spectrum of supports,

ranging from skilled nursing services to

assistance with activities of daily living or

help with instrumental activities of daily

living.

Seven members of the Task Force are

appointed by the Legislative Coordinating

Council (LCC). Three of these appointees

must be consumers of long-term care, three

providers of long-term care, and one a trustee

or board member of a long-term care facility.

Of these seven, no more than two members

may reside in any one congressional district.

The Chairperson and Vice Chairperson of

the Task Force are appointed by the LCC

from among the members of the Task Force.

The Chairperson is to be a legislative

member. Two members are appointed by the

President of the Senate and the Speaker of

the House. Of the two appointments, one is

to be a member of the Senate Committee on

Ways and Means and one a member of the

House Committee on Appropriations. The

appointees must be from different political

parties.

An additional two members are

appointed by the Senate President, and the

Minority Leader of the Senate is to appoint

two members. In each case, one appointee

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Kansas Legislative Research Department 2003 Long-Term Care

must be a member of the Senate Committee

on Public Health and Welfare and one a

member of the Senate Committee on

Financial Institutions and Insurance.

Two members are appointed by the

Speaker of the House and two members are

appointed by the Minority Leader of the

House. In each case, one appointee must be

a member of the House Committee on Health

and Human Services and one a member of

the House Committee on Insurance.

The Secretaries of Social and

Rehabilitation Services (SRS), Aging, and

Health and Environment (KDHE) or their

designees make up the remaining members

of the Task Force.

The Task Force is required to submit a

report and recommendations to the Governor

and Legislature on or before the second

Monday of January each year through 2005,

the year in which the statute creating the

Task Force will expire. In developing

recommendations, the Task Force is to

consider creative, common sense solutions

and approaches to problems that do not

necessarily require additional expenditures.

Membership of the Long-Term

Care Task Force

Legislative Members

Rep. Bob Bethell,

Chairperson

Sen. Henry Helgerson

Sen. Janis Lee

Sen. Chris Steineger

Sen. Susan Wagle

Sen. Larry

Salmans,

Vice Chairperson

Rep. Nancy Kirk

Rep. Jim Morrison

Rep. Judy

Showalter

Nonlegislative Members

Mark Baily, Via

Christi Services

Evie Curtis, Kansas

Advocates for Better

Care

Linda Lubensky

Kansas Home Care

Association

Carol Moore, ANP

(Gerontology)

Mennonite Friend-

ship Manor

Bob Smith,

Alzheimer

Association

Sister Beth Stover,

North Central Flint

Hills AAA

Ray Vernon, Wesley

Towers

Janis DeBoer

(Aging)

Margaret Zillinger

(SRS)

Charles Moore

(KDHE)

TASK FORCE ACTIVITIES

The Task Force met for nine days during

calendar year 2003. A one day meeting was

held in April to discuss home and

community based services waiver waiting

lists and review possible solutions

implemented by the states of Maine and

Oregon.

The Task Force met for one day in July to

discuss workforce issues in long-term care.

The specific concern to be addressed was the

shortage of staff for the physically disabled,

developmentally disabled, home health and

nursing facilities. Conferees who appeared

included representatives of the Kansas

Association of Homes and Services for the

Aging, the Kansas Department on Aging,

Kansas Association of Centers of

Independent Living, Kansas Council on

Developmental Disabilities, Kansas Home

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Kansas Legislative Research Department 2003 Long-Term Care

Care Association, Kansas Area Agencies on

Aging Association and the Department of

Social and Rehabilitation Services.

Conferees indicated that adequate

staffing for long-term care is a critical issue.

Factors that affect staffing include: how the

job is valued by society, the workplace, the

economy and labor market, and policy. The

Task Force heard testimony that recruitment

and retention are critical long-term care

staffing concerns and about methods

employers can use to target these concerns,

including the nursing home climate; training

initiatives and opportunities; financial

incentives; career ladders; and leadership

opportunities.

The Kansas Department on Aging

addressed culture change in nursing

facilities and presented information about an

awards program, Promote Excellent

Alternatives in Kansas Nursing Homes (PEAK),

which was created to support, promote, and

recognize the nursing homes in pursuing

“nontraditional” models of care with

progressive environments. The award

recognizes excellence in four areas: resident

choice, staff empowerment, home-like

environment and community involvement.

The Task Force addressed these culture

change issues with testimony from the 2003

PEAK award winners in its August and

September meetings: Kansas Veterans Home,

Winfield; Lakeview Village Health Center,

Lenexa; Lyons Good Samaritan Center,

Lyons; Pleasant View Home, Inc., Inman;

Rossville Valley Manor, Rossville; Sandstone

Heights, Little River; Schowalter Villa,

Hesston; Valley View Professional Care

Center, Junction City; Wichita County Health

Care Center, Leoti; and Windsor Place,

Coffeyville.

Conferees expressed concern about the

availability of direct support workers for the

disabled. Working shortages in the home

health care industry were also noted, with

concern about the shortages in rural areas.

The Task Force heard testimony that

shrinkage of the long-term care workforce is

at a crisis level and healthcare insurance and

benefits need to be addressed. The

Department on Social and Rehabilitation

Services presented information on a grant

application through the Centers for Medicare

and Medicaid to target workforce issues in

long-term care, including health insurance,

recruitment and training of Direct Support

Professionals (DSP) and the development of

a statewide insurance pool for DSPs.

The Task Force met for two days in

August to further address workforce issues in

long-term care services, including nursing

shortages, availability of liability insurance

in group pools, and job skills and training for

the industry. The Task Force heard from

additional PEAK award winners about

culture change in Kansas nursing homes.

Conferees who appeared included

representatives of The Healthcare Center at

Larksfield Place, the Coalition for the

Advancement of Careers in Health Care, the

Kansas Insurance Department, The Kansas

State Nurses Association, the Kansas State

Board of Nursing, the Kansas Department on

Aging, Lakeview Village, Lyons Good

Samaritan Center, Schowalter Villa, Valley

View Professional Care Center, Pleasant

View Home, Inc., Rossville Valley Manor,

Sandstone Heights Nursing Home,

Mennonite Friendship Manor, Kansas

Department of Commerce, Kansas

Department of Social and Rehabilitation

Services, the Kansas Association of Homes

and Services for the Aging, and the Kansas

Foundation for Medical Care.

One conferee presented information

about the working relationship between a

nonprofit facility and a technical college.

The conferee noted the measure of success in

the partnership is that residents are seen as

unique individuals and students are

encouraged and paid while working in their

home community, which has resulted in a

lower turnover rate when coupled with

senior staff mentoring. A conferee expressed

concern that the critical nursing shortage

warrants immediate attention, noting the

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Kansas Legislative Research Department 2003 Long-Term Care

supply will not be able to meet demand and

that education programs are unable to grow

due to the lack of faculty, facilities, and

clinical sites. One conferee highlighted

Kansas’ nursing shortage noting that the

current vacancy rate in Kansas hospitals is

11.3 percent for Registered Nurses. Another

conferee provided recommendations to

improve the number of nurses: increase

recruitment efforts; improve the image of a

nurse’s role in health care; increase the

number of faculty; increase scholarships;

improve working conditions; and improve

compensation. The Task Force heard from

recipients of the PEAK award, where

recipients addressed the culture change at

their facilities including: a joint effort among

all employees; neighborhoods for residents;

staff empowerment; the addition of a child

care center; cross-training of staff; a change

from sterile white units to a colorful facility;

and resident involvement in the changes that

were made.

The Task Force met for two days in

September to discuss estate recovery, group

funded insurance pools, and worker

recruitment. The committee further

discussed the President’s Task Force on

Medicaid Reform, and culture change in

other states and the use of the Civil

Monetary Penalty Fund.

Conferees who appeared included

representatives of the Department of Social

and Rehabilitation Services, the Kansas

Insurance Department, the Kansas

Association of Home and Services for the

Aging, Inc., the Kansas Department on

Aging, Windsor Place, Meadowlark Hills,

Kansas Veterans Home, the Kansas

Foundation for Medical Care, Inc., and the

Wichita County Health Center, Leoti.

The Task Force reviewed HB 2415,

regarding group pools for liability insurance

for long-term care providers. The Kansas

Insurance Department noted that a Long-

Term Care Liability Insurance Task Force

had been created to help address the liability

coverage for facilities. The conferee noted

that in mid-2000 premiums, in some cases,

were increasing in excess of 300 percent.

The Department of Social and

Rehabilitation Services provided information

about the process of estate recovery and

actions that it takes after the death of a

Medicaid recipient to recover property. The

discussion focused on legislation at the

federal and state level to address changes to

the current recovery system, including the

eligibility process and the disregard of assets.

Medicaid spend down requires a person

cannot own resources or assets in excess of

$2,000. However, there are resources

exempted from this spenddown - the home

in which the individual or spouse lives or

intends to return, one vehicle per family,

personal effects and keepsakes (e.g.

furniture, clothing, household goods), burial

funds and merchandise (limits apply), and

small life insurance policies. These are the

items that may exempted from estate

recovery by the long-term care insurance

credit, based on the amount of long-term

care that was paid for by the insurance

policy.

Another conferee spoke to the four

fundamental principles of new models for

nursing facilities as seen in the Greenhouse

Model: the elder is the decision-maker; front-

line care givers are empowered to be

responsive to elders and each other; an

attitude and atmosphere of home prevail;

and the organization, residents, and staff are

integral and vital part of their community.

In a discussion regarding the use of Civil

Monetary Penalty funds, a Task Force

member inquired about the use of these

funds for capital improvement changes. One

conferee noted that there is a need to define

the model of the foundational base of

resident-directed services through policies

and procedures, quality improvement

systems, and human flow systems. Items

requiring continued discussion, the conferee

noted, are the use of demonstration projects

and curriculum and licensing requirements

for administrators.

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Kansas Legislative Research Department 2003 Long-Term Care

The Task Force met for two days in

October to discuss the issues relating to the

availability of foreign pharmaceuticals in the

United States and Kansas, a program that

addresses prescription medications for low-

income Kansans, and training of long-term

care workers.

Conferees who appeared included

representatives of the Department of Social

and Rehabilitation Services, the Kansas

Pharmacists Association, Pat Hubbell

Associates, Inc., Wichita Medical Services

Bureau, and the Friends of the Johnson

County Nursing Center, Inc.

Conferees discussed concerns about the

availability of foreign pharmaceuticals. Two

factors, one conferee noted, seemed to drive

this interest in obtaining foreign

pharmaceuticals: the high cost of

prescription medication in the United States

and the electronic age, and the ease of

ordering products all over the world. One

conferee noted that importation of drugs

from any other country is illegal; no efforts

have been taken to purchase medications for

Medicaid beneficiaries through Canada.

Concern was expressed by one conferee

about the creation of a lucrative market for

counterfeit medication in the United States.

The cost of prescription medication for

seniors was addressed before the Task Force.

One conferee presented information about a

program designed to ease the burden of high

cost medication in Wichita, through the

Wichita Medical Services Bureau. The

pharmacy programs provide assistance to

individuals who qualify based on residency,

not having any other prescription insurance

or enrollment in any government program

that provides access to medications, and

meeting income guidelines. The Department

of Social and Rehabilitation Services

provided information about a three-year Real

Choices Systems Change Grant, noting its

primary goal of making home and

community-based services as accessible to

individuals with disabilities or long-term

illnesses as institutional care. One conferee

spoke to the high turnover rates in direct

care positions. The conferee expressed

concern that without sufficient growth to

address the shortfall in direct care, there will

be a crisis in this country if a solution is not

found to meet the needs of the aging

population. Employees, the conferee noted,

do not have formal training and orientation

to their work in long-term care. The

conferee went on to discuss the Geriatric

Education Research and Training Institute,

or GERTI. The program is developed to

educate long-term care workers by

discussing different concepts in culture

change in long-term care, communication

skills, different conditions affecting long-

term care patients and how to work with

them, safety issues, inspection processes and

many other aspects of long-term care giving.

The Task Force discussion concluded with

preparation of recommendations for the Task

Force report.

YEAR FOUR CONCLUSIONS

AND RECOMMENDATIONS

Civil Monetary Penalty Funds

The Task Force encourages the

development of grants to access civil

monetary penalty funds for quality

improvement and educational purposes at

various locations in the state for all long-

term health care providers, and specifically

those who have recognized problems. The

Task Force recommends programs like those

offered through GERTI , which provide

comprehensive training to long-term care

workers and have experienced, to date,

demonstrable success. While education

programs for nursing facilities are voluntary,

the task-force recommends the development

of incentives to persuade facilities to

participate. Suggestions included increasing

the time between facility inspections, which

are currently done on an annual basis, for

those facilities with exceptionally high

standards of care. The Task Force

encourages to the State Medicaid Director to

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Kansas Legislative Research Department 2003 Long-Term Care

utilize civil monetary penalty funds in

accordance with the letter received from the

Center for Medicare and Medicaid Services.

(See attached) In addition, the Task Force

notes that the Department on Aging is

forming a task force to address nursing

facilities with chronically low performance

rates.

The Civil Monetary Penalty (CMP) fund

is administered by the Department on Aging.

Revenue is derived from penalties assessed

to Medicare/Medicaid certified nursing

facility providers that are found to be out of

compliance with federal regulations. Aging

surveyors that are able to document

incidents of “immediate jeopardy to resident

health or safety” recommend penalties

between $1,000 and $10,000 per incidence,

depending on the seriousness of the

infraction and the facility’s history of

noncompliance. As a general rule,

recommendations for penalties are imposed

and collected. Federal regulation 42 CFR

488.442(g) requires that “Civil money

penalties collected by the State must be

applied to the protection of the health or

property of residents of facilities that the

State or HCFA finds non compliant, such as:

(1) payment for the cost of relocating

residents to other facilities; (2) state costs

related to the operation of a facility pending

correction of deficiencies or closure; and (3)

reimbursement of resident for personal funds

or property lost at a facility as a result of

actions by the facility or by individuals used

by the facility to provide services to

residents.”

The CMP has a balance of approximately

$1.7 million currently, with $200,000

committed to a two-year contract with the

Kansas University Medical Center to

evaluate the consistency of the nursing home

review process and to evaluate what

organizational characteristics are related to

resident care. SFY 2004 CMP Fund revenue

is anticipated to be approximately $50,000.

The agency cautions, however, that revenues

for the fund have declined due to the use of

sanctions other than fines for non-

compliance.

Vaccinations

The Task Force recommends the

introduction of legislation to require

vaccinations for influenza and pneumonia

for all nursing facility residents, with an

exception for those who are allergic to the

shots. Pneumonia vaccinations are necessary

only once—if you are 65 and have never had

one, or between 60 and 65 and have not had

one in five years. Influenza vaccinations are

necessary annually. The Task Force

anticipates no additional state costs for the

mandatory vaccinations. The cost will be

covered through Medicaid, Medicare or

personal resources, depending on the

consumers. The average cost for an

influenza shot is $20; the average cost for a

pneumonia shot is $30.

Change From Case Management

to Care Management

According to the Senate President’s

Medicaid Task Force, one of the most

important topics they covered was care

management. Don Muse, a health care

consultant invited to address the Task Force,

pointed out that certain high cost Medicaid

clients whose care, if managed by a team of

health professionals, could result in better

quality care at lower cost, like those with

diabetes.

Medicaid serves two primary groups -

poor women and children and the aged,

mentally ill, and disabled. Women and

children make up 75 percent of all Medicaid

recipients, while the cost of providing

service to them is only about 32 percent of

total Medicaid expenditures. Meanwhile,

the aged, mentally ill and disabled are only

25 percent of all Medicaid consumers, but

account for approximately 68 percent of the

costs.

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Kansas Legislative Research Department 2003 Long-Term Care

Managed care describes a system where

a trained person assists those who need

additional guidance as to their own medical

care. Medical care management moves away

from the concept of capitated managed care

guided by clerks and program benefit

limitations to an understanding that a

trained person, where necessary will interact

with the medical professionals to arrange the

proper and appropriate care to address

psycho-social, physical, and mental needs of

the client - in short, to treat the whole

person, not just their disease.

The problem already being faced by the

Department of Social and Rehabilitation

Services is the question of who is to provide

the care management. If the agency and the

state are to be assured of the best possible

use of budget dollars, according to the task

force report, then there has to be an

evaluation as to whether the service is best

provided by a professionally trained medical

person or by an attendant. It would seem that

if the care management system is to work in

the best interest of the consumer, then the

initial medical evaluation needs to be done

by a medically trained professional. The

implementing of the medically prescribed

program, hopefully, could be done by an

attendant.

By the blending of these two functions,

the hope is that there can be a medically

sound program which is guided day-to-day

by an attendant but under the watchful eye

of the health professional.

According to the American Association of

Retired Persons report “Before the Boom:

Trends in Long-Term Supportive Services for

Older Americans with Disabilities,” as the

baby boomers reach retirement age and

beyond, the types of services they will be

accessing is widely varied. Although

nursing homes have been the primary health

provider for the aged in the past, nursing

home utilization has decreased by one

quarter since 1974. The growth of long-term

care options, from assisted living to home

care services, as well as decreasing disability

rates seem to have fueled this trend.

The Task Force notes the continued need

for the public to be made aware of the

services available to them, especially as SRS

changes its delivery system by closing and

consolidating offices. In addition, the Task

Force recognizes the integral role played by

the area agencies on aging in directing

Kansans to services and providers.

Waivers

The Task Force encourages a resolution

to the federal government to attempt to affect

change in the mandates regarding home and

community based services (HCBS) waivers.

The Task Force encourages the pursuit of

HCBS waivers as an entitlement, like nursing

facilities. The federal government does not

currently treat HCBS waivers as entitlements

for funding purposes and does not require

the state to provide waiver services to all

who request them. The result in the last

fiscal year has been the growth of waiting

lists for all of the waivers. It is undisputed

that waiver services are less costly, on the

average, than nursing home services.

In addition, the Task Force encourages

the Department on Aging to request various

types of waivers, to better meet the needs of

Kansans accessing long-term care.

The Task Force also recommends the

continuation of the proviso that requires

funds follow consumers as they move from

nursing facilities into the community. The

Task Force is, however, concerned that there

be sufficient funds to continue the

community-based services following the

transition year period. There are seventy-five

opportunities for persons, as of July 1, 2003,

to begin moving from nursing facilities on

the physically disabled and frail elderly

waiver. The Task Force encourages the

Department on Aging to collaborate with

providers to seek out persons who would be

appropriately placed in a less restrictive

setting and take advantage of the cost savings

of having the funding follow the consumer.

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Kansas Legislative Research Department 2003 Long-Term Care

While they have experienced the typical

barriers to de-institutionalization of housing

and transition costs, the Area Agencies on

Aging and Centers for Independent Living

are working to pick up these costs. The

estimated time to complete the transition is

approximately one year.

The Task Force encourages the pursuit of

grants through the New Freedom Initiative -

the President’s program to: increase access

to assistive and universally designed

technologies, expand educational

opportunities, promote home ownership,

integrate Americans with disabilities into the

workforce, expand transportation options

and promote full access to community life.

These grants are one time money, so

continuing funding would be needed be

identified. The State of Texas implemented

Rider 37, which has allowed approximately

2,200 disabled persons to move from nursing

facilities to the community without

additional state appropriations.

Insurance

The Task Force recommends continued

review of insurance risk pools for nursing

facilities, in recognition of the rising cost of

insuring nursing facilities. For example,

premiums have reached nearly $1,000 per

bed and increases as high as 300 percent

have been reported. Providers have been hit

with very high rates. There are several

contributing factors - high claims in other

states, 9-11, and the poor performance of the

stock market limiting the liquid assets of

insurance facilities. The Task Force

members are concerned that the rising cost

of insurance for facilities leaves some

providers with only two choices - close their

doors or operate without insurance. It has

been estimated as high as 25.0 percent of

nursing facilities in Kansas go without

insurance each year.

Group funded insurance pools have

worked for larger organizations to address

these issues. The Task Force requests the

Insurance Committee to study this issue

further, and give additional attention to

including other health care providers in

these insurance pools and/or allowing

providers to form pools.

In addition, the Task Force recommends

the Legislature and agencies work hard to

address liability issues in the long-term care

industry to relieve the pressure of high

insurance costs. The Task Force notes the

nursing facility liability insurance does not

operate like auto insurance—there is no

reward for operating with few or no

violations, because premiums continue to

rise, despite having one of the lowest tort

claims liability caps in the nation.

The Task Force requests the House and

Senate Insurance Committees review the

inclusion of health care workers in the state

health insurance plan.

Provider Rates

The Task Force encourages Kansas

Department on Aging to examine the rate

setting process to see if there is a need to

adjust the reimbursement rates earlier than

originally intended. The 2003 Legislature

changed the rate setting methodology for

nursing facilities by setting FY 2001 as the

base year for rate setting initially, adjusted

by data collected in ensuing years. The

Department is given some flexibility in

selecting base years as data are collected.

Providers have expressed concern that

higher insurance premiums in 2002 and

2003 are not reflected in the new

methodology, placing financial strain on

providers. The use of a pass through of

funding to recognize those increased costs

for insurance not only for liability, but

employee health insurance, was suggested by

the Task Force.

Inspections

The Task Force recommends that the

Department on Aging and Bureau of Health

Facilities increase the length between

surveys for facilities that perform better to

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Kansas Legislative Research Department 2003 Long-Term Care

not more often than the allowable fifteen

months. Instead of an inspection every

twelve months, surveys of the good

performing homes should be extended to the

maximum allowable time between

inspections and poorly performing homes be

surveyed more frequently thus giving the

average of every 12 months for federal law.

The Task Force encourages Aging and the

Bureau of Health Facilities to work with the

federal government to meet those standards

while rewarding the facilities that are

providing good care.

In addition, the Task Force recommends

a Legislative Resolution to request the

federal government review the inspection

standards.

Workforce Issues in Long Term Care

The Task Force recommends the study of

workforce issues across the state. According

to the Kansas Association of Homes and

Services for the Aging, the biggest concern

for providers is workforce. Long term care

health workers are faced with a variety of

issues regarding their job, including how

society values the job, the workplace, the

economy and labor market and policy.

In regard to long term care health

workforce retention, the root issue is the

climate of the facility. Since the workforce

of a long-term care facility is primarily the

front line contact in caring for residents, they

should be empowered to be an integral and

honored part of all “resident-first, resident-

directed” care giving at a facility. The

climate is a direct result of the model of

service utilized by care providers. The

traditional efficiency-driven institutional

model does not provide a climate of

empowerment and honor for the workforce.

The Task Force believes it is time for the

era of the traditional model to pass away. It

must be replaced by a resident-directed

service model where residents are first and

foremost in all parts of their care, i.e. give

them choices: when and what to eat, when to

get up, when to go to bed, bathing

alternatives and recreational activities, to

mention a few. This new model is called the

Deep Culture Change Model.

In order to address the workforce issues,

as well as to provide a better level of care for

long term care residents, the Task Force

recommends the creation of a demonstration

site, at a facility with demonstrated success

in implementing culture change, funded by

the Civil Monetary Penalty (CMP) fund.

This site will also be a training site. It

will develop training materials and systems

for the description, understanding and

implementation of the Deep Culture Change

Model. Furthermore, upon success at the

first demonstration site, other sites should be

established across the state near community

colleges and vocational technical schools.

The methodology for implementing the

change from demonstration/development site

to full blown training site should be an

integral part of the first demonstration

project.

The first Demonstration Site would be

specifically responsible to:

1) Develop a “train the trainer” curriculum

for 1 to 5 subsequent Demonstration

Sites. The subsequent sites would be

learning sites for others.

2) Develop a complete “tool chest” of

systems designed to support and sustain

the Deep Culture Change Model, i.e.

policies and procedures, model

description/change processes, human

flow system, culture change quality

assurance (QA) systems, etc.

Community colleges and vocational

technical schools will be able to interconnect

with the demonstration sites so as to

determine needed curriculum changes for

various disciplines to be consistent with

deep culture change concepts. These

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Kansas Legislative Research Department 2003 Long-Term Care

disciplines include:

!Registered Nurse (RN);

!Licensed Practical Nurse (LPN);

!Certified Nursing Assistant (CNA);

!Social Worker;

!Social Service Designee;

!Long term care service providers

(Administrators-in-Training [AIT]

program along with Preceptor training);

!Long term care health workforce;

!Home and community based care

services providers; and

!Other areas of expertise as needed.

The Task Force encourages the

collaboration between community colleges

and vocational technical schools in the

provision of training for long term care

service providers, long term care staff

development, as well as the various

disciplines such as mentioned above.

Strategies to address these issues range from

culture change in facilities, as implemented

by the PEAK Award winners and the

recipients of the exemplary care award, to

additional educational opportunities for staff.

The Task Force also encourages training

in deep culture change for home and

community based services providers.

In addition, the Task Force encourages

the use of technology to provide educational

opportunities for facilities not located in

urban enters. The location of subsequent

demonstration sites can greatly aid in this

matter.

The Task Force recommends that SRS

pursue grant opportunities through the

Centers for Medicare and Medicaid and

elsewhere that target workforce issues in

long-term care. While the task Force

recognizes that the grants are short-term

solutions, they encourage SRS to pursue

plans to continue the programs started by

the grants through development of the

appropriate infrastructure.

The Task Force also recommends that

nursing school accreditation include a

long-term care module and encourages

the nursing associations to pursue this

inclusion.

The Task Force requests the House

Health and Human services committee

introduce legislation to update the

Administrators-in-Training (AIT) program for

adult care homes. The program is a 480 hour

practicum to help administrators be

successful in leading their facility teams and

providing a long-term professional

relationship for them while ensuring quality

care of seniors. The significant decline in

the number of licensed administrators of

adult care homes in the last several years

and the recommendation of the Board of

Adult Care Home Administrators (BACHA)

have convinced the Task Force that the AIT

program is in need of review and should also

be funded from the CMP fund.

Re-Entry of Older Persons

into the Workforce

The Task Force recommends that the

Department of Human Resources work to

address the unique needs of older persons re-

entering the workforce under the Workforce

Investment Act (WIA). The Task Force

recommends that specific funds be set aside

to address these needs.

Overview of Long-Term Care

Services and Responsibilities

The Task Force requests that the

Department of Health and Environment,

Department on Aging, and Department on

Social and Rehabilitation Services, for those

areas that are referred to as long term care,

provide a report outlining the functions

under state and federal control, to give the

Task Force better direction in affecting

change. In addition, the report should

include information regarding which

programs are mandated by the federal

government and which ones are optional to

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Kansas Legislative Research Department 2003 Long-Term Care

states and how changes might affect federal

funding streams. Finally, information

regarding the process for changing federal

regulations, where it applies, should also be

a part of the report. It is the expectation of

the Task Force that this information not

necessarily be all inclusive, but that it be

accurate, reflecting the precise language in

federal and state regulations whenever

possible, to give the Legislature a better

understanding of what regulations they

control or have an opportunity to change.

The Task Force requests reporting of the

information to the Legislature no later than

February 1, 2004.

Foreign Pharmaceuticals

The Task Force requests the House

Health and Human Services Committee

review the quality and cost of foreign

pharmaceuticals. The Task Force recognizes

that Kansans continue to search for ways to

make pharmaceuticals more affordable.

However, concerns about the content and

quality of drugs imported from other

countries, not regulated by the Food and

Drug Administration, lead the Task Force to

believe that further study is necessary.

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Kansas Legislative Research Department 2003 Long-Term Care

Appendix A

DEPARTMENT OF HEALTH & HUMAN SERVICES Centers for Medicare & Medicaid

Services

7500 Security Boulevard

Baltimore MD 21244-1850

Ref:S&C-02-42

Date August 8, 2002

From: Director

Survey and Certification Group

Center for Medicaid and State Operations

Subject: Use of Civil Money Penalty (CMP) Funds by States

To: Associate Regional Administrator

Divisions of Medicaid & State Operations

Regions I-X

State Survey Agency Directors

The purpose of this memorandum is to provide information regarding how states may use CMP

funds collected from nursing homes that have been out of compliance with Federal requirements It

has come to our attention that guidance is needed to ensure that states use CMP funds in

accordance with the law and in a consistent manner, while maintaining some flexibility in the use of

those funds.

Background - States collect CMP funds from Medicaid nursing facilities and from the Medicaid

part of dually-participating skilled nursing facilities (SNFs) that have failed to maintain compliance

with Federal conditions of participation. CMP funds collected from Medicare-participating SNFs

and the Medicare part of dually-participating SNFs are Federal funds and are returned to the

Medicare Trust Fund.

Section 1919(h)(2)(A)(ii) of the Social Security Act (the Act) provides that CMP funds collected

by a state as a result of certain actions by nursing facilities or individuals must be applied to the

protection of the health or property of residents of nursing facilities that the state or the Secretary

finds deficient. These actions include CMPs assessed against:

(1) A nursing facility that is not in compliance with Federal requirements in sections

1919(b), (c), (d) of the Act;

(2) An individual who willfully and knowingly certifies a material and false statement in a

resident assessment (section 1919(b)(3)(B)(ii)(I) of the Act);

(3) An individual who willfully and knowingly causes another individual to certify material

and false statement in a resident assessment (section 1919(b)(3)(B)(ii)(fl) of the Act); and

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Kansas Legislative Research Department 2003 Long-Term Care

(4) An individual who notifies (or causes to be notified) a nursing facility of the time or date

on which a standard survey is scheduled to be conducted (section

1919(g)(2)(A)(I) of the Act).

Page 2 - Associate Regional Administrators, DMSO; State Survey Agency Directors

The Act cites three examples of uses for CMP*s:

(1) Payment for the costs of relocation of residents to other facilities;

(2) Maintenance of operation of a facility pending correction of deficiencies or closure;

and

(3) Reimbursement of residents for personal funds lost.

The regulations, at 42 CFR 488.442(g), contain similar language with some very minor wording

changes that make it clear that the costs of relocation of residents to other facilities are for state

costs. The regulations also indicate that the persona1 funds lost at a facility are the result of

actions by the facility or by individua1s used by the facility to provide services to residents.

Section 7534B of the State Operations Manual (SOM) contains similar language, but specifies

that the funds must be used to protect the health or property of residents of deficient facilities.

In the preamble to the final enforcement regulations published on November 10, 1994, we

indicated that the law suggests that CMP revenues be applied to administrative expenses rather

than direct care costs although it is clear that states have broad latitude to determine which of

these types of expenses best meet the needs of their residents (page 56210 of the Federal

to implement its own procedures with respect to the use of CMPs. Our previous direction to

CMS regional offices has been that the specified uses of CMP funds in the Act and section

488.442(g) are not exhaustive, that states need flexibility in determining the appropriate use of

funds, and that regional offices have some oversight responsibility. Beyond this, we have not

provided general guidance to all states and regional offices on what is considered appropriate use

of these funds within the scope of the law and regulations. Due to the lack of guidance, a number,

of states have been reluctant to use a majority of the money. As resu1t, some states have a

significant amount of money on deposit and this amount is continuously growing.

Flexibility in Use of CMP Funds -- While the Act provides states with much flexibility to be

creative in the use of CMP funds, this flexibility is limited by the requirement that CMP funds are

to be focused on facilities that have been. found to be deficient. However, the law does not specify

when a facility must have been determined to be deficient to qualify for benefits under state project

funded by CMPs. Most nursing facilities have had one or more deficiencies either recently or in the

past. Rather than setting forth rigid criteria on when it is that facility must have been deficient to

be an eligible target for the application of CMP revenues, we believe that the best course is to

offer states maximum flexibility to make this determination. Apart from this, we believe that

projects funded by CMP collections should be limited to funding on hand and should be relatively

short-term projects.

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Kansas Legislative Research Department 2003 Long-Term Care

Page 3 - Associate Regional Administrators. DMSO; State Survey Agency Directors

Each state is responsible for ensuring that CMP funds are applied in accordance with the law. Regional

oversight should be general in nature, responding to questions from states or commenting on the occasional

project proposal submitted for regional office input, but there is no requirement that a regional office review

and approve each state project before it is implemented.

Appropriate CMP Fund Use —As we stated in the preamble to the 1994 final enforcement regulations,

CMP revenues should be spent on administrative expenses, rather than direct care costs, as applied to

deficient facilities. If the purpose of the state project is related to deficient practice, the CMP funds could

be used to prevent continued noncompliance by nursing facilities through educational or other means. For

example, to address particular areas of noncompliance, a state could develop videos, pamphlets, or other

publications providing best practices, with these educational materials being distributed to all deficient

nursing facilities. Other uses could include, for example, the development of public service announcements

on issues directly related to the identified deficient area, and employment of consultants to provide expert

training to deficient facilities. North Carolina and other states have issued grants to several nursing

facilities to fund Eden Alternative Projects, which provide training and other services necessary to support

the use of animals in nursing facilities for therapeutic purposes. Because CMP funds collected by a state

are state funds, the state may use the money for any project that directly benefits facility residents, in

accordance with section 1919(h)(2)(A)(ii) of the Act, including funding an increase in ombudsman

services.

Inappropriate CMP Fund Use — We believe that it is not appropriate for states to use CMP funds for a

loan to a deficient facility that is having financial difficulty meeting payroll or paying vendors. As pointed

out in the preamble, if the CMP is used by the facility to correct the noncompliance that led to its

imposition, it is, in effect, not a remedy.

If you believe that a state is not spending collected CMPs in accordance with the law or regulations, or not

at all, you should refer this matter to your regional office account representative so that he or she may

discuss this matter with the State.

Effective Date: This guidance is effective on the date of issuance.

Training: This policy should be shared with all survey and certification staff; surveyors, their managers and

the state/regional training coordinator.

/s/

Steven A. Pelovitz

39175(1/6/4{11:42AM})

Committee Reports

to the

2004 Kansas Legislature

Supplement

Kansas Legislative Research Department

February 2004

Legislative Coordinating Council

Chairperson

Senator Dave Kerr, President of the Senate

Vice Chairperson

Representative Doug Mays, Speaker of the House

Lana Oleen, Senate Majority Leader

Anthony Hensley, Senate Minority Leader

Clay Aurand, House Majority Leader

John Ballou, Speaker Pro Tem

Dennis McKinney, House Minority Leader

Kansas Legislative Research Department

300 SW 10th, Room 545-N, Statehouse

Topeka, Kansas 66612-1504

Telephone: (785) 296-3181

FAX: (785) 296-3824

kslegres@klrd.state.ks.us

http://www.kslegislature.org/klrd

Supplement

Commerce and Labor

Health Care Stabilization Oversight

Revised KPERS

School Based Budget

Kansas Legislative Research Department

300 SW 10th, Room 545-N, Statehouse

Topeka, Kansas 66612-1504

(785) 296-3181 kslegres@klrd.state.ks.us

http:/skyways.lib.ks.us/ksleg/KLRD/klrd.html

iii

SUPPLEMENT

FOREWORD

In the 2003 Interim the Legislative Coordinating Council appointed four special

committees to study some 20 study topics. Legislation recommended by the committees

will be available in the Documents Room early in the 2004 Session.

Joint committees created by statute met in the 2003 Interim as provided in the statutes

specific to each joint committee. Most of the joint committees have reported on their

activities and those reports are contained in this publication. Legislation recommended

by these committees will be available in the Documents Room early in the 2004 Session.

This publication also contains reports of other committees, commissions, and task forces

which are not special committees created by the Legislative Coordinating Council or Joint

Committees.

Reports of the Special Committee on Kansas Security, the Joint Committee on Children’s

Issues, the Legislative Educational Planning Committee, and the Joint Committee on State-

Tribal Relations, are not contained in this publication.

Minutes of the special committees; joint committees; other committees, commissions, and

task forces meetings are on file in the Division of Legislative Administrative Services.

A summary of each reporting entity’s conclusions and recommendations may be found on

page ---.

TABLE OF CONTENTS

SUPPLEMENT

Page

FOREWORD ..........................................................iii

TABLE OF CONTENTS ................................................. v

SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS ................. vii

SPECIAL COMMITTEE ON COMMERCE AND LABOR .......................1-1

Federal Reed Act Funds ..........................................1-1

State Occupational Safety and Health Agency .........................1-3

Taxable Wage Base ..............................................1-5

Workers Compensation ...........................................1-6

HEALTH CARE STABILIZATION OVERSIGHT COMMITTEE ..................2-1

Report ........................................................2-1

JOINT COMMITTEE ON PENSIONS, INVESTMENTS, AND BENEFITS .........3-1

REVISED Report ................................................3-1

SCHOOL-BASED BUDGET WORKING GROUP .............................4-1

Report ........................................................4-1

vii

SUPPLEMENT

SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS

Special Committee on Commerce and Labor

Federal Reed Act Funds. The Committee concluded the Kansas Department of Human Resources

(KDHR) should pursue an allocation of Congressional Earmark Grant funds, but the Committee

did not suggest how these monies should be spent. During the 2004 Session, the Secretary of

KDHR is invited to report to the appropriate standing committees regarding Congressional

Earmark Grant appropriations. It is believed that spending any available moneys should be dealt

with during the 2004 Legislative Session. Further, the Committee recommends that the Reed Act

funds remain in the Unemployment Trust Fund.

State Occupational Safety and Health Agency. The Special Committee on Commerce and

Labor recommends that the current federal Occupational Safety and Health Agency (OSHA)

system be maintained. During the deliberation, the Committee could find no compelling reason

for a state OSHA at this time. The expense involved in setting up a state system was a major

factor in the decision-making process. The Committee encourages state agencies, such as the

Kansas Department of Health and Environment and the Kansas Department of Human Resources,

on a cooperative basis and without duplication, to promote and publicize information that will

make businesses aware of safety measures that are available to the business world in order to

improve safety on the job. Additionally, the Committee recommends a future review of other

state OSHA plans in order to analyze and possibly incorporate additional job safety measures.

Taxable Wage Base. The Committee concluded that due to a total lack of interest by the public,

there are no recommendations on this topic.

Workers Compensation. After discussion and deliberation, the Committee makes the following

proposals:

!that a bill be drafted that requires the Workers Compensation Advisory Council to meet by

February 1 each year for the purpose of reviewing proposed legislation and quarterly

thereafter, as needed. Also to be included in the bill is a provision that a quorum and votes

of the Council be by simple majority of each side.

!that a follow up audit on the 1999 Post Audit be conducted to evaluate whether the problems

revealed in the 1999 audit have been resolved. Further, the Legislative Division of Post Audit

should conduct a statewide review of workers compensation cases in order to compile

statistics on the number of cases, investigations conducted, prosecutions involved and

settlement or outcome of cases. The Audit also should look at the number of cases settled in

favor of the claimant as opposed to the employer. A final issue to be included in the audit

should be an examination of the pay scale and retirement plans for Administrative Law

Judges.

!that the Legislature deal with the issues of pre-existing conditions, date of injury, work

disability (currently based on a comparison of skills over 15 years) level of benefits for injured

employees and whether drug or alcohol abuse on the part of the employer endangers the safety

of the employees.

viii

Health Care Stabilization Oversight

On the subject of the continuation of the Health Care Stabilization Fund Oversight Committee,

members and providers expressed the opinion that the Committee continues to serve as a

necessary link between the Board of Governors, the providers, and the Legislature, and should

be continued.

The Committee continues in its belief that the ability to contract for an independent annual

actuarial report is important to the safety and soundness of the Fund; however, the Committee

sees no need for an independent review in 2004. The issue will be revisited at the Committee’s

meeting in 2004.

Finally, while the Committee makes no recommendation for changes in the statutes governing the

work of the Board of Governors, it does recommend the following to the Legislative Coordinating

Council, the Legislature, and the Governor regarding the HCSF:

!The Health Care Stabilization Fund Oversight Committee continues to be concerned about

and would be opposed to any possible action to transfer money from the HCSF to the State

General Fund. The HCSF receives its funding from the professional liability coverage

surcharge payments by health care providers as provided for in the Health Care Provider

Insurance Availability Act. This source of funding for the HCSF is not a fee for a license,

registration, certification, government inspection, or other typical government service. The

HCSF is providing professional liability coverage for Kansas health care providers.

Furthermore, as set forth in the Health Care Provider Insurance Availability Act, the HCSF is

required to be ". . . held in trust in the state treasury and accounted for separately from other

state funds."

!The Committee believes that transferring money to the State General Fund from the HCSF is

contrary to legislative intent and the provisions of the Health Care Provider Insurance

Availability Act, KSA 40-3401, et seq. Further, this Committee believes this kind of "sweeping

monies" from the HCSF into the State General Fund also is contrary to the obligation of the

HCSF to provide professional liability coverage for eligible Kansas health care providers, and

would impair the ability of the HCSF to maintain an actuarially sound program for the benefit

of the health delivery system which serves the general public of Kansas.

Pensions, Investments, and Benefits

The following contains the recommendations of the Joint Committee on Pensions, Investments,

and Benefits, including a meeting of January 7, 2004, at which additional recommendations were

adopted pertaining to bonds.

!The Committee recommends favorably to the State Finance Council the issuance of $500

million in pension obligation bonds authorized by Section 16 of Chapter 155, 2003 Session

Laws of Kansas. This recommendation fulfills the provision of Section 16(f) of Chapter 155

that “No bonds shall be issued pursuant to this section prior to the review and recommenda-

tion to the State Finance Council of such issuance by the Joint Committee on Pensions,

Investments and Benefits.” The Committee further recommends:

"after reconsidering its action of December 1, 2003, that the principal and interest for bonds

may be paid from KPERS employer contributions to reimburse the State General Fund for

annual payments of bond costs; and

"that legislation be introduced to allow use of KPERS employer contributions for reimbursing

the State General Fund for bond payments.

!The Committee recommends the following items be included in a bill to be introduced for

consideration by the 2004 Legislature:

"Changing the actuarial cost method for all three plans—regular KPERS, KP&F, and Judges;

"Modifying the asset smoothing method;

"Reamortizing the unfunded actuarial liability if and when deemed prudent by the KPERS

Board of Trustees;

"Modifying the statutory contribution caps for local employers; and

"Separating the state and school group into two groups for actuarial purposes in calculating

individual contribution rates for the state group and for the school group.

!Regarding a long-range funding plan, the Committee regrets that a comprehensive package

was not developed during the 2003 interim. The Committee believes that HB 2014 from the

2003 Session was one step in solving the KPERS long-term funding issue. Additional steps

must be taken, including issuance of $500 million in bonds, passage of legislation to facilitate

paying bond principal and interest from employer contributions and to reimburse the State

General Fund for bond payments, and enactment of legislation modifying actuarial methods

and KPERS groups. Depending upon the disposition of these recommendations, further steps

may be required in developing a comprehensive plan.

School Based Budget Working Group

This is a status report prepared to describe the activities of the School-Based Budget Working

Group through its meeting of December 9, 2003. The Group has one more meeting date

authorized and will meet for the purpose of considering its final recommendations to the 2004

Legislature. It also is hoped that a recommended format for building-based budgeting can be

completed using actual data from a school district.

SPECIAL COMMITTEES

Report of the

Special Committee on Commerce

and Labor

to the

2004 Kansas Legislature

CHAIRPERSON: Representative Donald Dahl

VICE-CHAIRPERSON: Senator Karin Brownlee

RANKING MINORITY MEMBER: Representative Candy Ruff

OTHER MEMBERS: Senators Les Donovan, U.L. “Rip” Gooch, and Larry Salmans; Representatives

Broderick Henderson, Terrie Huntington, Todd Novascone, Stephanie Sharp, and Jim Ward

STUDY TOPICS

Federal Reed Act Funds

State Occupational Safety and Health Agency

Taxable Wage Base

Workers Compensation

February 2004

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Kansas Legislative Research Department 2003 Commerce and Labor

Special Committee on Commerce and Labor

FEDERAL REED ACT FUNDS

CONCLUSIONS AND RECOMMENDATIONS

The Committee concluded the Kansas Department of Human Resources (KDHR) should pursue

an allocation of Congressional Earmark Grant funds, but the Committee did not suggest how

these monies should be spent. During the 2004 Session, the Secretary of KDHR is invited to

report to the appropriate standing committees regarding Congressional Earmark Grant

appropriations. It is believed that spending any available moneys should be dealt with during

the 2004 Legislative Session. Further, the Committee recommends that the Reed Act funds

remain in the Unemployment Trust Fund.

Proposed Legislation: None

BACKGROUND

The Legislative Coordinating Council

called for the Special Committee on Com-

merce and Labor to review and make recom-

mendations regarding available federal Reed

Act monies which are a part of the Employ-

ment Security Financing Act of 1954. This

legislation was named in honor of Congress-

man Daniel A. Reed of New York, who was

chairman of the House Ways and Means

Committee at the time. The review should

include the possibility of using Reed Act

Funds in an innovative manner, such as

training unemployed aviation workers.

COMMITTEE ACTIVITIES

Secretary Jim Garner, Department of

Human Resources (KDHR), reviewed infor-

mation on the Reed Act which was autho-

rized in 2002 on a one-time basis. Funds to

the states are to be used only for authorized

purposes. Kansas’ share of the moneys was

$78.1 million. The following are permissible

uses of the Reed Act distribution:

!Operational funding as the states assume

nearly total responsibility for the current

federal Unemployment Insurance pro-

gram over the next six years.

!Administration of state Unemployment

Insurance Law.

!Computer and network equipment as

well as training, technical assistance,

and professional development of staff.

!One Stop operations.

!Labor Market Information and career

guidance materials.

!Special additional compensation pro-

grams.

!Payments to individuals not otherwise

eligible for regular compensation. These

include part-time workers and those who

qualify under alternative base periods.

!The distribution also could remain in the

state trust fund to provide Employer tax

relief.

As a result of 2003 legislation, the follow-

ing uses of the funds were authorized:

!$1.89 million for unemployment admin-

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Kansas Legislative Research Department 2003 Commerce and Labor

istration;

!$450,000 to cover new fees charged by

the State Treasurer; and

!up to $9 million for the Kansas Addi-

tional Benefits program (up to an addi-

tional two weeks of benefits for those

who exhaust all regular state and federal

extended entitlement). The balance

remains in the Unemployment Trust

Fund.

The Committee received information

about the receipt of a National Emergency

Grant (NEG) to assist dislocated aviation

workers in the Wichita area. Earlier in 2003,

Kansas received $2.35 million in grant funds.

These monies have gone primarily to meet

the needs of pre-existing commitments for

these dislocated employees. KDHR will be

seeking an extension of this grant for addi-

tional NEG funds.

Another possible source of funding which

was brought to the attention of the Commit-

tee was the allocation of Congressional Ear-

mark Grants. As one of the states in Region

V, Kansas has been the only state not to

receive monies from these grants for job

training purposes. The Secretary of KDHR

offered this avenue as a possibility for addi-

tional funding for job training activities.

Another official with KDHR indicated that

unemployment tax rates were going to go up

with or without the Reed Act monies.

CONCLUSIONS AND RECOMMENDATIONS

The Committee concluded the Kansas

Department of Human Resources (KDHR)

should pursue an allocation of Congressional

Earmark Grant funds, but the Committee did

not suggest how these monies should be

spent. During the 2004 Session, the Secre-

tary of KDHR is invited to report to the

appropriate standing committees regarding

Congressional Earmark Grant appropriations.

It is believed that spending any available

moneys should be dealt with during the

2004 Legislative Session. Further, the Com-

mittee recommends that the Reed Act funds

remain in the Unemployment Trust Fund.

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Kansas Legislative Research Department 2003 Commerce and Labor

Special Committee on Commerce and Labor

STATE OCCUPATIONAL SAFETY AND HEALTH AGENCY

CONCLUSIONS AND RECOMMENDATIONS

The Special Committee on Commerce and Labor recommends that the current federal

Occupational Safety and Health Agency (OSHA) system be maintained. During the

deliberation, the Committee could find no compelling reason for a state OSHA at this time.

The expense involved in setting up a state system was a major factor in the decision-making

process. The Committee encourages state agencies, such as the Kansas Department of Health

and Environment and the Kansas Department of Human Resources, on a cooperative basis and

without duplication, to promote and publicize information that will make businesses aware of

safety measures that are available to the business world in order to improve safety on the job.

Additionally, the Committee recommends a future review of other state OSHA plans in order

to analyze and possibly incorporate additional job safety measures.

Proposed Legislation: None

BACKGROUND

The Legislative Coordinating Council

asked the Special Committee on Commerce

and Labor to review the possibility of creat-

ing a state OSHA.

The Special Committee conducted a one-

day hearing on this topic. The review was to

include the financing of the proposed agency

and the impact on the state business commu-

nity. In 2002 there was an interim examina-

tion of 2002 HB 2868 which would have

established a state OSHA plan. At that time,

the Interim Committee on Commerce and

Labor concluded that there was concern

associated with the costs of initiating an

OSHA type program and these costs would

be detrimental to the financial situation in

Kansas. In 2003, HB 2129 was drafted. The

main supporter of HB 2129, Representative

Bob Bethell, also sponsored 2002 HB 2868.

COMMITTEE ACTIVITIES

Conferees who appeared on this topic

included the following: Representative Bob

Bethell; Linda Berndt, Kansas Health Care

Association (KHCA); Bob Welch, BRB Con-

tractors; Bob Knowles, Bob Knowles Con-

struction; Ron Pomeroy, Kansas Castings;

Rick Carlson, Koch & Co.; Barb Conant,

Kansas Trial Lawyers Association (KTLA);

Pam Scott, Kansas Funeral Directors Associa-

tion; Cory Peterson and Tom Slattery, Asso-

ciated General Contractors of Kansas (KS-

AGC); Don Greenwell, Kansas City Chapter

of Associated General Contractors (KC-ACG);

Larry Baer, League of Kansas Municipalities

(LOKM); Janet Stubbs, Administrator of the

Kansas Building Industry Association (KBIA)

Workers Compensation Fund; Bill Miller,

Building Erections Service; Larry Magill,

Kansas Association of Insurance Agents; Bob

Totten, Kansas Contractors Association

(KCA); and Will Leiker, Kansas AFL-CIO.

Written testimony was received from Chris

Wilson with the Kansas Building Industry

Association (KBIA).

Testimony favorable to HB 2129 and a

state OSHA plan was received from Repre-

sentative Bob Bethell and the conferees from

KHCA, BRB Contractors, Bob Knowles Con-

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Kansas Legislative Research Department 2003 Commerce and Labor

struction, Kansas Castings, and Koch & Co.

Further study of the issues involved in a

state statutory OSHA plan was encouraged

by the conferee from KTLA. The representa-

tive of the Kansas AFL-CIO recommended

the development of business and labor task

force to investigate the advantages and disad-

vantages of the proposal.

Opposition on this issue was expressed

on behalf of the Kansas Funeral Directors,

KS-AGC, LOKM, KC-AGC, the Administrator

of KBIA Compensation Fund, Building Erec-

tions Service, Kansas Association of Insur-

ance Agents, KCA, and KBIA.

CONCLUSIONS AND RECOMMENDATIONS

The Committee recommends that the

current system be maintained. During the

deliberation, the Committee could find no

compelling reason for a state OSHA at this

time. The expense involved in setting up a

state system was a major factor in the

decision-making process. The Committee

encourages state agencies, such as the Kan-

sas Department of Health and Environment

and the Kansas Department of Human Re-

sources, on a cooperative basis and without

duplication, to promote and publicize infor-

mation that will make businesses aware of

safety measures that are available to the

business world in order to improve safety on

the job. Additionally, the Committee recom-

mends a future review of other state OSHA

plans in order to analyze and possibly incor-

porate additional job safety measures.

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Kansas Legislative Research Department 2003 Commerce and Labor

Special Committee on Commerce and Labor

TAXABLE WAGE BASE

CONCLUSIONS AND RECOMMENDATIONS

The Committee concluded that due to a total lack of interest by the public, there are no

recommendations on this topic.

Proposed Legislation: None

BACKGROUND

The Legislative Coordinating Council

called for the Special Committee on Com-

merce and Labor to review the taxable wage

base of $8,000 a year per employee for unem-

ployment insurance tax payment calcula-

tions. The taxable wage base has not

changed since 1984.

COMMITTEE ACTIVITIES

The Committee scheduled a meeting

date, but as a result of a lack of public re-

sponse, the meeting was cancelled.

CONCLUSIONS AND RECOMMENDATIONS

The Special Committee on Commerce

and Labor cancelled the meeting that was

scheduled for a hearing on the issue of the

taxable wage base.

The Committee concluded that due to a

total lack of interest by the public, there are

no recommendations on this topic.

1-6

Kansas Legislative Research Department 2003 Commerce and Labor

Special Committee on Commerce and Labor

WORKERS COMPENSATION

CONCLUSIONS AND RECOMMENDATIONS

After discussion and deliberation, the Committee makes the following proposals:

!that a bill be drafted that requires the Workers Compensation Advisory Council to meet by

February 1 each year for the purpose of reviewing proposed legislation and quarterly

thereafter, as needed. Also to be included in the bill is a provision that a quorum and votes

of the Council be by simple majority of each side.

!that a follow up audit on the 1999 Post Audit be conducted to evaluate whether the

problems revealed in the 1999 audit have been resolved. Further, the Legislative Division

of Post Audit should conduct a statewide review of workers compensation cases in order

to compile statistics on the number of cases, investigations conducted, prosecutions

involved and settlement or outcome of cases. The Audit also should look at the number of

cases settled in favor of the claimant as opposed to the employer. A final issue to be

included in the audit should be an examination of the pay scale and retirement plans for

Administrative Law Judges.

!that the Legislature deal with the issues of pre-existing conditions, date of injury, work

disability (currently based on a comparison of skills over 15 years) level of benefits for

injured employees and whether drug or alcohol abuse on the part of the employer

endangers the safety of the employees.

Proposed Legislation: HB 2537 accompanies this report.

BACKGROUND

The Legislative Coordinating Council

requested the Special Committee on Com-

merce and Labor to study the possibility of

reforming the Workers Compensation Act,

including SB 181, and the role and perfor-

mance of the Workers Compensation Advi-

sory Council.

The Special Committee held hearings

during four days of meetings in order to

review this topic. Conferees who presented

testimony before the Committee included

various individuals. Among those who

appeared were Paula Greathouse, Richard

Thomas, Carol Cast, John Bouilet, and Rudy

Leutzinger, from the Division of Workers

Compensation; Virgil Dean, Kansas Histori-

cal Society; Jerry Donaldson, Legislative

Research Department; Mitch Rice, Revisor of

Statutes Office; Dick Cook, Kansas Insurance

Department; Brad Smoot, National Council

on Compensation Insurance (NCCI); Joe

Lawhon and Leo Hafner, Legislative Post

Audit; A.J. Kotich, Department of Human

Resources; David Schauner, Richard

Hofmann, and Terry Roberts, Coalition for

Workplace Safety; Tim Short, Kansas Trial

Lawyers Association (KTLA); Alicia Salis-

bury, former Chairperson of the Senate

Commerce Committee; Al Lane, former

Chairperson of the House Business, Com-

merce and Labor Committee; Jim DeHoff,

Kansas AFL-CIO; John Ostrowski, Workers

Compensation Advisory Council (WCAC)

member; Gary Peterson, Mike Snider and

Robert Martin,

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Kansas Legislative Research Department 2003 Commerce and Labor

attorneys; Representative Candy Ruff; and

Johnny Sutton and Jamie McDonald, citi-

zens.

Other conferees who appeared included

Charles Adkins, Occupational Safety and

Health Administration; Terry Leatherman,

Kansas Chamber of Commerce and Industry;

Bruce Moore, Administrative Law Judge;

Janet Stubbs, Kansas Building Industry

Association Workers Compensation Fund;

Bill Curtis, Kansas Association of School

Boards (KASB); Mike Schaffter and Scott

Anders, Kansas Farmers Service Association;

Leon Lungwitz, Wichita Independent Busi-

ness Association; Mike Pendergrass and Tim

Rakestraw, Superior Industries; Hal Hudson,

National Federation of Independent Business

(NFIB); Mark Desetti, Kansas National Edu-

cation Association (KNEA); and Beth Regier

Foerster, Adjunct Professor of Law at

Washburn University School of Law.

COMMITTEE ACTIVITIES

Historical Perspective

Virgil Dean, representative of the Kansas

State Historical Society presented an over-

view of special conditions that gave rise to

the workers compensation movement to the

Committee. Of note is the fact that Kansas

was one of the first states to enact a Workers

Compensation Act in 1911.

Exclusive Remedy Doctrine

Legislative Research staff and others

explained the exclusive remedy doctrine that

provides a quid pro quo or give and take

situation under which an injured employee

gives up the right to sue an employer in

exchange for effective and efficient medical

treatment and indemnity payments.

Another conferee from KTLA who ad-

dressed the exclusive remedy issue suggested

the WCAC should review this doctrine to

consider an exception to the rule when

egregious conduct is involved.

The Workers Compensation System

Workers Compensation, an insurance

plan, was outlined for the Committee by staff

from the Division of Workers Compensation.

It was explained that the Workers Compensa-

tion Law is designed to protect the interests

of both the employee and the employer.

According to an adjunct professor of workers

compensation at the Washburn University

School of Law, the principle that an accident

must arise out of and in the course of em-

ployment was presented as the standard test

for compensability in Kansas. There must be

a causal connection between the injury and

the work activities. The conferee stated the

claimant must meet the burden of proof. In

addition, according to the speaker, premiums

are driven by rapidly rising medical costs,

the stock market crash, September 11, 2001,

and insurance premiums but not by judges’

decisions.

Workers Compensation Insurance

and Rates

Staff from the Insurance Department and

the Division of Workers Compensation re-

viewed the mechanism of the workers com-

pensation system. Workers compensation

insurance written by insurance companies in

Kansas is either written by an insurance

company directly (voluntary market) or

through the Kansas Workers Compensation

Insurance Plan (the Plan). The two other

methods of workers compensation insurance

are the group funded pool and self insur-

ance. Group funded pools provide that

similar and dissimilar types of employers can

join a pool for liability coverage when finan-

cial safeguards are met. Self insurance for

employers is allowed when certain require-

ments such as:

!the company has been in continuous

operation for at least five years;

!the company has provided the last five

years of audited financial reports of the

company applying for self insurance;

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Kansas Legislative Research Department 2003 Commerce and Labor

!the company has at least 100 employees,

not necessarily in Kansas;

!the company has a annual premium of at

least $300,000 to $350,000;

!the company has a net worth of

$10,000,000; however a company with a

net worth of less than $10,000,000 can be

considered.

If a company meets all the minimum

requirements the amount of security required

to be on deposit with the state is determined.

Rating issues effecting workers compen-

sation insurance were explained for the

Committee. Rates, which are usually ad-

justed annually, are based on premium and

loss information provided by the insurance

carriers to the NCCI.

Workplace Safety

Safety measures under the auspices of

Industrial Safety and Health (ISHS) section

of KDHR were set out for the Committee.

ISHS performs audits that reviews the pro-

grams of employers and compares the ser-

vices they have received or requested to

receive from their workers compensation

insurance provider. Consultation programs

are provided in coordination with accident

prevention programs.

Fraud and Abuse

Information was presented to the Com-

mittee based on the 1999 Legislative Post

Audit dealing with the entirety of the Work-

ers Compensation Division including the

issue of fraud and abuse in the workers

compensation system. The 1999 Audit found

a pervasive pattern of inaction and excessive

delays in making decisions in the Workers

Compensation Fraud and Abuse Investiga-

tion Unit within the Division of Workers

Compensation. A current aggressive pro-

gram has been instituted to combat fraud and

abuse within the workers compensation

system, according to the conferee, an attor-

ney from KDHR.

Reforms from 1993

The former chairpersons of both the 1993

Senate Commerce Committee and the 1993

House Commerce and Labor Committee

briefly reviewed the 1993 Workers Compen-

sation legislation and urged the Committee

to evaluate the Workers Compensation Advi-

sory Committee which was established under

the 1993 legislation.

Richard Thomas with the Division of

Workers Compensation provided information

on the major changes in the 1993 workers

compensation reform legislation. In addi-

tion, he presented the current status of these

various changes. Other conferees addressed

selected changes brought about by the 1993

changes.

Analysis of 2003 SB 181

The revisor reviewed SB181 for the

Committee. As drafted, the bill contained

five issues, namely: 1) treatment of pre-exist-

ing conditions; 2) separation from employ-

ment; 3) accumulated type injuries; 4) dis-

ability retirement benefits; and 5) permanent

partial disability benefits. Ultimately, the

bill was revised so that the substitute bill in

its current form contains two issues:

!treatment of pre-existing conditions, and

!separation from employment after a work

related injury.

Physician Choice

The question of physician choice was

another issue presented for the Committee’s

consideration. Staff presented an analysis of

KSA 44-510h regarding the method of physi-

cian selection as well as change of physician.

Kansas law provides for the employer choice

of physician for an injured worker. Com-

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Kansas Legislative Research Department 2003 Commerce and Labor

ments in favor of retaining the employer

choice of physician suggested that employers

are in a position to provide the best choice of

physician. Testimony in favor of the em-

ployee choice of physician was advocated as

a factor for improving an injured worker’s

progress and hence improving the workers

compensation system.

Occupational Safety and Health

Administration (OSHA)

The regional administrator of OSHA

informed the Committee about the mission of

OSHA, which is to ensure safe and healthful

work places. The conferee explained

OSHA’s role in the DeBruce Grain Elevator

explosion and the Emerson accidents. The

administrator clarified that it is against the

law for OSHA to notify an employer of an

upcoming visit.

Multiple Factors of Workers

Compensation Costs

Testimony was provided from the dele-

gate representing the Kansas Building Indus-

try Association regarding pre-existing condi-

tions and the need to address this issue. In

addition the availability of a new methodol-

ogy the Physical Capacity Profile Testing

System, used for new hire testing was intro-

duced to the Committee. According to the

conferee, the aim of the System is to match

up the capabilities of an employee with the

job.

School Cost Presentation

Comments on behalf of the Kansas Asso-

ciation of School Boards addressed the in-

creasing costs of workers compensation

facing schools. The cost has increased from

$.30 per $100 paid in 2001 to $.46 in 2003.

Additionally, only two companies write this

business in Kansas, one being KASB.

A representative of KNEA stated there is

no workers compensation crisis in Kansas.

He continued that, due to low rates in Kan-

sas, businesses are attracted to the state.

Kansas Cooperative Cost Outlook

Individuals from the Kansas Farmers

Service Association (KFSA) testified about

rate escalation, multiple losses, and negative

results attributable to workers compensation

costs in their Association. The conferees

related examples of workers who experi-

enced medical injuries, but the conferees

indicated it was doubtful that the injuries

warranted the workers compensation claims

that were awarded.

The conferees encouraged changes that

would bring a sense of fairness to the work-

ers compensation system.

Small Business Cost Outlook

Conferees representing small businesses

spoke about the phenomenon of increasing

rates and the need for safety precautions in

the workplace. The need for maintaining the

exclusive remedy doctrine was emphasized

by the conferee from the NFIB.

Large Business Cost Outlook

Speaking on behalf of Superior Industries

International, Inc., two individuals ad-

dressed the issue of workers who file fraudu-

lent workers compensation claims and the

effects that such fraudulent claims have on

their business. According to the conferees,

stronger measures to protect against fraud

need to be in place. The conferees stated

that all cases they have experienced before

an Administrative Law Judge (ALJ) have been

settled in favor of the employee, until re-

cently when a new ALJ was appointed

Citizen Concerns

Johnny Sutton, citizen, testified about the

DeBruce Grain Elevator explosion in which

seven people died and ten were injured. The

conferee advocated that stricter safety mea-

sures and accountability need to be in place.

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Kansas Legislative Research Department 2003 Commerce and Labor

Jamie McDonald, citizen, spoke about the

death of her mother while on the job due to

another employee driving while impaired by

prescription drugs. She addressed the im-

portance of safety and accountability in the

workplace on the part of the employer.

CONCLUSIONS AND RECOMMENDATIONS

After discussion and deliberation, the

Committee makes the following proposals:

!that a bill be drafted that requires the

Workers Compensation Advisory Council

to meet by February 1 each year for the

purpose of reviewing proposed legislation

and quarterly thereafter, as needed. Also

to be included in the bill is a provision

that a quorum and votes of the Council be

by simple majority of each side.

!that a follow up audit on the 1999 Post

Audit be conducted to evaluate whether

the problems revealed in the 1999 audit

have been resolved. Further, the Post

Audit should conduct a statewide review

of workers compensation cases in order to

compile statistics on the number of cases,

investigations conducted, prosecutions

involved and settlement or outcome of

cases. The Audit should also look at the

number of cases settled in favor of the

claimant as opposed to the employer. A

final issue to be included in the audit

should be an examination of the pay scale

and retirement plans for Administrative

Law Judges.

!that the legislature deal with the issues of

pre-existing conditions, date of injury,

work disability (currently based on a

comparison of skills over 15 years) level

of benefits for injured employees and

whether drug or alcohol abuse on the part

of the employer endangers the safety of

the employees.

OVERSIGHT COMMITTEE

Report of the

Health Care Stabilization

Oversight Committee

to the

2004 Kansas Legislature

CHAIRPERSON: Dick Bond

RANKING MINORITY MEMBER: Representative Eber Phelps

OTHER MEMBERS: Senators Greta Goodwin, and James Barnett; Representative Jim

Morrison

NON-LEGISLATIVE MEMBERS: Mark Praeger, Paul Kindling, James Rider, Debra Doubek-

Phillips, Richard Brock, and Gene Schmidt

STUDY TOPIC

The Committee must review the operation of the Health Care Stabilization Fund and report

and make recommendations to the Legislative Coordinating Council regarding the financial status

of the Fund, including any recommendations for legislation necessary to implement recommenda-

tions of the Committee.

February 2004

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Kansas Legislative Research Department 2003 Health Care Stabilization

Health Care Stabilization Fund Oversight

ANNUAL REPORT

CONCLUSIONS AND RECOMMENDATIONS

On the subject of the continuation of the Health Care Stabilization Fund Oversight Committee,

members and providers expressed the opinion that the Committee continues to serve as a

necessary link between the Board of Governors, the providers, and the Legislature, and should

be continued.

The Committee continues in its belief that the ability to contract for an independent annual

actuarial report is important to the safety and soundness of the Fund; however, the Committee

sees no need for an independent review in 2004. The issue will be revisited at the Committee’s

meeting in 2004.

Finally, while the Committee makes no recommendation for changes in the statutes governing

the work of the Board of Governors, it does recommend the following to the Legislative

Coordinating Council, the Legislature, and the Governor regarding the HCSF:

!The Health Care Stabilization Fund Oversight Committee continues to be concerned about

and would be opposed to any possible action to transfer money from the HCSF to the State

General Fund. The HCSF receives its funding from the professional liability coverage

surcharge payments by health care providers as provided for in the Health Care Provider

Insurance Availability Act. This source of funding for the HCSF is not a fee for a license,

registration, certification, government inspection, or other typical government service. The

HCSF is providing professional liability coverage for Kansas health care providers.

Furthermore, as set forth in the Health Care Provider Insurance Availability Act, the HCSF

is required to be ". . . held in trust in the state treasury and accounted for separately from

other state funds."

!The Committee believes that transferring money to the State General Fund from the HCSF

is contrary to legislative intent and the provisions of the Health Care Provider Insurance

Availability Act, KSA 40-3401, et seq. Further, this Committee believes this kind of

"sweeping monies" from the HCSF into the State General Fund also is contrary to the

obligation of the HCSF to provide professional liability coverage for eligible Kansas health

care providers, and would impair the ability of the HCSF to maintain an actuarially sound

program for the benefit of the health delivery system which serves the general public of

Kansas.

Proposed Legislation: None

BACKGROUND

The Health Care Stabilization Fund

Oversight Committee was created by the

1989 Legislature and is described in KSA 40-

3403b. The 11-member Committee consists

of four legislators; four health care providers;

one insurance industry representative; one

person from the public at large, with no

affiliation with health care providers or with

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Kansas Legislative Research Department 2003 Health Care Stabilization

the insurance industry; and the Chairperson

of the Board of Governors of the Health Care

Stabilization Fund (HCSF) or another mem-

ber of the Board designated by the Chairper-

son. The law charges the Committee to

report its activities to the Legislative Coordi-

nating Council and to make recommenda-

tions to the Legislature regarding the Fund.

The reports of the Committee are on file in

the Legislative Research Department.

COMMITTEE ACTIVITIES

Report of Tillinghast-Towers Perrin

Tillinghast-Towers Perrin, actuary for the

Fund, was requested to evaluate the liabili-

ties of the HCSF as of June 30, 2003, and as

of June 30, 2004. The primary purpose of the

evaluation was to assist the Board of Gover-

nors in its decision on the level of surcharges

for fiscal year 2004. As of June 30, 2003, the

total indicated liability of the HCSF was

approximately $154 million. The corre-

sponding assets of the Fund were $199.4

million. The equity or surplus balance

(unassigned reserve) was $44 million. Pro-

jections for June 2004 are for $195 million in

assets, liabilities of $153 million, and an

equity or surplus balance (unassigned re-

serve) of $41.4 million.

Comments

In addition to the actuary’s report, the

Committee also heard from staff of the Board

of Governors regarding the number and

severity of claims being made against the

Fund, and the status of claims involving the

University of Kansas Medical School faculty

and residents of the training programs.

Additionally, staff indicated a growing con-

cern of the Board over the number of health

care providers obtaining basic coverage from

the Health Care Providers Insurance Avail-

ability Plan. Particularly, the Board is con-

cerned about the amount of money trans-

ferred from the Fund to the Plan to cover the

losses in the Plan as the law requires. To

reduce the level of concern, the Board has

imposed a premium increase on the partici-

pants in the Plan, in the anticipation that the

additional premiums will offset the losses in

the Plan and reduce the size of the transfers

from the Fund.

The actuary described the Fund’s current

financial position as sound. He added that

surcharges levied over the last several years

have been adequate and not extreme, and

that the Board of Governors has done a good

job of managing the Fund through some

difficult times. He again noted that Fund

balances were affected positively in the last

year because providers paid more for their

basic coverage upon which the surcharge is

based. The Fund was affected negatively

largely because of lower interest earnings on

Fund balances, higher dollar amount trans-

fers from the Fund to cover the losses in-

curred by the Health Care Provider Insurance

Availability Plan, and by an increase in the

number of claims made against the Fund.

The actuary and the Board staff noted the

decline in the number of companies writing

medical malpractice insurance, which has

resulted in more providers obtaining cover-

age from the Plan. He also expressed agree-

ment on the Board’s decision to significantly

increase the tail coverage rates, effective

January 1, 2004, as that increase is based on

the actuary’s finding that the current rate

structure is inadequate to cover the liability

incurred by the Fund.

CONCLUSIONS AND RECOMMENDATIONS

On the subject of the continuation of the

Health Care Stabilization Fund Oversight

Committee, members and providers ex-

pressed the opinion that the Committee

continues to serve as a necessary link be-

tween the Board of Governors, the providers,

and the Legislature, and should be contin-

ued.

The Committee continues in its belief

that the ability to contract for an independ-

ent annual actuarial report is important to

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Kansas Legislative Research Department 2003 Health Care Stabilization

the safety and soundness of the Fund; how-

ever, the Committee sees no need for an

independent review in 2004. The issue will

be revisited at the Committee’s meeting in

2004.

Finally, while the Committee makes no

recommendation for changes in the statutes

governing the work of the Board of Gover-

nors, it does recommend the following to the

Legislative Coordinating Council, the Legis-

lature, and the Governor regarding the HCSF:

!The Health Care Stabilization Fund Over-

sight Committee continues to be con-

cerned about and would be opposed to

any possible action to transfer money

from the HCSF to the State General Fund.

The HCSF receives its funding from the

professional liability coverage surcharge

payments by health care providers as

provided for in the Health Care Provider

Insurance Availability Act. This source

of funding for the HCSF is not a fee for a

license, registration, certification, gov-

ernment inspection, or other typical

government service. The HCSF is pro-

viding professional liability coverage for

Kansas health care providers. Further-

more, as set forth in the Health Care

Provider Insurance Availability Act, the

HCSF is required to be ". . . held in trust

in the state treasury and accounted for

separately from other state funds."

!The Committee believes that transferring

money to the State General Fund from

the HCSF is contrary to legislative intent

and the provisions of the Health Care

Provider Insurance Availability Act, KSA

40-3401, et seq. Further, this Committee

believes this kind of "sweeping monies"

from the HCSF into the State General

Fund also is contrary to the obligation of

the HCSF to provide professional liabil-

ity

coverage for eligible Kansas health care

providers, and would impair the ability

of the HCSF to maintain an actuarially

sound program for the benefit of the

health delivery system which serves the

general public of Kansas.

JOINT COMMITTEES

Reports of the

Joint Committee on Pensions,

Investments, and Benefits

to the

2004 Kansas Legislature

CHAIRPERSON: Representative John Edmonds

VICE-CHAIRPERSON: Senator Dave Kerr

RANKING MINORITY MEMBER: Representative Geraldine Flaharty

OTHER MEMBERS: Senators Jim Barone, Anthony Hensley, Stephen R. Morris, and Ruth

Teichman; Representatives Ray L. Cox, Vaughn L. Flora, Margaret Long, Bill McCreary,

Melvin Neufeld, and Clark Shultz

STUDY TOPICS

KPERS Long-Term Funding Study Assigned by LCC

Statutory Studies

February 2004

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

Joint Committee on Pensions,

Investments, and Benefits

REVISED KPERS LONG-TERM FUNDING STUDY

ASSIGNED BY LCC

CONCLUSIONS AND RECOMMENDATIONS

The following contains the recommendations of the Joint Committee on Pensions, Investments,

and Benefits, including a meeting of January 7, 2004, at which additional recommendations

were adopted pertaining to bonds.

!The Committee recommends favorably to the State Finance Council the issuance of $500

million in pension obligation bonds authorized by Section 16 of Chapter 155, 2003 Session

Laws of Kansas. This recommendation fulfills the provision of Section 16(f) of Chapter 155

that “No bonds shall be issued pursuant to this section prior to the review and recommenda-

tion to the State Finance Council of such issuance by the Joint Committee on Pensions,

Investments and Benefits.” The Committee further recommends:

"after reconsidering its action of December 1, 2003, that the principal and interest for

bonds may be paid from KPERS employer contributions to reimburse the State General

Fund for annual payments of bond costs; and

"that legislation be introduced to allow use of KPERS employer contributions for

reimbursing the State General Fund for bond payments.

!The Committee recommends the following items be included in a bill to be introduced for

consideration by the 2004 Legislature:

"Changing the actuarial cost method for all three plans—regular KPERS, KP&F, and Judges;

"Modifying the asset smoothing method;

"Reamortizing the unfunded actuarial liability if and when deemed prudent by the KPERS

Board of Trustees;

"Modifying the statutory contribution caps for local employers; and

"Separating the state and school group into two groups for actuarial purposes in calculating

individual contribution rates for the state group and for the school group.

!Regarding a long-range funding plan, the Committee regrets that a comprehensive package

was not developed during the 2003 interim. The Committee believes that HB 2014 from the

2003 Session was one step in solving the KPERS long-term funding issue. Additional steps

must be taken, including issuance of $500 million in bonds, passage of legislation to

facilitate paying bond principal and interest from employer contributions and to reimburse

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

the State General Fund for bond payments, and enactment of legislation modifying actuarial

methods and KPERS groups. Depending upon the disposition of these recommendations,

further steps may be required in developing a comprehensive plan.

Proposed Legislation: The Committee recommends two bills on this topic.

BACKGROUND

For the 2003 Interim, the Legislative

Coordinating Council (LCC) assigned one

study topic: to develop a long-range compre-

hensive funding plan to address the

unfunded liability of the Kansas Public

Employees Retirement System (KPERS). The

study would include incorporation of the

latest KPERS actuarial projections, an evalu-

ation of how the increased employer’s contri-

butions and the potential issuance of pen-

sion obligation bonds (both authorized by

the 2003 Legislature) and any changes in

non-financing elements, such as a change in

actuarial methodology, would affect the

KPERS unfunded liability.

KPERS provides retirement, disability,

and survivor benefits to more than 240,000

members and includes 1,450 participating

employers. According to the most recent

actuarial valuations, KPERS is not in actuar-

ial balance, creating long-term funding

concerns. In August of 2003, KPERS pre-

sented a report titled “Long-Term Retirement

Funding Plan” which was intended to help

develop an understanding of the problem

and possible solutions. A “Long-Term

Retirement Funding Plan: A Progress Report”

was presented in October of 2003 in order to

explain technical aspects of the long-term

funding situation and more detailed options

for addressing the issue.

According to the KPERS actuary, the

areas for review should include:

!Changing the actuarial cost method;

!Modifying the asset smoothing method;

!Reamortizing the unfunded actuarial

liability, including the reset date,

amortization method and period; and

!Modifying the statutory caps, especially

for local employers since no change has

been made.

COMMITTEE ACTIVITIES

Recent Legislation and Actuarial Projec-

tions of Fiscal Impact. KPERS staff and the

KPERS actuarial consultant provided long-

term funding projections for the state and

school group in order to estimate the fiscal

impact of 2003 legislation enacted last ses-

sion, plus other alternative options with

financial and non-financing elements. The

projections were included in a report of

“Long-Term Retirement Funding Plan: A

Progress Report.”

Projections were based on a number of

assumptions and are intended to portray

long-term trends. It was noted that the most

significant variable in the projections is

investment performance, which tends to be

volatile and not a constant amount. How-

ever, the model incorporates an assumed rate

of return equal to 8.0 percent each year, and

as actual investment returns vary from the

constant rate, the variance has a significant

impact on the model’s projections. For the

projections provided in reviewing fiscal

impacts, it was assumed that the first year’s

earnings were 12.0 percent, based on the rate

of returns this year (and not the 8.0 percent

assumed rate that is used in subsequent

years).

Legal Rights of Employees. Revisor of

Statutes staff provided a legal briefing on the

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

contractual rights of KPERS members. It was

explained that the Kansas Supreme Court

has found that the relationship of KPERS to

its members falls under the contractual

guarantees of the U.S. Constitution, thus

limiting unilateral modification in the agree-

ment to “reasonable changes” to maintain the

integrity of the system. It also was noted that

any such changes which result in disadvan-

tages to employees must be accompanied by

offsetting or counterbalancing advantages.

Noting the paucity of case law on the sub-

ject, the briefing concluded that:

!There is a contract for pensions between

the State and its employees which cre-

ates rights protected from unilateral

modification under the U.S. Constitution.

!Reasonable modification is allowed

based on Supreme Court decision;

!Reasonable modification may be made if

resulting disadvantages to employees are

counterbalanced by offsetting advan-

tages;

!Case law clearly states that the State

cannot increase employee contributions

without providing offsetting benefits;

!To justify an increase in employee con-

tributions to bolster the financial future

of the plan, there must be evidence that

the employer cannot meet its obligations

in the future and the employees’ pen-

sions are in jeopardy; and

!The employer may provide a new system

for new employees and may provide

options for existing employees to keep

what they have or opt into new provi-

sions.

KPERS State and School Group

In this section, the focus is on the state

and school group of KPERS. A later section

addresses the local group of KPERS.

Option A—Current Enhanced Contribu-

tion Rates. The 2003 Legislature in HB 2014

authorized that the statutory cap on the

employer contributions for the KPERS state

and school group will increase from 0.2

percent to 0.4 percent in FY 2006, to 0.5

percent in FY 2007, and to 0.6 percent in FY

2008 and subsequent fiscal years. The pro-

jected employer contributions from FY 2004

to FY 2033 would total $13.3 billion without

the statutory cap increase, and the higher

caps will yield almost an additional $9.3

billion, according to KPERS projections.

Revenues totaling $22.6 billion would be

generated for long-term funding of the

KPERS state and school group. Under this

projection (Option A), the KPERS state and

school group would have an unfunded actu-

arial liability of $802 million in FY 2033,

with a funded ratio of 96 percent. Contribu-

tion rates would rise to 18.44 percent in FY

2030, then decline until 2033.

Projected Fiscal Impact of HB 2014 on State Employer

Contributions (Option A): FY 2004 to FY 2033 for

State and School Group (In Billions)

Pre-HB2014

Contributions

Additional

Contributions

Authorized by HB 2014 Total

Contributions

$13.338 B $9.271 B $22.609 B

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

A series of policy options are available to

help shape a core set of variables that might

comprise a long-term plan in order to aug-

ment the enhanced employer contributions

authorized in the 2003 legislation. The first

component—bonding—was authorized by

that legislation.

Pension Obligation Bonds. The 2003

Legislature authorized in HB 2014 the issu-

ance of up to $500 million in pension obliga-

tion bonds. The projected impact of infusing

$500 million in bond money into KPERS for

investment could be improved by paying

principal and interest from non-KPERS funds

rather than paying principal and interest

from KPERS funds (including contribution

increases). The 2003 legislation did not

direct which source of money (KPERS or

non-KPERS) should be used to make the

bond payments. This policy decision would

require adding an average of $39 million

annually if payments were made from non-

KPERS money rather than KPERS money.

The benefits would be realized in the latter

part of the 30-year period and in the subse-

quent years after FY 2033.

Possible Actuarial Changes. A consider-

ation of non-financing elements, such as

actuarial changes, also were incorporated

into KPERS projections. Some statutory

changes would be required to implement

these possible actuarial changes. All three of

the following changes were recommended by

the KPERS actuary and approved by the

KPERS Board of Trustees for legislative

consideration. These actuarial changes

include modification of the actuarial cost

methods, of the asset valuation method, and

of the amortization period for the unfunded

actuarial liability. The Board has

recommended authorization be granted to

change the actuarial cost methods to the

entry age normal method for all plans; to

change the asset valuation method from a

three-year to five-year asset valuation

method for all plans; and to plan for

reamortization of the KPERS state and school

group’s unfunded actuarial liability at some

date in the future, depending upon a review

of the actual conditions in selecting the

optimal date for the change.

Actuarial Cost Method. By changing all

plans (KPERS, KP&F and Judges) to the entry

age normal (EAN) method, actuarial valua-

tions will become more comparable and

there is no material impact on long-term

funding for the other plans. Currently, each

plan uses a different method that makes

comparisons among the KPERS, KP& F and

Judges plans less meaningful. For the KPERS

state and school group, changing to the EAN

method would have an immediate impact on

funding projections that could be estimated

for December 31, 2003.

Fiscal Impact of Modifying Actuarial

Cost Method on State Contributions

State and

School Group Old

Method New

Method

Unfunded Actuarial Liability (UAL) $2.7 B $3.6 B

Funded Ratio 71% 66%

Employer Normal Cost Rate 5.28% 3.71%

Employer UAL Cost Rate 4.77% 6.19%

Total Employer Rate 10.05% 9.90%

A change in actuarial cost method will

require legislation for KPERS, including the state, school and local groups. The Board

has statutory authority to change methods for

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

the Judges and KP&F plans which the KPERS

actuary also recommends in making consis-

tent methods apply to all KPERS plans.

Asset Valuation Method. By changing

the asset valuation method to spreading

gains and losses evenly over a five-year

period, there is no material impact on long-

term funding. The current method calcu-

lates the expected value using the 8.0 per-

cent assumed rate of return, then adds one-

third of the difference between actual market

and expected values. The new method

would simplify calculations and be more

easily understood.

The Board has statutory authority to

change methods for the KPERS, Judges, and

KP&F plans, thus no legislation is required.

The KPERS actuary recommends all KPERS

plans use the same asset valuation method.

Amortization Period. Unfunded actuarial

liabilities (UAL) are amortized over a forty-

year period from June 30, 1993, for all three

KPERS plans. A thirty-year maximum amor-

tization period was incorporated into a new

rule by the Governmental Accounting Stan-

dards Board in 1996. Reamortization does

not reduce ultimate costs, but it does extend

the time period and tends to level out pay-

ments to make annual contributions more

affordable. However, total costs are

increased with reamortization by extending

payments over a longer time period. The

KPERS actuary recommends that

reamortization for the state and school group

be undertaken at the appropriate time, proba-

bly about FY 2015. All three KPERS plans

should conform to the same amortization

period.

The KPERS actuary’s recommendation, as

adopted by the Board of Trustees, states:

“Given the magnitude of KPERS’ funding

shortfall and the benefits of potential

reamortization, it merits additional consider-

ation as part of the long-term funding plan

for the state and school group. There are

various options for length of period and fixed

versus rolling amortization period. The

optimal reamortization date will vary de-

pending on the funding alternative selected;

there is not one optimal date.”

Legislation will be required to change the

statutory amortization period which is cur-

rently set at 40 years for all three plans.

Option B—Recommended Actuarial

Changes. The fiscal impact of making all

three actuarial changes (Option B) was mod-

eled, based on the assumptions that the UAL

is reamortized in FY 2015 to a fixed period of

30 years, with a floor of 10 years; the asset

valuation method is changed to five-year

averaging; the actuarial cost method is

changed to entry age normal; investment

returns are 12 percent for calendar year

2003; and investment returns average 8.0

percent after 2003.

The projected state employer payments

from FY 2004 to FY 2033 would total $13.3

billion without the statutory cap increase,

and the higher caps will yield almost an

additional $5.2 billion, according to KPERS

projections. Revenues totaling $18.5 billion

would be generated for long-term funding of

the KPERS state and school group.

Projected Fiscal Impact of HB 2014

on State Employer Contributions

(Option B): FY 2004 to FY 2033 for State

and School Group (In Billions)

Pre-HB2014

Contributions Additional Contributions

Authorized by HB 2014 Total

Contributions

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

$13.338 B $5.193 B $18.531 B

Under this projection (Option B), the

KPERS state and school group would have an

unfunded actuarial liability of $7.4 billion in

FY 2033, with a funded ratio of 69 percent.

Contribution rates would rise to 12.91 per-

cent in FY 2024, then gradually decline by

2033 to 12.65 percent. Option B would cost

approximately $4.1 billion less than Option

A by making the actuarially recommended

changes.

Projected Fiscal Impact of HB 2014

on State Employer Contributions (Option A)

and on State Employer Contributions After

Reamortization (Option B): FY 2004 to FY 2033

State and

School Group Option A Option B

Equilibrium

(Contribution) Rate 18.31% 12.67%

UAL FY 2033 $802 M $7,409 M

Funded Ratio

FY 2033 96% 69%

State Payments $22,610 M $18,531 M

Option B reduces state payments by

almost $4.1 billion over the 30-year period

when compared with Option A. The period

for amortization is extended beyond FY

2033, however. There will be additional

costs not reflected in these comparisons.

The savings should be viewed as short-term

savings because the total cost to the state will

be higher, assuming all assumptions are met,

since payments are extended beyond FY

2033. The KPERS actuary points out that

this method tends to flatten out contribution

rates earlier and make employer payments

more affordable. Nearly all retirement plans

reamortize, especially when the remaining

amortization period becomes very short. In

the case of the KPERS state and school

group, the KPERS actuary recommends

consideration of implementing this option at

some future date.

Combining Alternatives into New Op-

tions. The options considered for the state

and school group previously included:

!Option A: Current Law for Contributions,

No Bonds.

!Option B: Current Law for Contributions,

No Bonds, with Reamortization.

The projected impact of infusing $500

million in bond money into KPERS for in-

vestment was considered without

reamortizing and with reamortizing, as well

as by repaying bonds with KPERS money

and with non-KPERS money. Four alterna-

tives were presented, two that include bonds

with Option A and two that include bonds

with Option B (and reamortization):

!Option J: Current Law for Contributions,

with Bonds and KPERS Repayment.

!Option K: Current Law for Contributions,

with Bonds and non-KPERS Repayment.

!Option H: Current Law for Contributions,

with Bonds, KPERS Repayment,

Reamortization.

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

!Option I: Current Law for Contributions,

with Bonds, non-KPERS Repayment, Reamortization.

Projected Fiscal Impact of HB 2014 plus Reamortization on State Employer

Contributions (Option A) and on State Employer Contributions, with

Bonds (Option J & K): FY 2004 to FY 2033

State and

School Group Option A Option J Option K

Equilibrium Rate 18.31% 19.98% 14.76%

UAL FY 2033 $0.8 B $1.2 B $0.6 B

State Payments $22.6 B $23.3 B $21.4 B

Compared with Option A, state payments

would increase under Option J and a modest

decrease of $1.2 billion in state payments is

noted in Option K which also produces a

lower equilibrium rate. Without

reamortization, none of these alternatives

reduce state payments more than $1.2 billion

over the 30-year period. Contribution rate

increases average $37.9 million to $55.8

million annually with these three alterna-

tives.

Two other bond options, when

augmented by the enhanced employer pay-

ments, include reamortization (Options H

and I) and may be contrasted with Option B

that relies only on increased employer pay-

ments plus reamortization.

Projected Fiscal Impact of HB 2014 plus Reamortization on State Employer

Contributions (Option B) and on State Employer Contributions plus

Bonds (Option H & I): FY 2004 to FY 2033

State and

School Group Option B Option H Option I

Equilibrium Rate 12.67% 12.65% 11.13%

UAL FY 2033 $7.4 B $6.6 B $5.9 B

State Payments $18.5 B $18.4 B $17.8 B

The comparison of options indicates that

each alternative has the potential to reduce

the amount of state payments by $4 billion to

almost $5 billion in the period ending with

FY 2033. Reamortization causes an increase

in unfunded liability by extending the period

beyond FY 2033. However, it reduces the

average annual increase required in state

payments to between $29.0 million and

$33.0 million annually.

Other Alternatives. In addition, there

were other alternatives that included such

elements as additional employer contribu-

tion rate increases, employee contribution

rate increases with enhanced benefits, lower

benefit tiers for future employees, self-

funded cost of living adjustments for future

retirees, and cost of living adjustments for

current retirees. None of these alternatives is

addressed in this analysis in order to initially

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

focus on the core options that may be ad-

dressed in any long-term plan. These other

alternatives may be added to a core plan.

Summary and Conclusions for KPERS

State and School Group. KPERS listed a

number of factors to consider in evaluating

the options: funded ratio, UAL amount,

contribution rate, equilibrium date/rate,

increase in annual contributions, total con-

tributions for multiyear period, and present

value of multiyear contributions. The fol-

lowing table summaries some of the factors

in conjunction with certain options.

Comparison of Options for KPERS

State Employer Payments and Contributions

State and

School Group Option A Option J Option K Option B Option H Option I

Equilibrium Rate 18.31% 19.98% 14.76% 12.67% 12.65% 11.13%

UAL FY 2033 $0.8 B $1.2 B $0.6 B $7.4 B $6.6 B $5.9 B

Funded Ratio FY 2033 96% 95% 98% 69% 73% 76%

FY 2033 Rate 17.71% 20.16% 13.81% 12.65% 12.47% 10.87%

Total State Payments $22.6 B $23.3 B $21.4 B* $18.5 B $18.4 B $17.8 B*

Net Difference to A -- $ 0.7 B $ (1.2) B $ (4.1) B $ (4.2) B $ (4.8) B

Bonds No Yes Yes* No Yes Yes*

Reamortize No No No Yes Yes Yes

*assumes non-KPERS repayment of bonds with those funds included in state payments.

First, the six options may be contrasted

in terms of contributions (state payments)

over the 30-year period. Option A is current

law, with an estimated cost of $22.6 billion

without reamortization and without issuing

any pension obligations for long-term fund-

ing. Bonds without reamortization add $700

million to state payments (Option J), while

bonds repaid with non-KPERS funds and

without reamortization (Option K) produce

$1.2 billion in state contribution savings.

Reamortization produces $4.1 billion in

savings for state payments without issuing

bonds (Options B), and extends the time

period for payments beyond 30 years. When

reamortization is combined with bonds paid

by KPERS funds (Option H), savings in state

payments total $4.2 billion. A combination

of bonds paid with non-KPERS funds and

reamortization (Option I) produces the great-

est savings with $4.8 billion less in state

payments over the 30-year period.

Option I has the greatest savings potential

over the 30-year period. It also minimizes

the future state payments after FY 2033. The

contribution rate for Option I is 10.87 per-

cent, which is 1.6 percent less in FY 2033

than the next lowest rate of 12.47 percent for

Option H. The difference in cost to the state

is approximately $102 million for one year in

FY 2033. In order to implement Option I, the

state would have to make bond payments for

principal and interest with non-KPERS funds

for 30 years. The total non-KPERS expendi-

tures would be approximately $1.108 billion

over 30 years. Even with making the bond

payments with non-KPERS funds, Option I

costs less in terms of total state payments

than any other option over the same 30-year

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

period, with estimated expenditures of $17.8

billion.

The other evaluation factors indicate

Option I makes a positive contribution to-

ward a long-term funding plan. The funded

ratio never drops below 60 percent over the

30-year period, and rises to 76 percent in FY

2033. The UAL amount rises from $2.2

billion to slightly less than $6.5 billion, but

begins to decline after 2025. The contribu-

tion rates flatten out after reamortization in

FY 2015, generally in the 11 percent range

before starting to decrease in the 2030s. No

other option produces lower contribution

rates. The equilibrium date occurs in FY

2018, the earliest of any option. The in-

creases in annual state payments average

$29.0 million per year for Option I, while the

next lowest average is found in Option H

with $32.5 million annual increased pay-

ments. Current law (Option A) will require

average annual increased state payments of

$48.4 million.

Options B and H each produce more than

$4 billion in potential state contribution

savings over the 30-year period. The differ-

ence in savings added by bonds is $88 mil-

lion for Option H. The average annual in-

crease in state payments in Option H with

bonds is $32.5 million, while the average

increased amount for Option B is $33.0

million. Option H improves the long-term

funding for KPERS state/school more than

Option B when evaluated by the funded

ratio, UAL amount, FY 2033 contribution

rate, and equilibrium date/rate. Paying for

bonds with KPERS funds reduces the addi-

tional positive fiscal impacts noted in Option

I. The FY 2033 contribution rate for Option

H requires $102 million in additional state

payments than Option I. With

reamortization, each option will have contin-

uing payments in FY 2034 and beyond for

normal cost and unfunded liability associ-

ated with the KPERS state and school plan.

Separating the State and School Group.

KPERS presented information about the

fiscal impact of reestablishing a state group

and a school group. Prior to 1987, there

were separate nonschool and school groups.

Included in the nonschool group until 1988

were the local units of government. A local

group was established in 1988, the year after

the school group was added to the nonschool

group in 1987.

The KPERS actuary prepared the Decem-

ber 31, 2002, valuation with information

about separate state and school groups. That

information is extended in the KPERS report

that separates state and school into separate

groups for other comparative purposes.

Projected Fiscal Impact of HB 2014 on State and School Combined

(Option B) and on a Separate School Group and State Group

(Option S): FY 2004 to FY 2033 (In Billions)

Pre-HB 2014

Contributions

Additional

Contributions

Authorized by

HB 2014 Total

Contributions

State and School Group $13.338 $5.193 $18.531

School Group $9.981 $5.141 $15.122

State Group 3.357 (0.011) 3.346

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

TOTAL $13.338 $5.130 $18.468

The marginal difference in costs for

reamortization of the State and School Group

(Option B), compared with a reamortized

School Group and a State Group without

reamortization (Option S), is shown. Savings

of $63 million in state contributions over the

30-year period appear possible when

separating the state and school groups.

Projected Fiscal Impact of HB 2014 in Option B for State/School

Group and After Split of the State Group and School Group

in Option S: FY 2004 to FY 2033

Option B Option S

Equilibrium (Contribution) Rate 12.67%

State/School 8.96% State

14.31% School

UAL FY 2033 $7,409 M

State/School $70 M State

$7,878 M School

Funded Ratio FY 2033 69%

State/School 99% State

58% School

Additional comparisons between options

are presented in terms of equilibrium rate,

unfunded actuarial liability, and funded

ratio. When considered as a separate group,

the state component would reach equilib-

rium at 8.96 percent under current law, and

by FY 2033 have an unfunded actuarial

liability of $70 million, with a funded ratio

of 99 percent. The School Group would fare

much worse by itself and not part of the

combined group.

KPERS Local Group

The KPERS local group has a lesser

problem in long-term funding than the

KPERS state and school group. The 2003

Legislature took no action to increase em-

ployer contributions or to raise an existing

statutory cap on contribution increases. The

KPERS actuary noted that the same problem

of long-term funding, only to a lesser degree,

impacts the KPERS local group. A need to

confront the unfunded actuarial liability

applies to the local group of KPERS, and the

KPERS actuary recommended that the Legis-

lature also address this issue.

A statutory cap limits annual local contri-

bution rate increases to no more than 0.15

percent. The KPERS actuary recommends an

adjustment or elimination of the cap since

the model (Option L1) that is based on cur-

rent law does not produce an equilibrium

contribution rate in the next 30 years. No

modification of the local cap was adopted

last Session when the KPERS state and

school group‘s cap was changed in HB 2014.

The KPERS actuary reviewed three alterna-

tives (Options L2, L3, L4).

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

Projected Fiscal Impact on Local Employer Contributions (Option L1)

Compared with Modifications of Contribution Rates

(Options L2, L3, L4): CY 2003 to CY 2032

Local Group Option L1 Option L2 Option L3 Option L4

Equilibrium Rate None 5.44% 8.32% 7.60%

Equilibrium Date None CY 2005 CY 2013 CY 2009

UAL FY 2033 $2.6 B None $32 M $12 M

Funded Ratio FY 2033 65% 100% 100% 100%

Each of the alternatives would produce a

fully funded local plan by CY 2032. Option

L2 would raise the contribution rate

immediately to the actuarially required

amount. Over 30 years Option L2 requires

the least amount of average annual increase

(after the first year spike) and of total contri-

bution increase, but has higher contributions

required for the first four to six years. Op-

tion L3 has the same scheduled increases

that was adopted for the state and school

group last year. Option L4 is an accelerated

version of L3.

The Committee recognizes there has been

no testimony from local units as to which

alternative option would be preferred. There

are variances in one-time and in annual cost

increases that when spread across all local

participating governments may or may not be

considered significant impacts. Further

hearings will be require during the 2004

Session to determine the option preferred by

local units of government.

Further Deliberations on January 7, 2004

A special meeting of the Committee was

convened for the purpose of considering a

single agenda topic: reconsideration of the

Committee recommendation that pension

obligation bonds should be repaid with non-

KPERS money. The meeting considered

whether bond principal and interest for the

$500 million in bonds should be paid from

KPERS employer contributions. That issue

was raised in conjunction with the schedul-

ing of a State Finance Council meeting, and

the Committee’s reconsideration of its recom-

mendation was suggested as a step to pre-

cede a State Finance Council meeting.

The Senate President pointed out an

interim recommendation from the Legislative

Budget Committee that the state-paid KPERS

school employer contribution ought to be

included as part of the school finance for-

mula in order to be reflected in base state aid

per pupil. Currently, the money is appropri-

ated from the State General Fund to the

Department of Education and collected

quarterly by KPERS from the state agency. In

the future, the money could be distributed to

school districts, and then collected by

KPERS from the school districts.

The Director of the Budget briefed the

Committee on the Governor's position con-

cerning the $500 million bond issue. It was

indicated that the Governor does not support

paying the additional money from the State

General Fund for bond principal and inter-

est. Instead, the Governor asked for consid-

eration of paying bond principal and interest

from KPERS employer contributions. The

Budget Director explained that in making the

Governor's plan work, two things needed to

happen. First, a State General Fund appro-

priation was needed to repay bond principal

and interest in order to get the best bond

rating. Second, authority needed to be dele-

gated to KPERS in using employer contribu-

tions to repay the State General Fund for the

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

principal and interest payments on the

bonds. The Budget Director said legislation

will be required to implement the Governor's

funding plan. It was indicated that if the

Committee reconsidered its earlier funding

position, then adopted the Governor's recom-

mendation for funding and recommends a

bill to implement the plan, a State Finance

Council meeting could be called during the

first week of the 2004 Session (that begins

January 12, 2004) to authorize issuing bonds,

subject to enactment of suitable legislation.

The President of Kansas Development

Finance Authority (KDFA) presented new

bond data to demonstrate the current and

projected future markets for selling bond

issues, and the possible interest rate impacts

of bond costs in future markets.

The KPERS Executive Director presented

new estimates of fiscal impact if bonds were

repaid from employer contributions for the

State and School groups combined, and for

the entities if separated into state and school

groups.

The Committee discussed the impact of

changing from its initial recommendation of

December 1, 2003, that non-KPERS funds be

used to repay bond principal and interest, to

the Governor's recommendation of paying

from KPERS employer contributions. When

asked by the Committee, the KPERS Execu-

tive Director reported an estimated net pres-

ent value of the Committee's initial recom-

mendation would be approximately

$400,000,000, while the Governor's plan to

pay out of employer contributions would

reduce the amount to a preliminary esti-

mated net present value of $100,000,000, a

difference of approximately $300,000,000 in

net value to KPERS.

CONCLUSIONS AND RECOMMENDATIONS

The Joint Committee on Pensions, Invest-

ments, and Benefits makes the following

recommendations.

!The Committee recommends favorably to

the State Finance Council the issuance of

$500 million in pension obligation bonds

authorized by Section 16 of Chapter 155,

2003 Session Laws of Kansas. This rec-

ommendation fulfills the provision of

Section 16(f) of Chapter 155 that “No

bonds shall be issued pursuant to this

section prior to the review and recom-

mendation to the State Finance Council

of such issuance by the Joint Committee

on Pensions, Investments and Benefits.”

The Committee in its initial recommen-

dation stressed the fact that this is only one

piece of the ultimate solution dealing with

the unfunded actuarial liability. The initial

Committee’s recommendation of December 1,

2003, was adopted in conjunction with

materials provided by the Kansas Develop-

ment Finance Authority dated November 25,

2003, with specific reference to the amortiza-

tion schedule on pages 10-11 of that docu-

ment that includes capitalized interest for

three years preceding payments of both

principal and interest. The net proceeds to

KPERS would be approximately $455 million

in this schedule, with the capitalized interest

taken out of the par amount of $500 million

in bonds. Under this option, it was not

anticipated that KPERS would be responsible

for repayments. The burden would fall to

the State General Fund or some other fund-

ing source. The Committee considered

tobacco revenues as an alternative source,

but that funding plan did not gain approval.

At its special meeting of January 7, 2004,

the Committee reconsidered its position on

using non-KPERS funds to repay bond prin-

cipal and interest. The Committee adopted

a new funding scheme preferred by the

Governor that principal and interest pay-

ments for bonds would be financed by

KPERS employer contributions. The Com-

mittee recommends:

"after reconsidering its action of Decem-

ber 1, 2003, that the principal and inter-

est for bonds may be paid from em-

ployer contributions to reimburse the

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

State General Fund for initial payments

of bond costs; and

"that legislation be introduced to allow

use of employer contributions to KPERS

for reimbursing the State General Fund

for bond payments.

The Committee understands that this

payment plan may be revised at a later date

if the State General Fund is better able to

sustain the annual costs of principal and

interest on $500 million in bonds. In order

to secure the best rating for the bonds, initial

payments must be from the State General

Fund. Under this recommended plan, a

portion of the KPERS state and school em-

ployer contributions may be used to reim-

burse the State General Fund for bond costs.

Legislation is required to permit this change

in the use of KPERS employer contributions

made on behalf of state and school employ-

ees.

!The Committee recommends the following

items be included in another bill to be

introduced for consideration by the 2004

Legislature:

"Changing the actuarial cost method for

all three plans—regular KPERS, KP&F,

and Judges.

"Modifying the asset smoothing method.

"Reamortizing the unfunded actuarial

liability if and when deemed prudent

by the KPERS Board of Trustee.

"Modifying the statutory contribution

caps for local employers.

"Separating the state and school group

into two groups for actuarial purposes

in calculating employer contribution

rates separately for the state group and

for the school group.

Regarding the statutory contribution cap

increase for local employers, the Committee

recognizes there has been no testimony from

local units as to which alternative option

would be preferred. There are variances in

one-time and in annual cost increases that

when spread across all local participating

governments may or may not be considered

significant impacts. Further hearings will be

require during the 2004 Session to determine

the option preferred by local units of govern-

ment.

!Regarding a long-range funding plan, the

Committee regrets that a comprehensive

package was not developed during the

2003 interim. The Committee believes

that HB 2014 from the 2003 Session was

one step in solving the KPERS long-term

funding issue. Additional steps must be

taken, including issuance of $500 million

in bonds, passage of legislation to facili-

tate paying bond principal and interest

from employer contributions and to reim-

burse the State General Fund for bond

payments, and enactment of legislation

modifying actuarial methods and KPERS

groups. Depending upon the disposition

of these recommendations, further steps

may be required in developing a

comprehensive plan during the 2004

interim.

The estimated fiscal note for a $500 mil-

lion bond issue as originally recommended

by the Committee on December 1, 2003, had

an estimated cost of approximately $1.133

billion in principal and interest payments,

and a net present value benefit to KPERS of

approximately $455.4 million in bond

money. The recommended actuarial changes

over the same 30-year period have the poten-

tial of saving the state more than $4.0 billion

in contributions.

For the January 7, 2004, Committee meet-

ing, KDFA provided new estimates for bonds

paid with KPERS funds, including the bond

costs and the net present value to KPERS. In

materials dated December 10, 2003, three

alternative scenarios were presented by

KDFA, with net present values to KPERS of

$100.2 million at 6.0 percent total interest

3-14

Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

cost, of $88.6 million at 6.25 percent total

interest cost, and of $76.3 million at 6.5

percent total interest cost. The bond costs

for principal and interest ranged from $1.178

billion at 6.0 percent to $1.233 billion at 6.5

percent, assuming no capitalized interest.

Updated Fiscal Note

In materials provided January 13, 2003,

KPERS estimates the fiscal impact of alterna-

tive bond issues, with Option A paid with

non-KPERS funds and Option B paid from

KPERS employer contributions. Option B

reflects updated information in order for the

bond issue structure to be comparable with

the Option A bond issue and both issues

reflect a shared issue date. The following

table shows a comparison of the two options

for issuing a par value of $500 million in

pension obligation bonds. Option A requires

more capitalized interest and thus reduces

the net amount to KPERS in the short-term.

However, the greater present value to

KPERS, and more dramatically, the maxi-

mum long-term accrued value to KPERS is

achieved with Option A.

Option A

Non-KPERS

Payments

Option B

KPERS

Payments Difference

Net Amount to KPERS $455,419,787 $494,759,508 $(39,339,721)

Debt Service Costs 1,243,298,721 1,173,552,092 69,746,629

Present Value 455,419,787 99,627,014 355,792,773

Total Accrued Value 4,701,884,117 1,028,577,783 3,673,306,334

WORKING GROUP

Report of the

School-Based Budget Working Group

to the

2004 Kansas Legislature

CHAIRPERSON: Senator Bill Bunten

OTHER MEMBERS: Senators Derek Schmidt and Chris Steineger; Representatives Carol

Edward Beggs, Marti Crow, and Tim Owens

NON-LEGISLATIVE MEMBERS: John R. Atchley, Mike Jones, Kevin Murphy, Max Prosser,

and Paul Fink

STUDY TOPICS

Status Report

February 2004

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Kansas Legislative Research Department 2003 Pensions, Investments, and Benefits

4-1

Kansas Legislative Research Department 2003 School-Based Budget

School-Based Budget Working Group

STATUS REPORT

CONCLUSIONS AND RECOMMENDATIONS

This is a status report prepared to describe the activities of the School-Based Budget Working

Group through its meeting of December 9, 2003. The Group has one more meeting date

authorized and will meet for the purpose of considering its final recommendations to the 2004

Legislature. It also is hoped that a recommended format for building-based budgeting can be

completed using actual data from a school district.

Proposed Legislation: None

BACKGROUND

The School-Based Budget Working Group

was appointed by the Legislative Coordinat-

ing Council (LCC) and is comprised of six

legislators and five private-sector individu-

als. The LCC authorized the study to de-

velop a school-based and zero-based budget

model for potential use by school districts in

Kansas. The purpose of the study was to

determine the following:

!If a change to school-based budgeting

would assist citizens to better understand

school district finance;

!What benefits and problems would result

if school-based budgeting were the policy

of the state; and

!What would be the fiscal impact of im-

plementing school-based budgeting on

school districts and the state.

The Chairperson of the Group, Senator

Bill Bunten, added his own goal to the LCC

charge, which is the development of a

school-based budget format that will allow

board members, patrons, and all other inter-

ested parties to better understand school

budgets. The focus of the Group was on

formatting and coding budgets and not on

school funding in general. The Group took

note of the fact that many school districts

already do site-based budgeting, but there is

a lack of uniformity among districts as to

what is reported.

GROUP ACTIVITIES

Input by the State Department of Educa-

tion. The Group was assisted in its work by

Dale Dennis, Deputy Commissioner, and

Veryl Peter, Director of School Finance, State

Department of Education. They reviewed

current procedures and documents related to

budget preparation at the school district

level. They explained that the forms filled

out by school districts are intended to com-

ply with federal data collection requirements

and that the State Department of Education

extrapolates information from the budgets

and transmits it to federal agencies.

The school district budget preparation

cycle typically begins in December, although

the process may vary from district to district,

depending on local board preferences and

district size. The first step often is a request

by the superintendent for site-based budgets.

If site-based budgets are prepared, the Group

was informed that they generally deal with a

limited number of expenditures–those that

are under the control of the building princi-

pal–and usually consist of expenditures for

travel, supplies, and equipment. The prelim-

inary budget is reviewed by the board during

4-2

Kansas Legislative Research Department 2003 School-Based Budget

the spring, but actual preparation cannot

begin until the Legislature has adjourned in

May and actual appropriations for school

districts for the upcoming fiscal year, which

begins July 1, are known. Public hearings on

the proposed budget usually are conducted

in August and the final budget is submitted

to the State Department of Education and the

county clerk in the district on or before

August 25.

A concern to some members of the Group

is the fact that school districts, which begin

the fiscal year on July 1, do not operate with

approved budgets until August. According

to the State Department of Education staff,

under current law, districts have no other

alternative. They explained that, until the

Legislature adjourns, local boards do not

know how much money they actually will

have and cannot begin final budget prepara-

tion or complete salary negotiations with

staff. Another variable is student enroll-

ment, which is not know until the official

September 20 enrollment count. Finally,

school districts do not know until July what

their carry-forward balances will be nor have

assessed valuations been certified by county

officials for purposes of determining mill

levy rates. In light of these several problems

that are involved in moving the budget

preparation process up, the Group decided to

drop consideration of changing the budget

preparation time line.

In an effort to make information about

school district budgets easier to understand

and more accessible, the 2003 Legislature

enacted legislation that requires school

districts to prepare a document entitled

School District Budget Profile. The profile is

a summary of pertinent information about a

school district, including enrollments, ex-

penditures and revenues, mill rates, and

other information. In addition, Kansas State

Department of Education Websites are given

that allow access to reports on attendance,

violence, number of personnel and salaries,

graduation rates, and student scores on state

assessments. Depending upon the report, the

information is aggregated at the state, school

district, or school building level. The pro-

files are automatically generated when the

school district budget is transmitted to the

State Department. The 2003 Legislature also

required the preparation of Budget at a

Glance, a condensed version of the School

District Budget Profile. Both documents are

available on the State Department of Educa-

tion’s Website and in the district office and

must be made available upon request.

Technical Aspects of Implementing

Building-Based Budgeting. Part of the

Group’s charge was to consider problems

implementing building-based budgets. The

only attempt that previously had been made

to estimate possible costs of implementing a

building-based budgeting system had been

made the prior year by the School District

Budget Task Force, which made a report to

the Legislature in February 2003. The Task

Force had been appointed to, among other

things, consider the response of the State

Department of Education to an audit by the

Legislative Division of Post Audit and to

consider the feasibility of implementing

building-based budgeting.

The Task Force estimated it would cost

$5.0 million to implement building-based

budgeting, with costs likely being less in

many districts after the first year. The figure

was based on estimates made by individual

Task Force members for computer and staff-

ing expenses in their districts and ranged

from $1,000 for a district that had approxi-

mately 150 students to $400,000 for the

state’s largest district (Wichita), which had

49,000 students. The State Department of

Education maintained that one-third of the

school districts in the state that are small

(fewer than 400 students) would have diffi-

culty implementing the new format because

of a lack of computer and staff resources.

The Group member from USD 501 (Topeka)

reported that the Topeka school district has

purchased a new computer system which

allows it to allocate costs at the building

level, at a total cost of $2.5 million.

4-3

Kansas Legislative Research Department 2003 School-Based Budget

To address the matter of possible imple-

mentation of a building-based budget pro-

posal, the Group met with two contractors

who currently provide computer budgeting

services to Kansas school districts and with

a representative of International Business

Machines (IBM). John Staton, Management

Advisory Computer Systems (Greenbush),

represents an interlocal that provides com-

puter services to 90 small school districts.

He told the Group the major problem with

any proposal in terms of cost, implementa-

tion, and maintenance would be due to

coding–making sure that definitions were

uniformly understood and providing the staff

resources to do the work. He estimated that

ongoing additional costs for personnel would

be $4.2 million.

Depending upon the extent of the pro-

posal, other costs to implement a new system

could range from minimal to several hun-

dred thousand dollars per district. In Mr.

Staton’s opinion, the format being consid-

ered by the Group, which is an adaptation of

existing federal and state reporting require-

ments, could be implemented with some

modification by computer systems presently

in use by Kansas school districts and the

addition of one staff position per district to

handle the increased workload.

Roger Hack, Data Team Systems, Inc.,

represents a company that provides fund

accounting, payroll, human resources, fixed

asset, and other services to two-thirds of the

school districts and half of the educational

cooperatives in the state. He told the Group

that two types of costs must be considered:

one is the increased personnel cost to ensure

initial compliance with a new requirement

and the ongoing need to maintain the new

coding system. Mr. Hack was not able to

estimate the personnel costs, but did say that

the greater the level of detail required, the

greater the human cost to code, analyze, and

report the data. The other cost is the me-

chanical or computer expense to convert to

a new system, which Mr. Hack said would be

minor compared to the on-going cost of

labor.

It is Chairman Bunten's intention that,

since the site-based format under consider-

ation by the Group is based on the budget

format and coding system required by the

State Department of Education for use at the

district level, the coding changes necessary

to implement building-based budgeting

would require only the addition of a number

for each individual school. The coding, with

this exception, would be unchanged from

what presently is in use.

Regarding additional personnel, Chair-

person Bunten believes that all districts

presently have staff assigned to code in-

voices, and the addition of a number indicat-

ing the school or program to which the

expense is to be charged should not require

additional staff.

Gary Sanders, Business Development

Division of IBM, discussed the prospect of

centralizing or consolidating school district

budgeting at the state level. He said it would

be a huge undertaking, but would have the

advantage of economy of scale. He said that,

with regard to the technology, the capacity

exists to undertake such a project. He said

the main goal would be to link reports at the

various levels–individual school, individual

district, and state–so that data would transfer

from one level to the next.

Mr. Sanders told the Group that all com-

ponents of such an integrated system would

have implementation and ongoing costs, but

he was unable to make an estimate of what

those costs would be without additional

study. He said it is not uncommon for IBM

to utilize existing staff and equipment when

it undertakes a project–either using the

personnel and equipment at the outlying site

or moving it to the central location.

Public Input. Input was sought from

representatives of school districts and educa-

tional organizations on items related to the

Group’s activity, which was to develop a

building-based budget format and consider

problems associated with the implementa-

tion of site-based budgeting. The conferees

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Kansas Legislative Research Department 2003 School-Based Budget

had as their point of reference a proposed

format, described later in this report, that

had been developed over the course of sev-

eral meetings.

Diane Gjerstad, USD 259 (Wichita), dis-

cussed the proposed format from the per-

spective of the largest school district in the

state. She pointed out both the magnitude

of the proposed project for a district with

49,000 students and more than 100 buildings

and the fact that cite-based budgets prepared

in accordance with the current budgeting

time line would only be estimates and, in her

opinion, of little value. She contended that

the size of the budget the Wichita district

would prepare if the format were adopted

would exceed 1,100 pages.

According to Ms. Gjerstad, the discretion

schools have to spend money at the building

level is confined mainly to such things as

supplies and support staff. Major expendi-

tures, primarily for regular staff salaries and

benefits, are negotiated at the district level.

Ms. Gjerstad told the Group that the Wichita

school district currently spends about

$80,000 in overtime pay for staff to meet the

August 25 budget preparation deadline. She

said that cost would increase sharply if the

proposed building format were required and

the district’s computer system would not be

able to handle the increased workload. In

light of these difficulties, she questioned

whether adoption of a building-based format

would be worth the additional time, effort,

and money.

Jim Edwards, Kansas Association of

School Boards, told the Group that public

schools already have more reporting require-

ments than any other public entity. He

reviewed major components of the proposed

format and said the information already is

available, but is used for management pur-

poses, not for public information unless

requested. He said members of the public

who are interested in such detail could

request it, but questioned whether the public

would find the information helpful. He said

most districts already have some sort of

building-based budgeting or tracking system,

which has been developed to meet the needs

of local boards and communities.

Beth Reust, Superintendent of USD 380

(Vermillion), represented the United School

Administrators. She opposed building-based

budgeting for two reasons. First, in her

district, there are four attendance centers

housed in two buildings. She said teachers

move from one attendance center to another

within and between buildings and it would

be difficult to determine expenditures on a

building basis. She said the buildings also

are served by different phone companies

with noticeably different price structures.

She said comparisons between the buildings

would be misleading because the cost of

phone service from different providers is not

something the building principals can con-

trol.

Second, Ms. Reust said almost no interest

has been shown by the public in budget

matters in a number of years, in spite of the

district’s efforts to publicize board meeting

and budget materials. She questioned why

anyone thinks it is necessary to provide even

more budget detail when there seems to be

no interest for it.

John Severin, Superintendent of USD 415

(Hiawatha), told members that building-

based budgeting could lock in expenditures

and limit districts’ flexibility to move money

where it is needed. His concerns with the

proposal included the following:

!Purchases made at the district level, such

as for supplies, would have to be ac-

counted for at the building level, causing

an increase in staff time and money.

!Expenditures for building maintenance

are made both at the building and district

level, resulting in an incomplete and

inaccurate picture of the cost to operate

an individual building.

!Decisions regarding salaries are not final

when the budget is prepared and it

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Kansas Legislative Research Department 2003 School-Based Budget

would be difficult to break the informa-

tion down at the proposed level of detail.

!Sponsoring districts in a special educa-

tion cooperative would be responsible for

preparing a budget for special education

that takes into account expenditures by

participating districts, at an increase in

staff time and resources.

!Coding changes would have to be pro-

grammed into existing computer systems

and staff would have to go back through

vouchers from prior years to recreate

historical information required by the

proposed format.

!Differences in staff salaries due to experi-

ence and education would limit compa-

rability between and among buildings.

!Cuts in staffing in recent years due to

reduced funding makes this an inoppor-

tune time to add an additional reporting

requirement to schools.

!Few people seem interested in school

district budgeting, even though districts

have increased the amount of informa-

tion they report and have made efforts to

make the information more user friendly.

Proposed Format. The Group spent most

of its time developing a proposed building-

based budget format and coding system. The

format that evolved is based on existing

federal and state budget reporting require-

ments that are imposed on school districts.

The purpose of the Group was to take these

existing requirements and apply them, inso-

far as possible, to the individual building

level so that site-based budgeting would

complement already-existing budgets pre-

pared at the district level. This purpose was

considered to be advantageous because it

would create a unitary system comprised of

detail aggregated at the building, district, and

state levels and it would be built on codes

that already are in use by school district

personnel.

Special Education. One of the most

difficult decisions the Group made was how

to deal with expenditures for special educa-

tion. Provision of special education services

is mandated by both state and federal law

and accounts for approximately one-third of

total educational expenditures. Special

education costs are borne primarily by a

state categorical aid program, transfers for

special education from school district gen-

eral funds, and, to a lesser degree, from

federal funds. Services are provided by a

variety of methods, described below, which

make accounting for expenditures on a

building-by-building basis difficult:

!Some school districts have joined to form

cooperatives, or associations of school

districts, that pool resources and provide

services to members. One district serves

as the cooperative’s fiscal agent and hires

and pays for special education teachers,

who provide services to member dis-

tricts. Participating districts transfer

money from their special education

funds to the sponsoring district to reim-

burse it for services provided.

!Some school districts receive special

education services from an interlocal, a

separate legal entity that hires and pays

for special education teachers and is

reimbursed for services by districts that

purchase the service. Interlocals origi-

nated as an alternative to cooperatives

because some districts did not want to

assume the responsibility for hiring

teachers and providing special education

services to participating districts. Ap-

proximately 250 school districts receive

special education services from either

cooperatives or interlocals.

!Some school districts operate their own

special education programs, using their

own teachers and other resources.

It became apparent to the Group that

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Kansas Legislative Research Department 2003 School-Based Budget

coding special education services at the

building level would be difficult because

there is no standard way services are deliv-

ered. In addition to differences among dis-

tricts due to cooperatives, interlocals, and

stand-alone programs, some districts trans-

port students to other buildings and to other

districts, some districts transport teachers

from school to school and from district to

district, and public schools are required to

provide services to private school special

education students. All of these variations

make it difficult to code special education

costs on a building basis so that the informa-

tion is comparable from one district to an-

other. For these reasons, the Group made

the decision not to report special education

expenditures at the building level, but in-

stead to do the following:

!Those districts that purchase special

education services from a cooperative or

interlocal would show the expenditure as

a transfer made at the district level in the

central office budget.

!Interlocals and the sponsoring district of

a cooperative would prepare a budget

showing expenditures for special educa-

tion, using the same format and coding

developed by the Working Group for

building-based budgets.

!Those school districts that provide their

own special education services and are

not members of an interlocal or coopera-

tive would prepare a special education

budget showing expenditures on a

district-wide basis, using the format and

coding developed for building-based

budgets.

Building-Based Funds and Programs. As

noted, the aim of the Group was to report as

much information as possible at the building

level. It was apparent that some expendi-

tures could not easily be apportioned to

buildings, such as special education, or were

not meaningful when reported at the build-

ing level, such as expenditures to operate the

district’s central office. The Group deter-

mined that expenditures from the following

funds would be reported for each building:

General, supplemental general, bilingual

education, vocational education, professional

development, and federal. Expenditures for

central administration and special education

would be shown at the district level, using

the same format as for a building. There

would be no change in how districts pres-

ently format expenditures from the following

funds, which are expended at the district

level:

Adult Education

Adult Supplementary Education

Parent Education

Driver Training

Food Service

Capital Outlay

Summer School

Extraordinary School Programs

Special Liability Expense

Extraordinary Growth Facilities

Contingency Reserves

Textbook and Student Materials

Transportation

Data Processing

Bond and Interest

Gifts and Bequests

Other major decisions agreed to by the

Group include the following:

Salaries and Wages. Salaries for various

categories of employees (for example, admin-

istrators, teachers, other certified employees,

and noncertified employees) would be

shown for the following funding categories,

with the number of full-time equivalent

(FTE) employees indicated: general and

supplemental general fund, other district

funds, and federal funds. This information

also would be shown as a grand total. For

purposes of showing salary expenditures

only and not funding categories, within each

employee category various employee classifi-

cations, such as Principal, Assistant Princi-

pal, and so forth, would be shown. Salaries

for employee fringe benefits would be shown

by employee category (administrators, teach-

4-7

Kansas Legislative Research Department 2003 School-Based Budget

ers, and so forth) as a total expenditure and

broken down by funding category.

Central Office. Expenditures of the cen-

tral office of a school district would be

shown using the same format and coding as

the building-based budget.

Operations and Maintenance. Any ex-

penditure for operations and maintenance

which is made from one of the building-

based funds (general, supplemental general,

bilingual education, vocational education,

professional development, and federal)

would be coded as a building expenditure.

Any expenditure for operations and mainte-

nance which is made from a district-level

fund would be coded as a district expendi-

ture.

CONCLUSIONS AND RECOMMENDATIONS

A final recommendation will not be made

until the Group holds its last meeting. How-

ever, the Group did address one issue

brought to its attention by a member who

was concerned that the format under consid-

eration would aggregate salaries of staff into

categories, such as “administrators” and

would not allow the public to locate the

salary, including fringe benefits, of individ-

ual employees.

To address this concern, the Group rec-

ommends that KSA 2003 Supp. 72-8247 be

amended to add “fringe benefits” to the

salary information that is required to be

reported. The law that would be amended

was enacted by the 2003 Legislature and

requires each local board of education to

provide to a newspaper of general circulation

a statement showing the name, position, and

salary of the superintendent, deputy superin-

tendents, assistant superintendents, direc-

tors, principals, and any other administrator

with district-wide responsibilities. Publish-

ing the information is at the discretion of the

newspaper. The requirement will sunset

June 30, 2006.

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