Division of the Budget
Landon State Office Building Phone: (785) 296-2436
900 SW Jackson Street, Room 504 adam.c.proffitt@ks.gov
Topeka, KS 66612 Division of the Budget http://budget.kansas.gov
Adam Proffitt, Director Laura Kelly, Governor


May 1, 2023


The Honorable Renee Erickson, Chairperson
Senate Committee on Commerce
300 SW 10th Avenue, Room 546-S
Topeka, Kansas 66612
Dear Senator Erickson:
SUBJECT: Fiscal Note for SB 159 by Senate Committee on Federal and State Affairs
In accordance with KSA 75-3715a, the following fiscal note concerning SB 159 is
respectfully submitted to your committee.
SB 159 would enact the Kansas Rural Grocery Store Development Incentive Act. The
purpose of the Act is to promote, stimulate, and develop the general and economic welfare of the
State of Kansas and its communities and to assist in the development and redevelopment of grocery
and other food stores within and without a city. Grocery business projects could qualify for this
incentive program in cities with a population of less than 2,000 and counties with a population of
less than 8,000. The Act would provide a $3,000 income tax credit to the project developer for
each employee employed by the developed grocery store. The Act would allow the grocery
business project developer to retain up to 10.0 percent of the developer’s Kansas withholding taxes
to fund the project.
Building materials purchased by a contractor to construct, equip, reconstruct, maintain,
repair, enlarge, furnish, or remodel a grocery business would be exempt from state and local sales
tax. The Act would establish the Kansas Rural Grocery Business Grant Fund in the Department
of Commerce. Rural grocery store project developers would be eligible for grants of up to $2,000
for each new employee position created by the grocery store. The grants would be funded by an
annual transfer of $500,000 of sports wagering revenues from the Lottery Operating Fund to the
Kansas Rural Grocery Business Grant Fund. The Act would also allow local governments to
provide property tax rebates to project developers within the first five years of operation.
The Honorable Renee Erickson, Chairperson
Page 2—SB 159

The Department of Commerce would be required to submit an annual report to the
Governor, the House Committee on Commerce, Labor and Economic Development, and the
Senate Committee on Commerce. The annual report would include the number and scope of
grocery business projects that have been approved, an estimate of the jobs created or preserved as
a result of the approved grocery business projects, and an estimate of the multiplier effect on the
Kansas economy of the approved grocery business projects. The Department of Commerce would
be required to adopt rules and regulations to implement the bill by January 1, 2024. The Secretary
of Commerce would be required to conduct an annual review of the activities undertaken by project
developers to ensure that benefits provided follow the Act or rules and regulations adopted by the
Secretary. The bill would become effective on July 1, 2023.
The Department of Revenue estimates that the enactment of SB 159 has the potential to
decrease individual income tax, state and local sales tax, and state and local property tax revenues
in FY 2024; however, an fiscal effect cannot be estimated. The state funds directly affected by
this bill are the State General Fund, State Highway Fund, Educational Building Fund, and the State
Institutions Building Fund. The bill would also decrease the amount of property tax revenues that
school districts would receive through the state’s uniform mill levy. To the extent that less
property tax revenue would be available from the state’s uniform mill levy to fund expenditures
for school districts, the state would be required to provide more state aid from the State General
Fund through the school finance formula. However, the Department does not have sufficient
information on the number of grocery business projects that would be approved to make a precise
estimate of the amount of reduced state and local tax revenues.
The Department of Revenue indicates that the enactment of the bill would require $339,353
from the State General Fund in FY 2024 to implement the bill and to modify the automated tax
system. Of this amount, $123,894 would be ongoing expenditures to fund 2.00 FTE customer
relations specialist positions. In addition, if the combined effect of implementing this bill and
other enacted legislation exceeds the Department’s programming resources, or if the time for
implementing the changes is too short, additional expenditures for outside contract programmer
services beyond the Department’s current budget may be required.
The Department of Commerce indicates that the enactment of the bill would require
$189,000 of additional State General Fund expenditures in FY 2024 and subsequent fiscal years
to fund 2.00 FTE program manager positions responsible for issuing credits, certifying store
employees, and administering grants. The Kansas Lottery indicates that the transfers from the
Lottery Operating Fund to the Kansas Rural Grocery Business Grant Fund would decrease State
General Fund revenues by $500,000 per year.
The Kansas Department of Transportation indicates that the Act would have an unknown
fiscal effect as noted above. The Kansas Association of Counties and the League of Kansas
Municipalities indicates the bill would have an unknown fiscal effect on local governments. The
Act could incentivize new grocery stores in rural areas of the state that could result in higher local
The Honorable Renee Erickson, Chairperson
Page 3—SB 159

sales tax collections in communities with a new grocery business project. Any fiscal effect
associated with SB 159 is not reflected in The FY 2024 Governor’s Budget Report.


Sincerely,

Adam Proffitt
Director of the Budget

cc: Lynn Robinson, Department of Revenue
Keith Kocher, Kansas Lottery
Sherry Rentfro, Department of Commerce
Brendan Yorkey, Department of Transportation
Wendi Stark, League of Kansas Municipalities
Jay Hall, Kansas Association of Counties
John Hedges, Office of the State Treasurer


Statutes affected:
As introduced: 74-8711, 79-3606