Bill Summary – FastDemocracy

Division of the Budget
Landon State Office Building                                                                           Phone: (785) 296-2436
900 SW Jackson Street, Room 504                                                                        larry.campbell@ks.gov
Topeka, KS 66612                                Division of the Budget                                http://budget.kansas.gov
Larry L. Campbell, Director                                                                          Laura Kelly, Governor


                                                  February 12, 2019


         The Honorable Don Hineman, Chairperson
         House Committee on Rural Revitalization
         Statehouse, Room 186-N
         Topeka, Kansas 66612
         Dear Representative Hineman:
                   SUBJECT:       Fiscal Note for HB 2131 by House Committee on Rural Revitalization
                 In accordance with KSA 75-3715a, the following fiscal note concerning HB 2131 is
         respectfully submitted to your committee.
                 HB 2131 would reinstate the Enterprise Zone sales tax exemption that expired on
         December 31, 2011. The program provides a sales tax exemption for materials, equipment, and
         services purchased in connection with a business expansion project. In order for businesses to
         receive the sales tax exemption, manufacturing businesses would be required to create at least two
         jobs, nonmanufacturing businesses would be required to create at least five jobs, and retail
         businesses would be required to create at least two jobs located in a city with a population of 2,500
         or less or in a county with a population of 10,000 or less. The sales tax exemption would take
         effect beginning on July 1, 2019.

                                            Estimated State Fiscal Effect
                                       FY 2019         FY 2019            FY 2020              FY 2020
                                        SGF            All Funds           SGF                All Funds
            Revenue                             --                 --   ($99,000,000)       ($118,000,000)
            Expenditure                         --                 --         $67,075              $67,075
            FTE Pos.                             --                 --              0.50                0.50
                The Department of Revenue estimates that HB 2131 would decrease state revenues by
         $118.0 million in FY 2020. Of that total, the State General Fund is estimated to decrease by $99.0
         million in FY 2020, while the State Highway Fund is estimated to decrease by $19.0 million in FY
         2020. This bill also is estimated to decrease local sales tax revenues; however, the specific estimate
         of lower local sales tax revenues was not calculated by the Department of Revenue.
                To formulate these estimates, the Department of Revenue reviewed data on the Enterprise
         Zone sales tax exemption from calendar years 2009, 2010, and 2011. Adjusting for rate changes
The Honorable Don Hineman, Chairperson
Page 2—HB 2131

and inflation since 2011, the bill is estimated to reduce state sales tax collections by an average of
$118.0 million each year. However, the actual amount of sales taxes that are exempted could vary
widely from year-to-year as different businesses utilize this program.
       The Department of Revenue indicates that it would require a total of $24,950 from the State
General Fund in FY 2020 to implement the bill and to modify its computer system. The required
programming for this bill by itself would be performed by existing staff of the Department of
Revenue and outside contract programmer services. 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 Kansas Department of Transportation (KDOT) indicates that the bill would reduce
state revenues to the State Highway Fund as noted above. KDOT indicates that when the state
receives lower State Highway Fund dollars it may be required to make corresponding reductions
to planned expenditures for projects funded under the comprehensive transportation plan, known
as T-WORKS.
       The Department of Commerce indicates that the bill would require $42,125 from the State
General Fund in FY 2020 for administrative costs to reinstate this program. These estimates
include the salaries and wages and operating costs for a new 0.50 FTE position to administer this
program. This new program would require the Department to develop application forms and
agreements, review and track economic development activity related to reinstating the Enterprise
Zone Program sales tax exemption program.
         The Kansas Association of Counties and the League of Kansas Municipalities indicate that
the bill would provide a net reduction to local sales tax collections that are used in part to finance
local governments. The Kansas Association of Counties also indicates the bill has the potential to
create jobs and encourage investment in new business projects. Any fiscal effect associated with
HB 2131 is not reflected in The FY 2020 Governor’s Budget Report.


                                                      Sincerely,

                                                      Larry L. Campbell
                                                      Director of the Budget

cc: Lynn Robinson, Department of Revenue
    Ben Cleeves, Transportation
    Chardae Caine, League of Municipalities
    Jay Hall, Association of Counties
    Sherry Rentfro, Commerce
Statutes affected: 
As introduced: 79-3606, 79-3615