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


March 6, 2020
REVISED

The Honorable Steven Johnson, Chairperson
House Committee on Taxation
Statehouse, Room 185-N
Topeka, Kansas 66612
Dear Representative Johnson:
SUBJECT: Revised Fiscal Note for HB 2138 by House Committee on Taxation
In accordance with KSA 75-3715a, the following revised fiscal note concerning HB 2138
is respectfully submitted to your committee.
HB 2138 would establish a $5 entry fee for each customer admitted to a sexually oriented
business. The bill includes definitions for nude and sexually oriented business. The fee would be
collected by the Department of Revenue and deposited in the Family and Children Investment
Fund. The bill indicates the purpose of the fee on sexually oriented businesses is to promote the
health, safety, and general welfare of the citizens of Kansas and to mitigate the deleterious
secondary effects of sexually oriented businesses within the state. The Department of Revenue
would have the authority to adopt rules and regulations to implement the bill.
The Department of Revenue indicates that it does not have data on how many customers
are admitted to sexually oriented businesses in Kansas to make a precise estimate of the amount
of revenue that would be generated from the enactment of HB 2138. The Department of Revenue
indicates that it would require a total $453,082 from the State General Fund in FY 2021 to
implement the bill and to modify the automated tax system. The required programming for this
bill by itself would be performed by existing staff of the Department of Revenue. 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. Since the last fiscal note was issued, the Department of Revenue lowered
its estimate on administrative costs needed to implement the bill.
The state maintains two separate accounts within the Family and Children Investment
Fund: one for the Department for Children and Families and one for the Judiciary. The bill is
unclear where the collected fees would be deposited. However, the additional fees would likely
support programs that affect families and children across the state.
The Honorable Steven Johnson, Chairperson
Page 2—HB 2138

The Attorney General’s Office indicates the bill has the potential to increase litigation costs
if lawsuits are filed that challenge the constitutionality of this fee. Litigation could span multiple
fiscal years and could require the hiring of outside counsel. However, the Office did not provide
an estimate of the amount of potential litigation costs. Any fiscal effect associated with HB 2138
is not reflected in The FY 2021 Governor’s Budget Report.


Sincerely,

Larry L. Campbell
Director of the Budget

cc: Lynn Robinson, Department of Revenue
Mary Rinehart, Judiciary
Willie Prescott, Office of the Attorney General
Kim Holter, Children & Families