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 15, 2019
CORRECTED

The Honorable Kristey Williams, Chairperson
House Committee on K-12 Education Budget
Statehouse, Room 286-N
Topeka, Kansas 66612
Dear Representative Williams:
SUBJECT: Corrected Fiscal Note for HB 2150 by Representative Erickson and
Representative Humphries
In accordance with KSA 75-3715a, the following corrected fiscal note concerning HB 2150
is respectfully submitted to your committee.
HB 2150 would establish the Kansas Hope Scholarship Act to be administered by the State
Treasurer. Any student would be eligible to participate in this program if the student has reported
an incident of bullying. A student may report an incident of bullying to any teacher, counselor or
administrator, who would prepare a written report and submit it to the principal of the school where
the student regularly attends. The principal would be required provide a copy of the report to the
parent of the student who reported the bullying incident and investigate the incident. Within 24
hours after receipt of the written report, the principal would be required to provide a copy to the
parent of the alleged offender and the superintendent of the school district.
Upon conclusion of the investigation, or within 15 days after the incident was reported,
whichever occurs first, the district would be required to notify the parent of the student who
reported the incident that the student is eligible for the Kansas Hope Scholarship Program and
provide a written description of the program. Upon the student becoming eligible for the program,
the parent may elect to participate in the program and transfer the eligible student to a participating
learning entity.
The bill would provide a process to be followed in establishing accounts for eligible
students of the Kansas Hope Scholarship program, as well as requiring the State Treasurer to
maintain a list of qualified private schools. The accounts would be accessible to the parents of a
student to make electronic payments to the eligible new school. Upon execution of an agreement
between the State Treasurer and the parent, the State Treasurer would notify the resident school
district of the student’s participation.
For school year 2019-2020, and each subsequent school year, a student participating in the
Act would be counted in the enrollment of his or her resident school district for the purpose of
The Honorable Kristey Williams, Chairperson
Page 2—HB 2150

calculating state aid. The State Board would determine amounts to be transferred to the scholarship
fund and deducted from the state aid calculated for the resident school district as follows: (1) 88.0
percent of the BASE aid if the eligible student is enrolled in any of the grades one through five in
the current school year; (2) 92.0 percent of the BASE aid if the eligible student is enrolled in any
of the grades six through eight in the current school year; and (3) 96.0 percent of the BASE aid if
the eligible student is enrolled in any of the grades nine through 12 in the current school year.
The bill would create the Kansas Hope Scholarship Fund in the state treasury. Each month,
the bill would authorize the fund to earn interest based upon the average daily balance in the fund
and the net rate of the Pooled Money Investment Portfolio for the preceding month. The fund
would be used by the State Treasurer to deposit scholarship funds for each student, as well as
finance the administrative costs of the program. The bill would allow the State Treasurer to deduct
a percentage of the amount transferred into a scholarship account as reimbursement for its
administrative costs. For the first two years of the program, up to 5.0 percent could be deducted,
while in the third and subsequent years, up to 2.5 percent could be deducted.
For Kansas state income tax purposes, the bill would allow the amount of the scholarship
to be subtracted from federal gross income. Finally, HB 2150 would outline the process for schools
to become a qualified private school on forms prescribed by the State Treasurer.
Enactment of HB 2150 would potentially reduce state aid to school districts by the transfer
of state aid from the prescribed BASE calculation for a participating student to the scholarship
account that is managed by the State Treasurer. The transferred amount from the school district’s
state aid would be determined by the enrolled grade level of the student. However, the number of
students that would participate in the program cannot be estimated.
The State Treasurer indicates that the enactment of the bill would require expenditures
between $252,800 and $302,800 in the first year of the Act’s implementation, as well as an
additional 2.00 FTE positions. This estimate includes salaries and wages (including fringe
benefits) of $64,500 for a Public Service Administrator II position and $45,800 for an
Administrative Specialist. Also included in this estimate is the cost of annual and quarterly audits
totaling $42,500 (500 hours at $85 per hour). Finally, the agency estimates that purchasing
software for the program would cost between $100,000 and $150,000 from a vendor. However,
the agency indicates that if in-house programming resources would be available, this cost could be
reduced, depending on other existing priority projects. To finance these administrative
expenditures, the bill would allow the State Treasurer to deduct a percentage of the amounts
transferred from the school districts for reimbursements of these costs, of up to 5.0 percent in the
first two years of the program and up to 2.5 percent in the subsequent years.
The State Treasurer indicates that the agency cannot estimate the number of students that
would participate in the program. However, transfers of between $5,056,000 and $6,056,00 would
have to be made from school districts for scholarships in the first year in order to generate revenues
to cover its costs to administer the program ($5,056,000 X 5.0% = $252,800 and $6,056,000 X
5.0% = $302,800). Based upon the current approved BASE in the school finance formula for FY
2020 of $4,302 and using an average of 92.0 percent of this BASE ($3,958) that would be
transferred from school districts for a scholarship, between 1,278 students and 1,531 students
would have to participate in order to generate revenues for the expenses of the State Treasurer
($5,056,000 / $3,958 = 1,278 students and $6,056,000 / $3,958 = 1,531 students).
The Honorable Kristey Williams, Chairperson
Page 3—HB 2150

After the first year of implementation, the State Treasurer notes that the annual
administrative costs would total $152,800, including the salary and wage costs (including fringe
benefits) of the salaries of the Public Service Administrator II position ($64,500) and the
Administrative Specialist ($45,800), as well as the audit costs ($42,500).
In addition, because the bill would authorize the Kansas Hope Scholarship Fund to earn
monthly interest, enactment of the bill would increase transfers from the State General Fund.
However, because the average daily balance of the fund and interest rate is not known, this fiscal
effect cannot be estimated.
Calculations for Kansas income taxes for the scholarships would be based on the Kansas
adjusted gross income, which is calculated by adding or subtracting certain types of income from
the federal adjusted gross income. The bill would allow the amount deposited in a Kansas Hope
Scholarship Account to be excluded from income for Kansas income tax purposes beginning in
tax year 2019. However, if the scholarship would not be considered taxable for federal purposes
by the IRS, then the taxpayer would be able to deduct the scholarship amount on the taxpayer’s
state tax return, which would still reduce revenue to the State General Fund.
The Department of Revenue indicates that it would require a total $314,495 from the State
General Fund in FY 2020 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 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.
Any fiscal effect associated with HB 2150 is not reflected in The FY 2020 Governor’s Budget
Report.


Sincerely,

Larry L. Campbell
Director of the Budget


cc: Dale Dennis, Education
Peter Northcott, Office of the Treasurer
Lynn Robinson, Department of Revenue


Statutes affected:
As introduced: 79-32