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 26, 2019
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 2310 by Representative Hodge
In accordance with KSA 75-3715a, the following revised fiscal note concerning HB 2310
is respectfully submitted to your committee.
HB 2310 would reduce the state retail sales tax and compensating use tax rate for food and
food ingredients from 6.5 percent to 3.25 percent on July 1, 2019. Food and food ingredients
would be defined as substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated
form, that are sold for ingestion or chewing by humans and are consumed for their taste or
nutritional value. Food and food ingredients would not include alcoholic beverages, candy, dietary
supplements, food sold through vending machines, soft drinks, tobacco, or certain prepared food.
Food and food ingredients would specifically include bottled water. The bill would provide
specific definitions for bottled water, candy, food sold through vending machines, prepared food,
soft drinks, and dietary supplements. The bill would not adjust the distribution of state retail sales
and compensating use tax revenue, including revenue collected from food and food ingredients,
which would remain the same as current law: 83.846 percent to the State General Fund and 16.154
percent to the State Highway Fund.

Estimated State Fiscal Effect
FY 2019 FY 2019 FY 2020 FY 2020
SGF All Funds SGF All Funds
Revenue -- -- ($162,900,000) ($194,300,000)
Expenditure -- -- $2,092,046 $2,092,046
FTE Pos. -- -- -- 6.00
The Department of Revenue estimates that HB 2310 would decrease state revenues by
$194.3 million in FY 2020. Of that total, the State General Fund is estimated to decrease by $162.9
million in FY 2020, while the State Highway Fund is estimated to decrease by $31.4 million in FY
2020. This bill would have no effect on local sales tax revenues. The fiscal effect to state revenues
during subsequent years would be as follows:
The Honorable Steven Johnson, Chairperson
Page 2—HB 2310

FY 2021 FY 2022 FY 2023
State General Fund ($180,000,000) ($182,900,000) ($185,800,000)
State Highway Fund (34,700,000) (35,200,000) (35,800,000)
($214,700,000) ($218,100,000) ($221,600,000)
The estimate assumes that 15.0 percent of all current sales tax collections are collected on
food and food ingredients. State General Fund revenues in the out years assume a 1.6 percent
annual growth rate based on the November 2018 Consensus Revenue Estimate.
The Department of Revenue indicates that it would require a total $2,092,046 from the
State General Fund in FY 2020 to implement the bill and to modify the sales tax system. The bill
would require the Department to hire 6.00 new FTE positions to review, process, and audit sales
tax returns. The Department estimates that ongoing expenses for salary and wages for the 6.00
FTE positions and overhead expenses would total $356,909 from the State General Fund in FY
2021. The current composite jurisdiction sales tax system does not accommodate a second state
sales tax rate. 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. Since the original fiscal note was issued, the Department of Revenue lowered
its estimate on administrative costs needed to implement the bill.
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 League of Kansas Municipalities and Kansas Association of Counties indicate the bill
would have no fiscal effect on local governments. Any fiscal effect associated with HB 2310 is
not reflected in The FY 2020 Governor’s Budget Report.

Sincerely,

Larry L. Campbell
Director of the Budget

cc: Ben Cleeves, Transportation
Lynn Robinson, Department of Revenue
Chardae Caine, League of Municipalities
Jay Hall, Association of Counties


Statutes affected:
As introduced: 79-3602, 79-3606, 79-3603, 75-5171, 79-3620, 79-3703, 79-3710