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


February 12, 2021


The Honorable Robert Olsen, Chairperson
Senate Committee on Commerce
Statehouse, Room 236A-E
Topeka, Kansas 66612
Dear Senator Olsen:
SUBJECT: Fiscal Note for SB 177 by Senate Committee on Commerce
In accordance with KSA 75-3715a, the following fiscal note concerning SB 177 is
respectfully submitted to your committee.
SB 177 would hold employers harmless for fraudulent claims of unemployment benefits.
Additionally, employers would not be charged for any benefits paid beginning March 12, 2020,
through December 31, 2021. Employers would not be required to reimburse the state for claims
identified as fraudulent by the employer. The time limitation on disputed claims or appeals in
current law would not apply to cases of fraud or benefits paid from March 15, 2020 through
December 31, 2022. The Department of Labor would be required to immediately and fully credit
an employer’s account for any benefits that were determined to be fraudulent or provided in error.
The Department of Labor would be required to review all reimbursing employer accounts for the
20 years preceding July 1, 2021 and credit any employer for benefits paid by fraud or in error that
were charged to the employer’s account and not recovered through normal recovery efforts.
The bill would require the Department of Labor to review all available information
regarding improper unemployment benefit payments for the state for the time period of March 15,
2020, through December 31, 2022. Within 60 days of the information becoming available, the
Department of Labor would be required to certify to the Department of Administration any
amounts for improper payments. The bill would require the Department of Administration to
transfer amounts identified in the certification from the State General Fund to the Unemployment
Trust Fund. The bill would authorize the Governor to transfer the certified amounts from a fund
other than the State General Fund, if approved by the State Finance Council.
Any federal funds for the Unemployment Insurance Trust Fund received after January 1,
2021, in response to the pandemic would be subject to determination by and an act of the
The Honorable Robert Olsen, Chairperson
Page 2—SB 177

Legislature. Any federal unemployment insurance benefit program established as a result of
COVID-19 or any pandemic would not be continued after the ending date of the federal program
through the use of state unemployment insurance fund contributions made by employers.
The bill would create a new standard rate schedule, new solvency rate schedules, new credit
rate schedules and a new fund control table for Rate Year 2022 and subsequent calendar years for
the calculation of employment contributions to the Unemployment Insurance Trust Fund. The bill
would also establish a new calculation for the reserve fund ratio. The bill would abolish the
Employment Security Interest Assessment Fund. The Department of Labor would be required to
post Unemployment Insurance Trust Fund computations and data on the Department’s website.
The data must include information from the previous 20 fiscal years and for FY 2022 and each
subsequent fiscal year.
The bill would create the Unemployment Compensation Modernization and Improvement
Council. The 11-member Council would include employers, employees, members of the
Legislature, and the Secretary of Labor or the Secretary’s designee. Members of the Council
would be eligible to receive compensation for costs associated with a member’s service on the
Council. Member compensation and expenses would be paid by the Department of Labor from
the Employment Security Administration Fund or the Department’s State General Fund account.
The Secretary of Labor would be required to appoint an Executive Secretary of the Council. The
Council would be required to examine and recommend changes to the unemployment
compensation system and claims filing process. Within six months of the Council’s first meeting,
the Council would be required to submit a report with its recommendations on improvements to
the unemployment claims filing process. The bill would also require the Department of Labor,
with the assistance of the Council, to develop a strategic staffing plan that accounts for substantial
increases or decreases in the number of claims for benefits. The staffing plan must be presented
to the Council, the Legislature, and the Governor no later than six months after the first Council
meeting.
The bill would require a new unemployment insurance system to be deployed no later than
December 31, 2022. The bill specifies the required functions, features, and benefits of the system.
The Department of Labor would be required to provide annual updates to the Council and the
Legislative Coordinating Council on the status and progress of the new unemployment insurance
system.
In response to the COVID-19 pandemic, the duration of unemployment benefits was
extended to 26 weeks. Under HB 2196, for the weeks commencing on and after April 1, 2021,
claimants would be eligible to receive benefits for:
1. A maximum of 16 weeks if the Kansas unemployment rate is less than 5.0 percent;
2. A maximum of 20 weeks if the Kansas unemployment rate is at least 5.0 percent but less
than 6.0 percent;
3. A maximum of 26 weeks if the Kansas unemployment rate is at least 6.0 percent.
The Honorable Robert Olsen, Chairperson
Page 3—SB 177

The Department of Labor would be required to create and manage a promotional campaign
for the short-term compensation program. The bill would adjust the reduction limits of the normal
weekly hours of work for employees under a shared work plan. The bill would also add services
performed by a petroleum landman on a contractual basis to be covered by unemployment laws.
The Kansas Department of Labor is currently unable to estimate the total amount of
fraudulent or improper unemployment payments in the state. As a result, the amount from State
General Fund or other funds that would be transferred to the Unemployment Trust Fund because
of fraudulent or improper payments is unknown. The Department anticipates having a working
figure in the coming weeks. A revised fiscal note will be issued once the information is available.
The agency notes that, according to the U.S. Department of Labor’s Office of Inspector General,
the national total of fraudulent unemployment payments could be $36.0 billion or more. The
Kansas Department of Labor estimates the fiscal effect on the State General Fund could be
sizeable.
The Kansas Department of Labor indicates the bill would affect contributions to the
Unemployment Insurance Trust Fund. The Department uses a measure called the Average High
Cost Multiple (AHCM) to assess the solvency of the Fund. The AHCM is the number of years
benefits could be paid based on the average of the three highest years of benefit payments over the
last 20 years. An AHCM of 1.0 would mean the Unemployment Insurance Trust Fund would have
enough reserves to pay one year of benefits. To estimate the potential fiscal effect on revenue to
the Unemployment Insurance Trust Fund, the Department looked at scenarios for various AHCMs.
If the AHCM was 0.20, the Department estimates the Unemployment Insurance Trust Fund would
receive $146.7 million less revenue under SB 177 compared to current law. If the AHCM was
0.50, the Department estimates the Fund would receive $131.1 million less revenue. Lastly, if the
AHCM was 0.70, it is estimated that the Fund would receive $115.6 million less revenue.
The Kansas Department of Labor estimates that upgrading the unemployment insurance
system would cost $46.7 million from all funds, including $9.6 million from the State General
Fund. The all funds figure includes $42.7 million for design and implementation and $4.0 million
in annual maintenance costs. The total cost includes $27.8 million in FY 2021, all from special
revenue and federal funds, and $18.9 million in FY 2022, which includes $9.6 million from the
State General Fund and $9.3 million from special revenue and federal funds. Of the total cost for
modernizing the unemployment insurance system, approximately $37.0 million from special
revenue and federal funds is included in the Governor’s budget. The revised estimate from the
Department would ensure the upgraded unemployment insurance system would be ready for
deployment before December 31, 2022, as required in the bill.
The Kansas Department of Labor estimates the bill would require additional expenditures
of $688,660 from federal funds and 9.00 FTE positions. This includes $125,800 for 1.00 FTE
position to support the Unemployment Compensation Modernization and Improvement Council
($82,800 for salaries and wages plus $43,000 for other operating expenditures); $499,650 for 7.00
FTE positions to conduct research on fraud ($356,650 for salaries and wages and $143,000 for
other operating expenditures); and $63,210 for 1.00 FTE position for the shared work program
The Honorable Robert Olsen, Chairperson
Page 4—SB 177

($45,210 for salaries and wages and $18,000 for other operating expenditures). Except as noted
above, any other fiscal effect associated with SB 177 is not reflected in The FY 2022 Governor’s
Budget Report.

Sincerely,

Adam Proffitt
Director of the Budget

cc: Dawn Palmberg, Department of Labor
Julie Menghini


Statutes affected:
As introduced: 44-703, 44-501, 44-704, 44-710, 44-710a, 44-710b, 44-757, 44-758