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Minutes for HB2429 - Committee on Appropriations

Short Title

Distribution of tax revenue from the cigarette and tobacco products tax to the children's initiative fund.

Minutes Content for Thu, Jun 1, 2017

Mark Dapp, Legislative Research Department, provided a briefing on HB 2429.  The bill relates to the Kansas cigarette and tobacco products act and the distribution of tax revenues, children's initiative fund, amends the statute and repeals the existing section.

Mark Dapp responded to questions from committee members and reviewed the history for the Kansas Endowment for Youth Fund and the Children's Initiative Fund (CIF) (Attachment 2).  He stated that the consensus revenue estimate for FY 2017 is $130 million to the State General Fund (SGF), approximately $127 million in FY 2018 and $124 million in FY 2019, with the passage of the bill.   Amy Deckard, Legislative Research Department provided background information regarding the funding shift from Temporary Assistance for Needy Families (TANF) to CIF for the Parents as Teachers program.

Chairman Waymaster stated that testimony on HB 2429 and HB 2430 would be presented jointly.  He opened the hearing on the bills.

Jill Wolters, Office of the Revisor of Statutes, provided a briefing on HB 2430  (Attachment3).  The bill authorizes the sale of certain tobacco settlement receipts; creates the Great Plains Tobacco Settlement Financing Corporation; authorizes the issuance of bonds payable form the tobacco asset payments; amendments to the Kansas Development Finance Authority.  She reviewed K.S.A. 38-2102 (d) (4) regarding the CIF purposes, requirements for funded programs, transfers from the KEY fund, adjustments for increased or reduced tobacco litigation settlement agreement proceeds, which were included in the bill brief (See attachment 3).

Jill Wolters responded to questions from committee members regarding the creation of the Great Plans Tobacco Settlement Financing Corporation, which would be an affiliate of the Kansas Development Finance Authority (KDFA) and reviewed by the State Finance Council. 

Eric Stafford, Kansas Chamber of Commerce, presented testimony as a proponent of the bill (Attachment 4).  He responded to questions from committee members regarding the survey conducted by the polling firm of Cole Hargrave Snodgreass and Associates. Of the 400 Kansas registered voters, the results reflected a preference for spending cuts over raising taxes.

Discussion followed by committee members regarding balanced budget solutions, adequately funding K-12 schools to meet the Supreme Court's ruling, and delayed payments for Kansas Public Employees Retirement System,

The meeting recessed at:  10:00 a.m.

The meeting reconvened at:  10:50 a.m.

Eric Stafford, Kansas Chamber of Commerce, continued to respond to questions from committee members regarding the state budget shortfall, and items included in the polling survey.

Senator Masterson presented testimony as a proponent of the bill (written testimony will be forthcoming).  He responded to questions from committee members regarding dedicated revenue funds to pay-down the KPERS debt.

Representative Murnan presented testimony as an opponent of the bills (Attachment 5).

Annie McKay, Kansas Action for Children, presented testimony as an opponent of the bills (Attachment 6), and she responded to questions from committee members. She responded that the proposal to securitize the master settlement agreement has not been discussed with the Children's Cabinet at this time. Discussion followed regarding the Attorney General Derek Schmidt's written testimony in opposition of HB 2430  (Attachment 7).

Written testimony as a proponent of the bill was provided by Dave Trabert, Kansas Policy Institute (Attachment 8). Written testimony in opposition of HB 2430 was provided by Hillary Gee, American Cancer society (Attachment 9).

Jeremy LaFaver, Alliance form Childhood Education, presented testimony as an opponent of the bills (Attachment 10).

Shawn Sullivan, Director, Division of the Budget provided additional information in response to previous questions from committee members.  He stated that he met with KDFA and the Children's Cabinet in February regarding securitization and how it would be structured.  A copy of this presentation will be provided to committee members, he stated.  KDFA has an entity by the name of Great Plains, which would shelter the SGF from any risks, he noted.  A review of the estimates, based on the amount securitized and the impact of market factors followed.  The interest rate for a thirty year term would be between 4 and 4.25 percent. There would not be an issue with due diligence with the settlement, he added.

Discussion followed by committee members regarding master agreement settlement payments. 

Chairman Waymaster closed the hearing on the bills.

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