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Minutes for SB26 - Committee on Commerce

Short Title

Income tax credit for certain purchases of goods and services by a taxpayer from qualified vendors that provide employment to individuals who are blind or disabled.

Minutes Content for Thu, Jan 31, 2019

Chairperson Lynn opened the hearing on SB 26 and requested Revisor Chuck Reimer to provide an overview of the bill.

Chairperson Lynn recognized Patrick Terick, Director of Governmental Activities and Patrick Jonas, CEO, Cerebral Palsy Research Foundation of Kansas, who provided testimony in support of the bill.  Recent changes brought about by Centers for Medicare and Medicaid Services (CMS) rulings and Federal Workforce Innovation and Opportunity Act (WIOA)  legislation are forcing disability providers to reassess long-established models for employing people with disabilities.

Legislators often hear from constituents about growing waiting lists, about increasing Medicaid caseload costs and from advocates about persons with disabilities who are trapped in a system with little hope.  The proposed language seeks to solve each of these challenges with a singular solution:  to increase competitive and integrated employment opportunities for persons with disabilities.  SB 26 implements an approach that could lead to significant savings to the state by reducing subsidies to Kansan's with disabilities.  The bill achieves this by incentivizing private sector taxpayers to subcontract work to nonprofit entities engaging in the hiring of people with disabilities in competitive and integrated employment practices.

The bill would authorize the issuance of a $0.15 tax credit for each dollar spent on goods and services expended with organizations focused on employing persons with disabilities.  (Attachment 2)

The following safeguards have been included in the legislation:

 - Qualified vendors must have at least 30 percent of employees be Kansas residents with a disability.

 - Qualified vendors must provide a high level of health insurance (thus reducing Medicaid expenditures).

 - The amount of the credit would be capped at $500,000 for each qualified vendor per taxpayer relationship each tax year.

 - The total amount of cumulative credits allowed for the life of the program would be capped at $5 million.

 - The Secretary of Commerce would be required to certify annually the qualified expenditures eligible for the tax credit and provide the amount to the Kansas Secretary of Revenue.

 - The Secretary of Revenue would be required to make an annual report to the standing taxation committees on the implementation and effectiveness of the tax credit program.

Senator Alley commended the quality of work being done by disabled employees who have been subcontracted by Spirit to produce specific parts for their aircraft assembly. 

Senator Baumgardner asked how many certified businesses are in Kansas.   Mr. Jonas responded he believed there were about a handful. 

Chairperson Lynn recognized Doug Wisby, President and CEO, Multi Community Diversified Services, Inc. (MCDS), who provided testimony in support of the bill.  MCDS is a community service organization that has provided services to persons with intellectual and developmental disabilities for 45 years. 

The intent of the bill is to move persons with severe disabilities off of Medicaid and the Home and Community Based Waiver to gainful, community employment with companies that are:

 - Non-profit.

 - Have a primary purpose of employing persons who are blind or severely disabled.

 - Pay minimum wage or better.

 - Offer health insurance or contribute towards the cost of insurance.

 - Produce products and services that are cost and quality competitive with what is available in the marketplace.

Benefits to the state include:

 - State General Fund savings of $0.43 on every dollar of Medicaid spent on waiver services.

 - Additional state income tax revenue for wages paid to employees.

 - The capture of sales tax revenue for purchases made with wages paid.

 - The turn of dollars kept in Kansas.

 - Individuals who are now covered under commercial health insurance instead of Medicaid. 

In addition, there are intangible benefits to those who now have the opportunity for employment.  (Attachment 3)

Chairperson Lynn recognized James Quillen, Vice President/IDD, OCCK, Inc. in Salina, Kansas, who provided testimony in support of the bill.  OCCK is approaching their 49th year of providing services to persons with disabilities throughout North Central Kansas, serving 4,000 people annually.  (Attachment 4)

SB 26 incentivizes private business to contract with qualified not for profit agencies in providing employment opportunities for people with disabilities.  The bill incentivizes qualified vendors and not for profit agencies to have an integrated workforce, as defined by the Employment First Initiatives Act; pay employees at or above minimum wage; and encourages participation in the health insurance market.  OCCK, Inc. supports this bill as it could provide organizations with resources needed to begin a transition of employment services for people with disabilities from a  workforce in a segregated sheltered setting to a workforce that is integrated, working at competitive wages. 

Written only testimony in support of the bill was provided by:

 - Senator Mike Peterson  (Attachment 5)

 - Shelby Fry, Director, TARC Industries/Employment Services, and Chair for the Kansas State Use Law Committee  (Attachment 6)

 - Michael Monteferrante, CEO/President of Envision  (Attachment 7)

 - Colin McKenney, CEO, Starkey, Inc.  (Attachment 8)

 - Matt Fletcher, Executive Director, InterHab  (Attachment 9)

 - Jason Watkins, Wichita Regional Chamber of Commerce  (Attachment 10)

There was no testimony submitted in opposition or neutral to the bill.

Chairperson Lynn closed the hearing on SB 26