December 2007

Dec. 27, 2007
(Distributed to Kansas newspapers Dec. 24, 2007)


Ka-ching by Dec. 31st

While we’re all about hip-deep in news coverage of upcoming presidential nomination events in Iowa and New Hampshire, Kansas House and Senate members have been quietly raising money for their upcoming 2008 reelection campaigns.

It’s quiet now because the big throw down doesn’t officially occur until Jan. 10. That’s the day that House and Senate candidates must report how much money they have raised in the last year—and from whom—for the kickoff of the legislative election cycle.

But you can be sure that while most of us are either returning Christmas gifts or vowing to lose enough weight that they’ll fit, legislators and candidates and those who are planning to become candidates for the Legislature are checking their lists of friends to see just who might be interested in contributing to a campaign fund by Dec. 31.

So far, it’s just anecdotal stuff we’ve heard…a legislator coming in for an interim committee meeting and bragging that he/she had a “pretty good fundraiser” back in the district or that he or she has spent a lot of time writing letters to lobbyists and political action committees requesting campaign funds for the upcoming year.

This running for the Legislature business is expensive. Just a year ago, House candidates spent a record $3.6 million for the 125 seats up for grabs, and the winners in those elections spent the bulk of the money, of course, $2.5 million.

It’s been three years since the Senate was up for reelection, and its 40 winners spent a total of $2.7 million.

Now, before the big campaign finance reporting day, House members are sitting on $2.5 million—that’s the number they reported a year ago. Just how much they’ve added to that total will be known on Jan. 10.

Senators who have had three years to raise money for their upcoming campaigns, reported a year ago having $1.04 million in their accounts, and that’s not enough for the campaigns looming for most of them.

Count on campaigns to raise and spend more money on this election cycle than ever in Kansas history and push the total pricetag of the upcoming legislative elections well over $7 million.

This campaign reporting is in itself an art/science.

When those reports come in next month, there’s a good chance that we’ll see candidates with almost preposterous amounts of money on hand. Several will have well over $100,000 in the bank. That’s the science of it. The art of it is that, well, are you interested in getting into a campaign against a candidate with that much money on hand? Showing up with the right amount of money can scare off challengers who feel that no matter how noble their cause, they are just not going to be able buy the television/radio/newspaper ads or finance the mailings to be competitive.

Some legislators will show relatively little money on hand during that January report, knowing they can raise thousands and thousands of dollars between the last day of the legislative session (candidates can’t take money from most businesses and corporations during the session) and the start of real campaigning. That low-ball reporting may lure an opponent into the race.  Lure an opponent? Sure. It’s easier to raise money when there is an opponent filed because that creates jeopardy that a candidate’s supporters will respond to…with checks…

Oh, and there will also be candidates with more money than political savvy or social skills.

That’s what the elections are about. And we’re about to see the start of campaigns that will demonstrate that.

Dec. 20, 2007
(Distributed to Kansas newspapers Dec. 17, 2007)


Biz tax compromise

Kansas may be about to solve—slowly—one of the most bitter fights between business and the state that has come up in the last decade.
It’s how to allow businesses that have qualified for tax credits to actually get those credits, either in cash or by spreading those credits among offshoot corporations of bigger businesses.

There’s no way to tell whether it will satisfy businesses that have at last count about $400 million worth of tax credits that can’t be used, but it’s a start.
Part of the problem with tax credits that businesses earn by investing in factories and workers in Kansas is that the credits are limited to use by the specific corporation that applied for them. That means, say, a business enterprise that has one corporate arm that builds buildings and another that operates them—a not-uncommon corporate structure—may wind up with the building company having tax credits that its sister corporation that operates buildings and makes profits can’t use. It’s the same corporate pocketbook, but not being able to transfer the credits essentially traps them in a corporation that might not be able to use them.
The solution that the Kansas Department of Commerce and the Kansas Department of Revenue recently came up with is to allow that transfer—up to a statewide total of maybe $20 million a year.

Why the roughly $20 million cap? Well, the state can’t afford to hand out $400 million in tax credits which translates into $400 million of revenue not coming into the state treasury.

So, with the state tight on money anyway, where does that $20 million come from? A new facet of corporate taxation which will have corporations that make a significant deal—say, selling a plant—include the unusual sale proceeds in their total corporate income, which Kansas can tax a share of. That means, for example, that unusual business income that would occur if a corporation sells a plant in Nebraska is subject to state corporate income tax on that sale, instead of the corporation paying tax just to Nebraska on the transaction.

By making more of multistate corporate income subject to Kansas taxes, Revenue estimates that Kansas could reap a corporate tax windfall of about $20 million. That’s how the state finances transferring those frozen tax credits for Kansas businesses.

It’s complicated as is most corporate taxation law, but it means that the businesses which stay in Kansas actually get to use the tax credits they’ve earned fair and square by building in Kansas and hiring Kansans to work for them.

What’s it mean for most of us? It means that the credits designed to keep Kansas business and industry growing and providing jobs actually work. It doesn’t get a lot better than that for the state.

Another facet of the business tax plan is one that is far simpler to understand, but just might be a key to keep young businesses in business in Kansas. It’s allowing businesses with tax credits to essentially cash them in—at 30 percent of their value. Sound like a bad deal? Not if your business needs a substantial lump of cash now when there’s payroll to meet and suppliers to pay.

The upside is that rather than wait for years to reclaim that tax credit, businesses can get the cash relatively quickly. The upside for the state is that it extinguishes tax credits at bargain rates. It’s a business decision that is what business is all about—making choices.

Does either of the tax deals bring prosperity to Kansas? No. But they put Kansas in the game when someone’s thinking about starting a business here or make it possible for a business to get a good enough start to give it the best chance to prosper.

Not a sexy issue, not a headline-grabber, but it may have a lot to do with business and jobs in Kansas for Kansans…

Dec. 13, 2007
(Distributed to Kansas newspapers Dec. 10, 2007)


Juicy session ahead

Legislators are already preparing for, and to some extent fearing, a session starting Jan. 14 that will be dominated by electricity.
The first shoe to drop was the denial of a permit for Sunflower Electric to build two 700 megawatt coal-fired power plants near Holcomb. That frustrated—actually maddened—many legislators from western Kansas who see that power project as the last “big thing” that the region west of US-81 highway is likely to see before legislative reapportionment in four short years.

The second shoe, which is falling but hasn’t hit the ground yet, is the Kansas Corporation Commission decision on just how much additional revenue—read profit—it will allow Westar Energy to make if it contracts for about 300 megawatts of  electricity from wind turbines.

Gov. Kathleen Sebelius is a fan of wind power as long as the windmills that produce it aren’t located in the scenic Flint Hills, and Westar is happy to provide it…as long as the utility gets a better-than-average return on its investment in wind.  And, so far, Westar is pretty particular about just how much profit it wants and the KCC—remember those commissioners got their cozy indoor jobs because Sebelius appointed them—is ideally going to come to a decision that would allow Westar enough profit to go ahead with the wind power deal.

So, we have western Kansas legislators who want their carbon dioxide-producing coal-fired power plants and we have eastern Kansas legislators who may or may not care about the Holcomb plant, but who may have some concerns that their constituents will pay higher prices for electricity if Westar gets higher than normal rates for its adventure in wind energy.

So far, it looks like the governor is winning. She gets to point to avoiding a massive carbon dioxide-spewing power plant out west and gets—maybe—her wind energy that is environmentally and politically friendly.

Look for the Legislature to try to figure a way to get the Holcomb plants built, either through overturning the denial of a construction permit for Holcomb or maybe messing with the KCC if its ruling on the Westar case tilts toward Westar and the governor too much.

How does that Legislature do that? It’s as simple as getting a bill passed to authorize the Holcomb plants or maybe to declare that because there are no state or federal laws regulating carbon dioxide, the state can’t consider that pollutant in approving or denying a construction permit.

Or, the Legislature could override any KCC decision that is too friendly to Westar—or, in a weird twist, appears so eco-friendly that it boosts Westar’s return on its investment in wind, essentially making eastern Kansans served by Westar pay an even higher utility bill for that wind power.

Already a key legislative interim committee has proposed overturning a KCC ruling on an unrelated matter dealing with telecommunications regulation. It’s not a rate case decision, of course, but it can be considered as the Legislature firing a warning shot across the bow of the KCC. Unrelated? Yes, but nothing is really unrelated in the machinations of the Kansas Legislature. Of course, the governor can veto anything the Legislature passes, and that would create even more friction on the floors of the House and Senate.

It may come down to a “what are we willing to do without” session if the Legislature and governor freeze up over the politics of electric generation.
That’s not the “let’s get through this and start the reelection campaign” scenario that many lawmakers were looking forward to in this upcoming election year.
It’s all going to get very, very interesting, isn’t it?

Dec. 6, 2007
(Distributed to Kansas newspapers Dec. 3, 2007)

Search what?

One of the nicest aspects of the United States Constitution is that in most cases, it just seems reasonable.

Without ever having read it, most Americans can tell if something is constitutional by how an action feels in the pit of their stomachs. It’s one of those “that just isn’t right” feelings that you get when something just doesn’t seem fair, that just doesn’t seem like something we do in America.

And there’s also the concept, a little less clear-cut, that “this just isn’t the way we do things in Kansas; Kansans aren’t like that.”

An obscure, but powerful, change in state law dealing with searches has some of that uncomfortable feel to it for some people, but the Kansas Court of Appeals has upheld that change in search law as constitutional.

It’s a case from Lyon County, where a sharp law enforcement officer in July of 2006 used a just days-old law to search the vehicle which a guy wanted for a traffic warrant climbed into outside an Emporia convenience store.

The change in search law? It changed the reasons for which police can make lawful searches producing evidence that is admissible in court.  In practical use, it is most likely to be applied to searching cars.

The old rule: Police can search for evidence of “the” crime for which a person is lawfully arrested.  If the driver smells like pot or alcohol, police can search the vehicle for the pot or alcohol. Sounds fair and square, doesn’t it? If a person is arrested leaving a burglarized house, police can search his/her vehicle for stuff stolen from the house. Fair and square.

The new law, which took effect July 1, 2006, and got its first test by a superior court last week, allows a search for evidence of “a” crime. The change from “the” to “a” is powerfully significant.
A guy arrested for a traffic warrant? It’s reasonable and lawful within the U.S. Constitution’s 4th Amendment “freedom from unreasonable search and seizure” provision for a cop to look around the car, make sure there isn’t a weapon within reach of the suspect, or maybe roller skates that would assist the suspect in running away, escaping custody.

But searching the car for evidence of  “a” crime, which amounts to “any” crime, well, it feels like a stretch, but the Kansas Legislature has authorized it and  now the Kansas Court of Appeals has ruled that stretch to be constitutional.

It’s hard to argue against anything that allows police to arrest criminals. But the breadth of the “a” crime, well, it isn’t hard to conjure up some bizarre circumstances that might put a lot of people at risk.

Drive your neighbor who has an old traffic ticket he/she didn’t take care of to the grocery store? Some cop recognizes your passenger and arrests him/her? What if your kid’s IPod is in the glove compartment, and it just happens to contain illegally downloaded rock music? You could be in trouble.

Caught fishing without a license? Presumably, law enforcement could drain the lake to see whether you’ve tossed evidence of “a” crime into the water.

Of course, that’s all edge-of-reasonable stuff, but you can think up your own scenarios.

In the Lyon County case, the cop arrested the guy wanted for only a traffic violation, searched the car and found dope. The Lyon County District Court judge tossed out the dope evidence found looking for fruits of “a” crime. But the Appeals Court put the dope back into evidence.

Maybe the broadened search authority will help cops catch more drug dealers or arrest drunk or drugged drivers who we’d just as soon not have waiting at the stoplight beside us. Hard not to want to get tough on drugs or criminals of any specialty. That’s what Americans and Kansans do. And Kansas joins dozens of states with the same “a” vs. “the” law on the books.

The change in state law, which now is formally held to be constitutional in Kansas, may be a good thing, may be a bad thing, but it has a strange “stomach feel” to some Kansans.

It’s the law now, and don’t look for anyone to reconsider it because that would show up in campaign brochures as being “soft on crime,” and don’t expect any legislators to check their “stomach feel” on the issue in an election year…