SESSION OF 2023
SUPPLEMENTAL NOTE ON HOUSE BILL NO. 2302
As Amended by House Committee on Water
Brief*
HB 2302, as amended, would establish funding for the
State Water Plan and water infrastructure projects, create the
Water Technical Assistance Fund and the Water Projects
Grant Fund, authorize the Kansas Water Office (KWO) to
provide grants and adopt rules and regulations to establish
criteria for grants, and authorize distribution to the State
Water Plan Fund (SWPF) of a portion of the revenue from the
state sales and compensating use tax (sales tax revenue).
State Water Plan Fund Transfers and Appropriations;
Kansas Water Authority (New Section 1)
The bill would require that on July 1, 2023, and each
July 1 after through July 1, 2028, no statutory transfers to the
SWPF would be made if the full amount of sales tax revenue
is transferred to the SWPF.
[Note: The SWPF is a statutory fund that receives two
statutory transfers each fiscal year, $6.0 million from the State
General Fund (SGF) and $2.0 from the Economic
Development Initiatives Fund (EDIF), unless modified by the
Legislature.]
The bill would state the SWPF would continue to be
appropriated and expended for the purposes prescribed in
law, with the following exceptions:
____________________
*Supplemental notes are prepared by the Legislative Research
Department and do not express legislative intent. The supplemental
note and fiscal note for this bill may be accessed on the Internet at
http://www.kslegislature.org ●On July 1, 2023, and each July 1 after through July
1, 2028, or as soon thereafter when moneys are
available:
○$5.0 million would be transferred from the
SWPF to the Water Technical Assistance
Fund established by the bill; and
○$15.0 million would be transferred from the
SWPF to the Water Projects Grant Fund
established by the bill.
The bill would state that for FY 2024 through FY 2026,
an amount no less than $15.0 million from the SWPF would
be applied toward the retirement of any water supply storage
debt for Milford and Perry Lake reservoirs until the debt is
retired.
The transfers from the SWPF would only occur if the full
amount of sales tax revenue authorized for distribution is
transferred to the SWPF.
The bill would sunset the provisions of New Section 1 on
July 1, 2028. All moneys in and liabilities of the two funds
established by the bill would be transferred to the SWPF, and
the two funds would be abolished.
The bill would allow, notwithstanding the provisions of
the law that established the SWPF, the Kansas Water
Authority (KWA) to recommend to the Legislature an
appropriation of up to 10.0 percent of the unencumbered
balance of the SWPF to be used to supplement the salaries
of existing state agency full-time equivalent (FTE) employees
and for funding new FTE positions created to implement the
State Water Plan. The moneys from the appropriation could
be used to supplement existing positions, but the moneys
could not be used to replace SGF or fee fund moneys or
other funding for positions existing on July 1, 2023.
2- 2302 The bill would list the eligible FTE positions for which
moneys could be used to include engineers, geologists,
hydrologists, environmental scientists, attorneys, resource
planners, grant specialists, and any other similar positions.
The bill would allow the KWA to recommend that
moneys be used to supplement salaries if at least two
conservation districts present a joint proposal to the KWO for
positions to provide shared services to the districts involved in
the proposal.
The KWA would be required to encourage funding
requests from state and local entities on projects that provide
a direct benefit to water quantity and quality, including water
infrastructures that are both natural and man-made, and
include matching funds from non-state sources.
The bill would state that all reporting requirements in the
SWPF law would continue and would apply to the two funds
established in the bill.
Water Technical Assistance Fund (New Section 2)
The bill would establish the Water Technical Assistance
Fund, which would be administered by the KWO.
The bill would provide that when the unencumbered
balance of the Fund exceeds $15.0 million, the excess
moneys could be recommended for appropriation by the KWA
for the same purposes as any other moneys in the SWPF are
appropriated.
The bill would require the KWO to use the Fund to
provide grants for planning, engineering, management, and
other technical assistance that could be necessary in the
development of plans for water infrastructure projects or for
processing the grant and loan applications for such water
infrastructure projects. The KWO could offer services directly,
provide funding to other organizations to provide services at
3- 2302 no cost to a municipality or special district related to water, or
the KWO could provide grants directly to applicants to cover
expenses related to the hiring of technical assistance.
The bill would allow any municipality or special district
related to water organized under state law to apply for a
grant. The KWO would be authorized to award full or partial
grants to the applicants. Municipalities with fewer than 2,000
residents would be prioritized for the awarding of full grants.
Watershed districts, conservation districts, groundwater
management districts, and all special districts related to water
would not be prioritized for the awarding of full grants for the
purposes of New Section 2 of the bill.
The bill would require the KWO to adopt rules and
regulations to establish any necessary criteria for
administering the Fund and awarding grants for technical
assistance. The bill would require the criteria to include, but
not be limited to, factors applicable to:
●Municipalities of different populations, including the
prioritization of small municipalities as required by
New Section 2(b)(2);
●Factors that could include, but not be limited to,
public health, socio-economic factors, and the
ability for a municipality to repay any loans without
grant assistance; and
●Special districts, such as watershed districts,
conservation districts, groundwater management
districts, rural water districts, and any other similar
districts formed for a special or single purpose
related to water.
The bill would prohibit any single awarded grant for
technical assistance to exceed $1.0 million unless specified
by an appropriation act of the Legislature.
4- 2302 Water Project Grant Fund (New Section 3)
The bill would establish the Water Projects Grant Fund,
which would be administered by the KWO.
The bill would provide that when the unencumbered
balance of the Fund exceeds $45.0 million, the excess
moneys could be recommended for appropriation by the KWA
for the same purposes as any other moneys in the SWPF are
appropriated.
The bill would allow the KWO to provide full or partial
funding for grants to any municipality or special district related
to water that is established under state law for the following:
●Construction, repair, maintenance, or replacement
of water-related infrastructures and any related
construction costs;
●Matching moneys for grant or loan applications for
water-related infrastructure projects; and
●Grants that could be applied to an outstanding loan
balance from the existing Public Water Supply
Loan Fund or Kansas Pollution Control Revolving
Fund.
The bill would require the KWO to adopt rules and
regulations to establish any necessary criteria for grants from
the Water Projects Grant Fund. The rules and regulations
would include any necessary criteria that could be applied to
the selection of projects with outstanding loan balances from
the existing Public Water Supply Loan Fund or Kansas
Pollution Control Revolving Fund. The criteria would be
based on the following factors:
●The planned construction on the project with the
outstanding loan balance being complete;
5- 2302 ●The municipality or special district having made at
least five years of payments on the project loans;
●Awarding grants that provide repayment of up to:
○90.0 percent of any remaining project loan
balance for cities with fewer than 2,000
residents;
○75.0 percent of any remaining project loan
balance for cities with fewer than 5,000
residents;
○50.0 percent of any remaining project loan
balance for cities with fewer than 10,000
residents; and
○25.0 percent of any remaining project loan
balance for all other cities in Kansas; and
●Any other relevant criteria including, but not limited
to, the socio-economic status of the residents of
any municipality, public health, and the ability of
any municipality to repay a loan without further
assistance.
The bill would prohibit any single grant awarded for a
project to be greater than $8.0 million unless specified by an
appropriation of the Legislature.
The bill would require the KWO and Kansas Department
of Health and Environment (KDHE) to coordinate the sharing
of information about applicants to the Public Water Supply
Loan Fund and the Kansas Pollution Control Revolving Fund,
and require the agencies to take into consideration approval
or likely approval of a grant by the KWO when considering
the eligibility of any municipality to receive moneys from the
funds.
6- 2302 Sales Tax Revenue (Section 4)
The bill would require the State Treasurer, on and after
July 1, 2023, and before July 1, 2028, to credit 1.231 percent
of sales tax revenue and deposit the amount in the SWPF.
Technical Amendments (Sections 6 and 8)
The bill would make technical amendments to account
for the trigger of statutory transfers to the SWPF should the
full amount of sales tax revenue be transferred to the SWPF.
Kansas Water Authority Report (Section 7)
The bill would require the KWA to include in its annual
report to the Governor and Legislature an account of all
moneys expended from the Water Technical Assistance Fund
and the Water Projects Grant Fund each year.
Background
The bill was introduced by the House Committee on
Water at the request of Representative Blex.
House Committee on Water
Proponent Testimony
In the House Committee hearing, proponent testimony
was provided by representatives of the Cities of Caney and
Wichita, Ducks Unlimited, Kansas Farm Bureau, Kansas
Livestock Association, Kansas Municipal Utilities, League of
Kansas Municipalities, Regional Economic Area Partnership
of South Central Kansas, Sierra Club – Kansas Chapter, The
Nature Conservancy, and WaterOne. The proponents
generally stated the legislation is a good start, more work
7- 2302 needs to be done, and there is a willingness to have these
discussions.
Written-only proponent testimony was provided by
representatives of the Cities of Arkansas City, Belle Plaine,
Columbus, Ellsworth, Fredonia, Garden City, Greensburg,
Haysville, Independence, Logan, Maize, McLouth, Mound
Ridge, Olathe, Ottawa, Overland Park, Parsons, Valley Falls,
and WaKeeney; Kansas Agribusiness Retailers Association,
Kansas Grain and Feed Association, and Renew Kansas
Biofuels Association; Kansas Association of Conservation
Districts; Kansas Contractors Association; Kansas
Cooperative Council; Kansas Corn Growers Association;
Kansas Farmers Union; Kansas Rural Center; and Kansas
Rural Water Association.
Neutral Testimony
Neutral testimony was provided by a representative of
the Kansas Department of Agriculture, KDHE, and KWO,
stating the agencies are committed to working with each
other and the House Committee to move forward with the bill.
Opponent Testimony
Written-only opponent testimony was provided by a
representative of the City of McPherson, stating the bill does
not address certain groundwater management district and
municipal water issues.
House Committee Amendments
The House Committee amended the bill to:
●Add provisions that would require the KWA to
encourage funding requests from state and local
entities that cooperate with qualified nonprofit
entities on projects that provide a direct benefit to
8- 2302 water quantity and quality, including water
infrastructures that are both natural and man-
made, and including matching funds from non-state
sources;
●Delete municipalities as the sole receiver of grants
from the KWO;
●Add special districts to various provisions of New
Section 2;
●Add groundwater management districts to those
that would not be prioritized for the awarding of full
grants of New Section 2;
●Replace municipalities with greater than 2,000
residents with municipalities of different populations
and specify prioritization of small municipalities;
●Require the KWO and KDHE to coordinate sharing
information about applicants to the Public Water
Supply Loan Fund and the Kansas Pollution
Control Revolving Fund and take into consideration
the approval or likely approval of a grant by the
KWO when considering the eligibility of any
municipality to receive moneys from the funds; and
●Make clarifying amendments.
Fiscal Information
According to the revised fiscal note prepared by the
Division of the Budget on the bill, as introduced, the
Department of Revenue estimates the bill would decrease
SGF revenues by $48.1 million in FY 2024, including a
reduction of $54.1 million in retail sales and compensating
use tax revenue and an increase of $6.0 million by eliminating
the SWPF transfer from the SGF. Based on the November
9- 2302 2022 Consensus Revenue Estimate, the Department of
Revenue estimates the bill would result in distributing $54.1
million in retail sales and compensating use tax revenue to
the SWPF in FY 2024, including $41.4 million of retail sales
tax receipts and $12.7 million of compensating use tax
receipts.
In the original fiscal note issued, the distribution of retail
sales and compensating use tax to the SWPF were identified
as a transfer from the SGF instead of as reduction in SGF
revenues. This distribution would replace the existing
statutory transfers to the SWPF totaling $8.0 million, resulting
in a net funding increase of $46.1 million for additional water
infrastructure projects in FY 2024. The Department of
Revenue indicates that the specific adjustments to the SGF in
subsequent fiscal years would be as follows:
FY 2025 FY 2026 FY 2027 FY 2028
Sales Tax ($42.0
million)
($42.7
million)
($43.2
million)
($43.6
million)
Comp. Use
Tax
($13.5
million)
($14.2
million)
($14.9
million)
($15.6
million)
Net
Transfers
$6.0 million$6.0 million$6.0 million$6.0 million
($49.5
million)
($50.9
million)
($52.1
million)
($53.2
million)
The suspension of the existing statutory transfer from
the EDIF to the SWPF would increase EDIF revenues by $2.0
million per year from FY 2024 through FY 2028. The
Department of Agriculture, KDHE, and KWO are the primary
recipients of the SWPF appropriations, so enactment of the
bill would likely increase the expenditures of all three
agencies by unknown amounts. According to KWO,
administration of the bill would cost $246,650 in FY 2024 and
$200,000 in subsequent fiscal years. These expenditures
would be made to fill 2.0 FTE positions and contract with
outside counsel to draft rules and regulations.
10- 2302 KDHE indicates that enactment of the bill could
decrease agency revenues from loan service fees as water
storage debt is paid off, but the size of this reduction is
unknown.
Any fiscal effect associated with the bill is not reflected
in The FY 2024 Governor’s Budget Report.
The League of Kansas Municipalities indicates the new
local grant opportunities authorized by the bill would increase
municipal revenues by unknown amounts.
The Kansas Association of Counties indicates the bill
would not have a fiscal effect on counties.
Water; State Water Plan Fund; State Water Plan; water infrastructure projects; Water
Technical Assistance Fund; Water Projects Grant Fund; rules and regulations; sales
tax revenue; Kansas Water Office; Kansas Water Authority; State General Fund;
Economic Development Initiatives Fund
11- 2302