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 http://budget.kansas.gov
Adam C. Proffitt, Director Laura Kelly, Governor
Division of the Budget
February 14, 2024
The Honorable Adam Smith, Chairperson
House Committee on Taxation
300 SW 10th Avenue, Room 346-S
Topeka, Kansas 66612
Dear Representative Smith:
SUBJECT: Fiscal Note for HB 2508 by Representative V. Miller, et al.
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2508 is
respectfully submitted to your committee.
Under current law, State General Fund transfers to the Local Ad Valorem Tax Reduction
Fund (LAVTRF) are suspended in the appropriations bill for both FY 2024 and FY 2025 and are
capped at $54.0 million when the transfer is set to resume in FY 2026. HB 2508 would resume
the transfer from the State General Fund to the LAVTRF in FY 2025 and in each future fiscal year
based on 3.63 percent of the total retail sales and compensating use taxes credited to the State
General Fund during the preceding calendar year. The State Treasurer would advise each county
treasurer prior to June 1st of each year on the amount of LAVTRF moneys from the state that the
State Treasurer estimates will be paid to each county based on population (65.0 percent) and
valuation (35.0 percent). The transfer from the State General Fund to the LAVTRF and the State
Treasurer paying each county their portion of the LAVTRF would both occur on January 15th and
July 15th of each year. After crediting the July 15th payment, each county treasurer would credit
each political subdivision to residential taxpayers as rebate to be reflected a credit on their next
ensuing property tax statement. The bill includes procedures for the county to determine the rebate
amount.
The bill would also remove statutory references to the LAVTRF. Specifically, the
LAVTRF would no longer be used for loan repayments if a municipality fails to repay a water or
sewer loan from the Kansas Department of Health and Environment’s State Revolving Fund. The
bill would remove the ability for a municipality to use LAVTRF distributions to fund a water
pollution control project; remove LAVTRF distributions as a factor in the State Library’s grant-
in-aid to local public libraries; and remove language that allows LAVTRF distributions to counties
be withheld under certain circumstances. The Honorable Adam Smith, Chairperson
Page 2—HB 2508
HB 2508 would reduce State General Fund revenues by $130.3 million in FY 2025 by
resuming the State General Fund transfer to the LAVTRF. The bill would decrease State General
Fund revenues by $74.1 million in FY 2026 by increasing the State General Fund transfer to the
LAVTRF from $54.0 million to $128.1 million under the provisions of the bill. The last State
General Fund transfer to the LAVTRF occurred in FY 2003, since then transfers have routinely
been suspended in appropriations bills.
The Department of Revenue’s Property Valuation Division would be required to calculate
and report current assessed values and distribution, as well as update related documents. The
Department indicates that these costs are estimated to be negligible and could be absorbed within
existing resources.
The State Treasurer indicates the bill would require it to implement computer programming
changes in order to apportion and pay amounts to counties based on population and assessed
valuation. The State Treasurer indicates it would be required to advise each county treasurer on
the amount of LAVTRF moneys from the state that the State Treasurer estimates will be paid to
each county. The State Treasurer indicates that the administrative costs to implement the bill are
estimated to be negligible and could be absorbed within existing resources. The amounts
transferred to the LAVTRF would also be required to be included as expenditures in the State
Treasurer’s budget beginning in FY 2025.
The Kansas Department of Health and Environment (KDHE) indicates the bill would have
no fiscal effect on the operations of the State Revolving Fund programs. The bill removes a
mechanism for expedited repayment of loans from municipalities that have missed a payment but
the revenue generating streams a municipality may use for loan repayment remain in place.
Eliminating that mechanism, which has never been used, does not threaten the financial backing
of revenue or general obligation bonds for the State Revolving Fund programs. State statutes retain
use of service charges, connection fees, special assessments, property taxes, grants, or other
sources of revenue available to the municipality to make loan repayments.
KDHE indicates removing the ability for a municipality to use LAVTRF distributions to
fund a water pollution control project would have no fiscal effect on its operations. KDHE
indicates that this provision was used in the early years of the Clean Water Act and associated
construction grant program but is no longer used.
The State Library indicates since the LAVTRF has not been funded in two decades, it has
not been a factor for grant-in-aid for some time. Removing this as a factor will not have a
noticeable impact on the eligibility requirements. The fiscal effect associated with HB 2508 is
partially reflected in The FY 2025 Governor’s Budget Report, which includes resuming funding
the LAVTRF with a $54.0 million transfer from the State General Fund under the original
requirements of the program.
The League of Kansas Municipalities and the Kansas Association of Counties indicate that
the bill would provide additional resources for property tax relief directly to property owners. The The Honorable Adam Smith, Chairperson
Page 3—HB 2508
Kansas Association of Counties indicates the bill would increase costs to counties to implement
the bill by unknown amounts. Counties would have programming costs to calculate the
distribution.
Sincerely,
Adam C. Proffitt
Director of the Budget
cc: Lynn Robinson, Department of Revenue
Jay Hall, Kansas Association of Counties
Wendi Stark, League of Kansas Municipalities
John Hedges, Office of the State Treasurer
Amy Penrod, Department of Health & Environment
Ray Walling, State Library
Jody Allen, Board of Tax Appeals