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
March 12, 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 2815 by House Committee on Taxation
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2815 is
respectfully submitted to your committee.
Under current law, the statewide mill rate to fund public education is set at 20-mills for
school years 2023-2024 and 2024-2025. SB 332 would set the statewide mill rate to fund public
education at 18-mills for school year 2025-2026. For school year 2026-2027 and in each future
school year, the Director of Property Valuation at the Department of Revenue would calculate the
mill rate amount that generates same property tax revenue as levied for the 2025-2026 school year
using the current tax year’s total assessed valuation. The bill removes specific references to the
20-mills statewide mill rate to fund public education. The bill includes a policy statement that
revenues generated from the statewide school property tax levy would remain consistent rather
than automatically increasing as a result of property valuation increases; and the Legislature
provides direct appropriations from the State General Fund to pay for the cost of education.
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. The bill would eliminate
the transfer to this fund from the State General Fund, transfer the balance of the fund to the State
General Fund on July 1, 2024, abolish the fund, and transfer the liabilities of the fund to the State
General Fund. 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 State Revolving Fund of the Kansas Department of Health and Environment
(KDHE). 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 2815
Under current law, State General Fund transfers to the County and City Revenue Sharing
Fund are suspended in the appropriations bill for both FY 2024 and FY 2025 and the transfer is
set to resume in FY 2026. The bill would eliminate the transfer to this fund from the State General
Fund, transfer the balance of the fund to the State General Fund on July 1, 2024, abolish the fund,
and transfer the liabilities of the fund to the State General Fund. The bill would also remove
statutory references to the County and City Revenue Sharing Fund.
Under current law, State General Fund transfers to the Special City and County Highway
Fund are suspended in the appropriations bill for both FY 2024 and FY 2025 and the transfer is
set to resume in FY 2026. The bill would eliminate the transfer to this fund from the State General
Fund.
The Department of Revenue estimates that HB 2815 would reduce the statewide mill rate
to fund public education that would result in a reduction of property tax revenues totaling $94.2
million in FY 2026, $136.2 million in FY 2027, $180.1 million in FY 2028, and $226.0 million in
FY 2029. The Division of the Budget notes that the estimated reduction in revenues from the
school levy would require an offsetting appropriation for State Foundation Aid from the State
General Fund to keep the Base Aid for Student Excellence (BASE) in the school finance formula
at $5,623 for FY 2026, as included in The FY 2025 Governor’s Budget Report. If this provision
of the bill would be enacted without a corresponding increase to the State General Fund
appropriation for State Foundation Aid, the Department of Education would have to prorate the
BASE by reducing state aid to school districts in FY 2026.
The bill would increase State General Fund revenues by $171.3 million in FY 2026, $173.6
million in FY 2027, $176.0 million in FY 2028, and $178.4 million in FY 2029 by eliminating the
State General Fund transfer to the LAVTRF, County and City Revenue Sharing Fund, and Special
City and County Highway Fund. For FY 2026 when these transfers are set to resume under current
law, the LAVTRF would receive $54.0 million, County and City Revenue Sharing Fund would
receive $102.0 million, and Special City and County Highway Fund would receive $15.3 million.
The last State General Fund transfer to these funds occurred in FY 2003; since then, transfers have
routinely been suspended in appropriations bills and have been excluded from long-term budget
profiles.
The Department of Revenue’s Property Valuation Division would be required to annually
calculate the mill rate amount that generates the same property tax revenue as levied for the 2025-
2026 school year using the current tax year’s total assessed valuation. 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 perform minor accounting
procedures to abolish the LAVTRF and County and City Revenue Sharing Fund. 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 Kansas Department of Transportation (KDOT) indicates that all revenues to the
Special City and County Highway Fund are disbursed to local governments by a statutory formula.
The fund is included in KDOT’s budget for reporting purposes and the bill would not change
reporting requirements. KDOT indicates the bill would have no fiscal effect on its operations. The Honorable Adam Smith, Chairperson
Page 3—HB 2815
KDHE indicates the bill would have no fiscal effect on the operations of the State
Revolving Fund programs. The bill would remove 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, would not threaten the financial backing of revenue or general obligation bonds for the State
Revolving Fund programs. State statutes would retain the 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 FY 2025 Governor’s Budget Report
includes resuming funding the LAVTRF with a $54.0 million transfer from the State General Fund
beginning in FY 2025. No other provisions of HB 2815 are reflected in The FY 2025 Governor’s
Budget Report.
The League of Kansas Municipalities and the Kansas Association of Counties indicate that
the bill would eliminate the statutory transfers from the State General Fund to the LAVTRF,
County and City Revenue Sharing Fund, and Special City and County Highway Fund that could
provide additional resources to local governments. By lowering the statewide mill rate to fund
public education, the bill has the potential to reduce revenues that are pledged to repay tax
increment financing projects such as redevelopment districts or bioscience development districts;
however, it is unknown what impact the bill would have on the viability of those projects.
Sincerely,
Adam C. Proffitt
Director of the Budget
cc: Ray Walling, State Library
Gabrielle Hull, Department of Education
Lynn Robinson, Department of Revenue
Wendi Stark, League of Kansas Municipalities
Jay Hall, Kansas Association of Counties
John Hedges, Office of the State Treasurer
Amy Penrod, Department of Health & Environment
Brendan Yorkey, Department of Transportation