Sen. Kellie Warren, a Leawood Republican and chairwoman of the Senate Judiciary Committee, helped usher through the Legislature a bill offering as much as $500 million to businesses in compensation for government restrictions imposed during the COVID-19 pandemic. (Tim Carpenter/Kansas Reflector)
TOPEKA — The Kansas Legislature pushed to the finish line an extraordinary plan to redirect as much as one-half billion dollars in federal COVID-19 relief aid to businesses claiming damages from city, county and state public health mandates during the pandemic.
The Republican-led House and Senate massaged edges of the original version, which had elicited negative reaction from legislators worried about lack of transparency, failure to include an appeal process for businesses, and handing power to an unelected three-person board anchored to the attorney general with limited involvement of the governor’s office or legislators. Each of those areas were tweaked in the final version slipped through both chambers Saturday with only a handful of votes to spare.
Gov. Laura Kelly generated controversy more than one year ago during early stages of the pandemic by issuing executive orders urging people to stay at home and for businesses to temporarily close or operate under special rules. State restrictions were gradually phased out with county and city officials taking responsibility for mandates.
Limited-government advocates viewed restraints on private commerce as inappropriate, while supporters appreciated the effort to limit spread of a deadly virus. More than 5,000 fatalities in Kansas have been linked to the coronavirus.
In the Legislature, there was general acknowledgement businesses destabilized during the pandemic could use supplemental government assistance in the recovery process. Some Republicans went further, however, demanding local and state government suffer financially for treading on liberty.
“I do think it is important we give businesses the opportunity to submit a claim,” said Rep. Fred Patton, a Topeka Republican who chairs the House Judiciary Committee. “It may not be perfect. I do think we’ve come up with a decent product.”
Senate Minority Leader Dinah Sykes, D-Lenexa, said she had reservations about legislation rushed through the political process and missing guardrails to guide implementation. She was troubled by the three-person board deciding which businesses would receive aid and how much each deserved in compensation. Board members are to be appointed by Senate President Ty Masterson, House Speaker Ron Ryckman and the governor. There will be a 2-1 GOP majority.
“This could be backroom deals,” Sykes said. “Three people are picking winners and losers. We don’t have enough transparency.”
In 2020, the governor’s SPARK task force supervised vetting of proposals for allocation of about $1 billion in federal aid. Those recommendations were forwarded to the State Finance Council, which included Kelly and legislators of both parties. The Democratic governor held veto power on the SFC, which irritated Republicans in the statehouse.
Nuts and bolts
The 20 pages of Senate Bill 273 require the state to set aside 25% of available COVID-19 federal funding for pay of potential claims, while cities and counties must earmark 35% of this cash for compensation of businesses. Eligible businesses must have 50 or fewer full-time employees and outline an argument that government restrictions negatively impacted their bottom line.
The three-person board must be named by July 1 and will receive administrative assistance from the office of attorney general and the governor’s office of recovery.
Ground rules to guide business applications are to be ready by Sept. 1 and the task force established last year by the governor must determine by Sept. 15 how much cash has to be deposited in the city, county and state compensation pools. The window for businesses to submit claims runs from Oct. 1 to Dec. 31. The board has until Sept. 30, 2022, to decide who and what warranted compensation from state, county or city governments.
The Legislature’s auditing agency is to review a random sample of 10% of applications by January 2023. By February 2023, conclusions of the board are to be reported to a joint legislative committee responsible for claims against the state. The information would go by the end of February 2023 to the Legislative Coordinating Council, which includes Republican and Democratic leaders from the Senate and House. The governor isn’t part of the LCC.
Checks containing financial compensation to businesses are to be issued by April 1, 2023.
The attorney general’s office will be responsible for producing a report by March 2024 detailing how much of the money awarded to businesses filtered down to company employees. The program would expire Jan. 1, 2025.
Businesses would submit 2019 and 2020 tax returns and document income from 2019 to 2021. The application must outline what government edict purportedly undermined the business and the duration of those limitations. The receipt of coronavirus grants, unemployment benefits, tax relief and other support must be listed by the applicants.
Nonprofit organizations wouldn’t be eligible for these financial awards, but companies based in Kansas or approved to do business in the state would qualify. A restriction meriting compensation could include a closure order, reduced hours of operation and occupancy limits. Orders requiring a face covering would come into play if enforced after May 31.
Only work of the legislative committees would be subject to the Kansas Open Records Act and the Kansas Open Meetings Act. The deliberative process of the board is to be entirely closed to the public. Businesses are expected to be able to include legal costs of the application process in their plea for financial compensation.
Points of contention
Rep. John Carmichael, a Wichita Democrat and an attorney, praised the House judiciary chairman for making “an attempt to make a very, very bad bill only a very bad bill.”
Carmichael said he was disappointed the bill didn’t require companies to dedicate a specific percentage of their payout to employees, a goal that would avoid business owners from pocketing all of these government payments. The legislation didn’t outline how the board or LCC should prioritize claims.
Carmichael also raised questions about transparency, exclusion of nonprofits and the dash in the annual session’s final hours to get a bill on the governor’s desk.
“Haste makes waste. This is not the piece of legislation we want to pass to aid Kansas businesses or Kansas workers,” said Carmichael, who referenced comments from more than one GOP senator that government in Kansas had to be punished. “We clearly left working Kansans out in the cold.”
Topeka Rep. Vic Miller, an attorney and a Democrat, said the bill adopted by the House on a vote of 68-42 would likely unravel during implementation and supporters of the measure should be forced to reckon with that outcome.
He predicted the Kansas law would add to the “horror stories and self-indulgence that came from legislation that was not fully vetted.”
Sen. Richard Hilderbrand, R-Galena, said he was offended Kelly took executive action to deem certain businesses as essential so they could remain open and others as nonessential and subject to restraint of trade. He expected work of the new board to be more thoughtful than the governor’s actions during the health emergency.
“Three people picking winners and losers is better than one person that picked essential and nonessential,” Hilderbrand said.
During the Senate’s debate on the bill and before the 28-14 vote affirming the bill, Sen. Kellie Warren, a Republican who chairs the Senate Judiciary Committee, defended the decision to require cities and counties to set aside a higher percentage than the state.
“Could you explain the reason for that?” said Sen. Pat Pettey, a Democrat from Kansas City, Kansas.
“It was just a policy decision,” Warren said.
“Or,” Pettey replied, “maybe an oversight?”
Warren, who had a prominent role in development of the business compensation bill, said it was difficult not to miss the overreach by government during the pandemic in ways that blindsided businesses and took away liberties.
Pettey said the Legislature could legitimately make a case for establishing a state compensation fund, but shouldn’t order cities and counties to be part of that process.
Rep. Aaron Coleman, D-Kansas City, went a step further by declaring the bill a violation of the Kansas Constitution.
It’s possible Kelly could veto the bill, but the Legislature would have an opportunity May 26 on the typical ceremonial end of the legislative session to attempt an override.
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