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Minutes for HB2702 - Committee on Commerce
Short Title
Decoupling the KIT and KIR workforce training programs from the high performance incentive fund program and enhancing the workforce training tax credit.
Minutes Content for Fri, Mar 13, 2020
Chairperson Lynn opened the hearing on HB 2702 and requested Assistant Revisor Charles Reimer to provide an overview of the bill.
Chairperson Lynn recognized David Soffer, Kansas Department of Commerce, who presented testimony in support of the bill, which would remove Kansas Industrial Training (KIT) and Kansas Industrial Retraining (KIR) as a method to qualify for the High Performance Incentive Program (HPIP). The bill would also remove the 2 percent state payroll training requirement for companies seeking to qualify for HPIP. (Attachment 1)
The KIT program is designed to assist firms involved in net new job creation. The KIR program is designed to assist companies who are restructuring or retraining their workforce. Since 2008, funding for KIT/KIR has dropped from $2.8 Million to $1.6 Million. As a result, when the awards that were issued to companies in order to qualify for HPIP were combined, a dramatic drop has been seen in the average award the Kansas Department of Commerce (KDOC) made from $891.94 for competitive awards in 2008 to $442.16 today.
HPIP provides tax incentives to employers that pay above-average wages and have a strong commitment to skills development for their workers. This program recognizes the need for Kansas companies to remain competitive and encourages capital investment in facilities, technology and continued employee training and education. A substantial investment tax credit for new capital investment in Kansas and a related sales tax exemption are the primary benefits of this program.
Currently, a company may qualify for HPIP by receiving a training incentive through the KIT/KIR program. This was done in order to help companies work around the training requirement equal to 2 percent of the company's state payroll, which can be costly to companies when you add on the capital investment and wage requirements. In the last three fiscal years (FY17-FY19), of the 881 certifications and recertifications done for HPIP, 392 were a result of companies using KIT/KIR to qualify. This amounts to 44 percent of HPIP certifications. As a result, the KIT/KER program is losing valuable funding in order to help HPIP companies qualify for that incentive.
In reviewing the KIT/KIR grants over the last 5 years, in 4 of those years a 50 percent or greater amount of the KIT/KER budget was used to qualify companies for HPIP. That amounts to over $3.5 Million in grants. These dollars could have gone to companies who were solely focused on training and retraining their employees.
The legislation addresses two important issues:
1) KIT and KIR will no longer be used to assist companies to qualify for HPIP. This frees up funding to assist with companies who can utilize the training and retraining program more efficiently and effectively.
2) The 2 percent training requirement is eliminated for HPIP certification and recertification. The only benefit that will still require the 2 percent payroll training requirement is the $50,000 tax credit. The requirement should not be a prerequisite for the other two benefits when the company is making a significant capital investment and wage commitment to Kansas.
Chairperson Lynn recognized Eric Stafford, Kansas Chamber, who presented testimony in support of the bill. HPIP has been one of the state's most effective economic development incentive programs. HPIP offers a 10 percent income tax credit for capital investments of more than $50,000 ($100,000,000 in five metro counties), a sales tax exemption for the capital investment on their qualified facility, and a training tax credit up to $50,000. (Attachment 2)
The component of HPIP that the bill modifies is the requirement that businesses participate in KIT or KER. Kansas Chamber members have consistently shared that the training requirements under the HPIP program are cumbersome. Eliminating this requirement has received unanimous support from members.
Chairperson Lynn asked if any consideration had been given to increasing the 10 percent income tax credit to 15 percent. Mr. Soffer responded the idea was one to be considered for competitive purposes, however, in the interest of conserving dollars, the idea of increasing the percentage of the tax credit had not been pursued.
Chairperson Lynn asked when the bill would become effective. Mr. Soffer indicated it would take effect after its publication in the statute book. Reed Holwegner, Kansas Legislative Research, said the three options for effective date would include 1) July 1, 2020, 2) on publication in the register, or 3) January 1, 2021.
Written only testimony in support of the bill was submitted by:
- Kevin Walker, IOM, Senior Vice President of Public Policy, Overland Park Chamber (Attachment 3)
- Jason Watkins, Wichita Regional Chamber of Commerce (Attachment 4)
- Tim McKee, CEO, Olathe Chamber of Commerce (Attachment 5)
No testimony in opposition or neutral to the bill was submitted.
Chairperson Lynn closed the hearing on HB 2702.
