June 12, 2021
Lawrence, US 85 F
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Kansas businesses angry about COVID-19 mandates can get in line for piece of $500M

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 Kansas 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 elicited negative reactions from legislators worried about lack of public transparency, failure to include an appeals process for businesses, and control of the process by an unelected three-person board with limited involvement of the governor’s office and state legislators. Each of those areas were tweaked in the final version that slipped through both chambers early Saturday with a handful of votes to spare.

Gov. Laura Kelly generated dismay more than one year ago during early stages of the pandemic by issuing an executive order urging people to stay at home and for businesses to shut down or operate under social distancing rules. The state restrictions were gradually phased out with county and city officials taking responsibility for mandates. Limited-government advocates viewed these restraints on private commerce as inappropriate, while supporters appreciated the effort to limit spread of a deadly virus.

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In the Legislature, there was general acknowledgement businesses harmed during the pandemic could use more help from government during 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 lacking guardrails to guide implementation. She was especially troubled by creation of the three-person board to decide which businesses received 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 $1 billion in federal aid. Those ideas were forwarded to the State Finance Council, which includes Kelly and legislators of both parties. The governor held veto power on the SFC.

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 supposed to be ready by Sept. 1 and a task force established last year by the governor to organize allocation of previous federal aid 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 warrants compensation from state, county or city governments. The distribution of responsibility for health orders among a city, county or state government will be determined and each fund tapped accordingly.

The Legislature’s auditing agency is to complete a review of random sample of 10% of applications by January 2023. By February 2023, conclusions of the three-person board are to be reported to a regular legislative committee that works on claims against the state. That information would travel by end of February 2023 to the Legislative Coordinating Council, which includes Republican and Democratic leadership from the Senate and House. LCC has authority to spend state funding, which the board and claims committee doesn’t have.

Checks containing the financial compensation are to be transferred to businesses by April 1, 2023.

The attorney general’s office will be responsible for producing 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 undermined the business and duration of those limitations. The businesses’ receipt of other coronavirus grants, unemployment benefits, tax relief and other support must be listed.

Nonprofit organizations won’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. An order requiring a face covering would come into play unless in place after May 31.

Only the 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 will be closed to the public. Businesses are expected to be able to include legal costs of the application process in their plea for financial compensation. A business participating in the claims process would be forbidden to pursue a lawsuit.

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 most or all of the government compensation. The legislation didn’t outline how the board and LCC should prioritize claims. He also raised questions about transparency, exclusion of nonprofits and the mad dash on the annual session’s final day to get a bill on the governor’s desk with a realistic chance of avoiding veto.

“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 senator that government in Kansas had to be financially punished to avoid a repeat in the future. “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 unravel and supporters would be have to reckon with that result.

He predicted the Kansas law would add to the “horror stories and self-indulgence that came from legislation that was not fully vetted.”

Nonessential?

Sen. Richard Hilderbrand, R-Galena, said he was offended that Kelly took executive action to deem businesses as essential so they could stay open and others nonessential and subject to restriction or temporary closure.

“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 35% of federal funding due to each and for the state to deposit 25% of its next shipment of cash in a comparable fund.

“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.

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“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 tie state funding to a compensation fund, but went too far by ordering cities and counties to participate.

Rep. Aaron Coleman, D-Kansas City, went a step further by declaring the bill a violation of the Kansas Constitution.

“I think we’re going to find out that we’re not able to do this,” Coleman said. “I think we’re going to find that the federal guidelines are not going to allow it.”

It’s possible Kelly could veto the bill, but the Legislature would have a chance May 26 on the typical ceremonial end of the legislative session to attempt and override of this or other measures.

Kansas Reflector is part of States Newsroom, a network of news outlets supported by grants and a coalition of donors as a 501c(3) public charity. Kansas Reflector maintains editorial independence. Contact Editor Sherman Smith for questions: info@kansasreflector.com. Follow Kansas Reflector on Facebook and Twitter.

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