TOPEKA — Kansas is lagging behind 27 other states that have made significant progress over the last five years in evaluating the impact and effectiveness of costly tax incentives, according to Pew Charitable Trust evaluation ratings.
Kansas is kept company by 23 other states the ratings deem “trailing.” On its website, Pew defined trailing as states that “lack a well-designed plan to regularly evaluate major tax incentives.” In its next steps, Kansas is looking at the transparency of its incentive program.
On Thursday, Jan. 31, the Kansas House Commerce, Labor and Economic Development Committee continued its discussion of its tax incentive disclosure bill, House Bill 2006, which would require the Department of Commerce to create a public database to disclose information on economic development incentive programs. First introduced on Jan. 14, the bill is still in preliminary stages.
These programs include certain property tax exemptions and tax credit programs as well as any other program administered directly in whole or in part by the Department of Commerce.
The bill was created and introduced by Rep. Kristey Williams (R-77th), who said she believes HB 2006 can create more transparency and accessibility for taxpayers in Kansas.
“Making sure the public knows how their tax dollars are used, where they are used, and by whom they are used is fundamental right of the people who fund the incentives,” said Williams.
The bill would not change current incentive policies, but rather it would allow information to be conveniently and quickly available to anyone who wanted to examine incentives, Williams said . However, it would not allow disclosure of information if the disclosure violated federal laws.
The Department of Commerce would be responsible for collecting and reporting all the information in a digital format that is searchable by program, business and county, printable and available online.
In his proponent testimony, Michael Austin, director of the Center for Entrepreneurial Government at the Kansas Policy Institute, said “the creation of a database by HB 2006 is a step in the right direction…it encourages scrutiny, reform and hopefully a more effective use of taxpayer dollars.”
Kansas Chamber Vice President of Government Affairs Eric Stafford opposed the bill, along with Kansas Economic Development Alliance Board Member Trent Armbrust, and Olathe Chamber of Commerce CEO Tim McKee.
Overall, they supported using economic development tools to recruit and retain employers throughout Kansas and ensure effective use of taxpayer money. Yet, they expressed concern over violations of confidentiality, saying it could jeopardize relationships with Kansas businesses.
“[Businesses] value the information that they were disclosing — extremely proprietary for their strategic growth — and they asked us to sign on disclosure. That is the perspective of the company,” Armbrust said. “It would give away a competitive advantage.”
In response, Williams asked if Armbrust believes the taxpayers of Kansas deserve transparency about general information such as the name of the business, location, incentive amount, how long they’ll receive the incentive, and if they met their obligations.
“There is nothing about their income or their plans for expansion; only about the incentives,” said Williams.
Stafford said there has to be a better way of being transparent than placing information online.
“It’s just a website of information,” he said. “There’s no follow-up.”
He proposed doing a report every three to five years to review and measure the economic impact of Kansas’ programs. He also referred to Pew’s suggestions for states to best evaluate tax incentives. Pew’s three recommended steps were to 1.) make a plan; 2.) measure the impact; and 3.) inform policy choices.
However, Rep. Bradley Ralph (R-119th) said that the website would serve two main functions: provide information to the legislators to do their jobs well and provide information to the public for their interests.
According to the bill’s fiscal report, the Department of Commerce estimated that it would need $59,813 from the State General Fund in FY 2019 and $44,550 in FY 2020 to create a job position designated to collecting and reporting the information.
“Other states are doing a fantastic job of the providing the data and it’s not hurting their economic development,” Williams said. “They are growing because fairness matters, honesty matters, doing the right thing matters, and this bill is simply that.”
There is no further discussion scheduled for HB 2006 as of Jan. 31.
Angel Tran is a University of Kansas senior from Wichita majoring in journalism.