Taxation committee hears briefing on HCR 5,014 to create ‘freedom from taxes’ endowment

At an informational briefing of the Committee on Taxation, legislative staff and Representative-level members discussed HCR 5,014, a proposed constitutional amendment that would create a “freedom from taxes fund” and a Kansas Citizens Freedom Review Board to review and eliminate state sales and compensating-use tax exemptions. The proposal would direct revenues from eliminated exemptions into two subfunds intended to finance elimination of state-imposed property taxes and later state income and privilege taxes.

Adam Siebers, reviser for the committee, gave the technical overview, saying HCR 5,014 would amend Article 11 of the Kansas Constitution to establish the fund and the review board and to “authorize the board to review tax exemptions and approve or eliminate exemptions.” He told the committee the funds would be administered by the state treasurer and that “any expenditures from the freedom from taxes fund would be solely used for the elimination of state imposed property, income, and privilege taxes.”

The measure as described would: create two subfunds (a state property tax elimination fund and a state income and privilege tax elimination fund); require the treasurer to calculate and transfer amounts generated from eliminated exemptions into the fund; allow interest earnings to be used to substitute for the identified tax revenues when the treasurer determines the fund has sufficient projected earnings; and include a five-year sunset for exemptions approved by the citizen board unless reauthorized by the Legislature.

"I am not advocating that we pass HCR 50 14 this year," said the Speaker Pro Tem (identified in the record as Speaker Pro Tem), who presented the policy rationale and numbers supporting the concept. He described the measure as “a massive…fundamental shift” in tax policy and said he expected further study by the committee and nonpartisan research staff. Using his assumptions, he said a scenario that directs about $2 billion annually into the fund with a roughly 7.5% investment return could allow the property-tax subfund to reach self-sustaining levels in about seven to eight years; he estimated the endowment size needed to substitute for state portion of property tax at roughly $13 billion to $15 billion under those assumptions.

Committee members raised a range of procedural and policy questions. Representative Bryce asked what guardrails would prevent future legislatures from raiding the fund and whether the Legislature could reimpose property taxes after elimination; the reviser and the proponent pointed to constitutional protections in the draft language and to explicit prohibitions in the measure against levying the identified state-imposed property and income taxes once the treasurer determines elimination conditions are met. The proponent acknowledged the Legislature would retain the authority to reauthorize eliminated exemptions in a later session and could act to restore exemptions that the citizen board removed.

Lawmakers pressed on specifics of implementation and risk. Questions and committee discussion covered:

- Tracking and revenue accounting: Representative Wolff asked how the state would track collections from previously exempt transactions; the Speaker Pro Tem said that would require coordination with the Department of Revenue and research staff to assign codes and reporting so the treasurer could calculate transfers.

- Scale and assumptions: Representative Turner and others asked about underlying assumptions. The proponent said his scenario assumed $2 billion in annual initial receipts directed to the fund and a 7.5% annual return; he also said statewide tax exemptions totaled about $9 billion in 2024 and that $2 billion would be roughly 22% of current exemptions.

- Timing and sequencing: The proposal would use revenue from eliminated sales-tax exemptions first to seed the property-tax elimination subfund; once the treasurer determines the property-tax subfund’s projected interest earnings exceed the amount needed to replace the state-imposed property tax, the state-imposed property tax would be discontinued in the next ensuing year. After that, transfers would build the income-and-privilege-tax subfund until a similar threshold is reached.

- Legislative and local impacts: Members asked whether the plan would shift burdens to local governments or how counties might pursue similar mechanisms. The proponent said the measure initially targets the state share of property taxes as a proof of concept and that local taxes are largely set by locally elected officials; he also noted the constitutional protection in the proposal is meant to insulate the endowment principal from future legislative transfers.

- Precedents and international examples: The proponent cited Norway’s sovereign wealth fund as a comparable international model of an insulated, investment-driven fund; members pointed to Alaska and international examples when discussing protections and the risks of raiding principal.

Committee members also discussed demographic and growth risks—how future population or business growth might change revenues and needed services—and whether fees or other mechanisms should be considered if rapid in-migration outpaced the fund’s capacity to replace tax revenues. The Speaker Pro Tem said such design details would be part of further study and statute-writing if the amendment advanced.

No formal committee vote was taken on HCR 5,014 during the briefing; the measure was presented as an informational item and proponents asked the committee to continue study through the interim. The committee did approve, by unanimous consent and without recorded opposition, a separate bill request, RS1988, a resolution described by staff as a request to the U.S. Department of Education to block-grant non-pass-through federal education funds to Kansas.

The committee chair said members should expect continued work and follow-up research and listed a planned continuation of other business, including consideration of House Bill 2,377 at a subsequent meeting.

The briefing produced several open questions the committee identified for future staff work: modeling alternative investment returns and deposit scenarios; drafting statutory details for board composition and appointment; specifying accounting and Department of Revenue reporting for tracking eliminated-exemption revenue; and analyzing fiscal impacts on local governments and potential interactions with federal funding or bond ratings.