Senate Creates Massive Fund To Compensate Businesses For COVID-19 Excesses

By Tim Carpenter, Kansas Reflector

May 4, 2021

TOPEKA — The Kansas Senate endured an excruciatingly long debate before approving a bill Tuesday anointing a three-person board with unilateral authority to settle behind closed doors the economic damage claims filed by businesses undercut by COVID-19 orders by state, county or city governments.

The legislation sent to the Kansas House would place Attorney General Derek Schmidt, a candidate for the Republican nomination for governor in 2022, in charge of a novel settlement process allocating a tantalizing $700 million to businesses that would be exempted from the state’s open meeting and records statutes. GOP senators were adamant that Gov. Laura Kelly have no leadership role in distribution of the assistance.

“Part of the American dream is being a business owner. You put your blood, sweat and tears into your effort,” said Sen. Kellie Warren, a Johnson County Republican. “I think businesses were blindsided and their liberties were taken away.”

Senate Democrats raised questions about whether the bill created a conflict of interest for the attorney because Schmidt would be responsible for defending the state in COVID-19 lawsuits as well as negotiate resolution of COVID-19 claims made in response to city, county or state edicts. In addition, Senate Minority Leader Dinah Sykes said Schmidt would reap political benefit from administering the compensation system.

Senate President Ty Masterson and House Speaker Ron Ryckman, both Republicans, and the Democratic governor would each select one person to serve on the business-relief board. The state is expected to receive in the neighborhood of $1.6 billion in the next round of federal stimulus funding approved by Congress and President Joe Biden.

The Senate bill was amended to set aside 35% of available federal COVID-19 relief aid to compensate Kansas businesses for pandemic abuses of government. When brought to the floor, Senate Bill 286 would have laid claim to 100% of unencumbered relief aid allocated to Kansas. If money is left over in the city and county funds, the state would release that cash for use by public officials in those cities and counties.

Sen. Rick Wilborn, R-McPherson, offered the amendment because the notion of “100% was probably too rich” and a final figure would likely have to be negotiated with the House.

In addition, the bill was altered by the Senate to require placement on a public website the business name, address and amount of payment authorized by the special board.

Warren, chairwoman of the Senate Judiciary Committee, said developers of the bill sought an expedited process for distributing compensation. Secrecy of board deliberations is important because companies will be asked to submit confidential financial records with applications, she said.

“We wanted to make sure businesses that have been through so much already because of restrictions by a government … would be properly protected,” she said.

Sen. Tom Holland, a Baldwin City Democrat, said the bill lacked a precise definition of what economic harm would trigger a government payout. He asserted Schmidt could become mired in a conflict of interest by organizing a system allocating settlement payments to businesses offended by government mandates and turning around to fight businesses that filed lawsuits against the state seeking compensation for COVID-19 mandates by government.

“I see this as a massive conflict of interest,” Holland said. “I’m concerned you’ve got the attorney general wearing two hats. Who does he represent? On top of that, the guy’s running for governor. Come on. It has very little transparency. The accountability is out the window.”

Warren objected to Holland’s interpretation of a conflict of interest, saying: “I will tell you you are way off. The conflict-of-interest argument is a red-herring.”

Before the Senate took up the bill, Rep. Fred Patton, a Topeka Republican and chairman of the House Judiciary Committee, raised questions about the measure.

“I’m supportive of the idea,” he said. “Why would we not have any of this information open to the public? We’re comfortable allowing a three-member unelected body to distribute that kind of money? I don’t have any right to appeal?”

Under the bill, businesses applying for compensation would submit up to three years of tax returns and information about how government impaired operations, how much in stimulus loans or grants had been received through other federal, state or local programs and whether the business was deemed essential or nonessential during the pandemic. The application could include information about extraordinary contributions to communities during the COVID-19 crisis, which has led to the death of nearly 5,000 Kansans.

Sen. Dennis Pyle, R-Hiawatha, said drafters of the bill should have required issuance of written notices to business about the program because too many owners would likely not be aware of decisions at the Capitol allowing people to file claims with the state board. He also raised concern that unprecedented flow of federal money into the Kansas economy could fuel a sense people could depend on government handouts.

The GOP-controlled Senate deflected a series of amendments authored by Democratic senators, including a proposal by the Senate Democratic leader to compel businesses receiving compensation to earmark half of that money for employee salaries of benefits. Also defeated was Sykes’ amendment directing a portion of available federal aid to Kansas workers on the front line of the pandemic, including health and education employees.

Sen. Mike Thompson, a Johnson County Republican, said Sykes misunderstood intent of this legislative effort. He said the objective was to sanction reckless, freedom-eroding government at all levels and to compensate businesses that suffered from government overreach in the pandemic.

“There’s got to be some punitive portion of this bill,” Thompson said. “This is a compensation package for businesses. It has nothing to do with employees.”

Also rejected by the Senate was an amendment by Sen. Pat Pettey, a Democrat from Kansas City, Kansas, that would pass responsibilities given the attorney general’s office over to the Kansas Department of Commerce. She also was unsuccessful in attempting to remove from the bill the obligation of cities and counties to pay damage claims to businesses determined by the new three-person board.

“I think it’s very inappropriate for us doing this overreach of Big Brother,” Pettey said.

Warren said she would seek to advance a bundle of COVID-19 legislation during the veto portion of the annual session. Her list included adoption of a prohibition on so-called vaccination passports. The bundle could include extension of a law allowing people to decline to participate in contact tracing for the virus. It could feature tweaks to a 2021 law enabling individuals to swiftly challenge COVID-19 restrictions adopted by school districts or other government entities.

For example, there have been challenges in Johnson County to mask mandates in public schools. Warren said the process wasn’t being implemented as the Legislature intended and being “abused” by local units of government.

This story was originally published by Kansas Reflector. For more stories from the Kansas Reflector visit Kansas Reflector.