Gov. Laura Kelly rejects bill to compensate businesses for COVID-19 losses, citing federal guidelines

Andrew Bahl Titus Wu
Topeka Capital-Journal
Gov. Laura Kelly vetoed Friday a sweeping bill aimed at compensating businesses for COVID-19 related shutdowns, citing the bill's lack of transparency.

Gov. Laura Kelly vetoed Friday a sweeping bill aimed at compensating businesses for COVID-19 related shutdowns, arguing its use of federal relief funds violates guidance from the U.S. Treasury Department. 

Under Senate Bill 273, state and local governments would have had to divert up to 25% or 35% of money from the American Rescue Plan Act to pay out claims for businesses who are able to prove they were harmed financially when the state ordered them closed in the early days of COVID-19.

A three-member board appointed by legislative leaders and the governor would preside over the claims, using a variety of factors to determine a proper amount to be awarded, although such meetings wouldn't be open to the public.

To help address transparency concerns, lawmakers added more oversight over the process from legislative and executive branches.

More:To Kansas businesses hurt by COVID-19 orders, here's what compensation might come your way

Top Republican legislators sharply criticized the move.

“Over the last 15 months, Kansas small businesses have endured numerous challenges including restrictions and mandatory closures imposed by government," Senate President Ty Masterson, R-Andover, said in a statement. "The governor's refusal to help these same businesses she herself shuttered is tone deaf."

Governor argues bill violates federal guidelines

Kelly called the bill "well-intentioned" but argued guidance from the U.S. Treasury Department barred using the federal relief dollars in the way legislators envisioned. The amount set aside could have been as much as $500 million, lawmakers said during debate.

There has been concerns that SB 273 would violate a clause in the guidance restricting funds from being used to settle litigation, as well as language limiting how local governments can be mandated to use the money.

"SB 273 is well-intentioned, but it violates federal rules for the use of American Rescue Plan Act funds that prevent the state from placing conditions or requirements on local governments’ use of ARPA funds," Kelly said in a statement.

Kelly said she would rather use an already existing process to provide relief for businesses, one which uses a taskforce started last year specifically to drive out federal aid.

"All recovery initiatives should go through the transparent, federally compliant, bipartisan, and efficient process we have already established through the SPARK Taskforce," she said.

But supporters of the bill feel differently. In a statement released ahead of the veto announcement, a coalition of business groups said the "vague" federal guidance wouldn't have posed a problem for SB 273.

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Does the veto create a risk for lawsuits?

The bill was in large part an effort to pre-empt lawsuits from businesses seeking compensation for the state and local restrictions to curb the spread of the virus.

Kelly issued a statewide stay-at-home order for five weeks last spring, although Republican lawmakers eventually gave local officials more control over closing businesses and issuing restrictions.

But Omega Bootcamps, a Wichita gym, was the first business to file suit in December, saying a provision in emergency management laws allows it to seek financial damages.

Ryan Kriegshauser, the attorney representing Omega Bootcamps, argued the concerns about the Treasury guidance were unfounded and a convenient excuse for Kelly to reject the legislation.

"It is incredibly premature and an incredibly narrow reading (of the Treasury guidance)," Kriegshauser said. "And I'd view it as an excuse to just not sign the thing and play politics with it. I think you have to let these things play out."

More:Does Kansas owe businesses for mandating they close? A new lawsuit says yes.

It is unclear how the lawsuit will progress and how Kelly's decision to veto the bill will affect the legal proceedings. The case was paused by Omega Bootcamps and Attorney General Derek Schmidt in an effort to work out a legislative solution, which eventually became SB 273.

Kriegshauser said the veto would open the door for lawsuits to be successful, although he said he would need to confer with his client over how best to move forward.

"We tried to find a legislative solution, it was passed and then vetoed, this is our other remedy," he said of going to court. "There is no way you can dismiss this, this is what the state has said to do. It is just unfortunate for the small businesses because it is going to be an intensive litigation process."

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It is not clear whether leaders will have enough votes to override the governor's veto.

In the Kansas Senate, members would need to flip four votes to override. Four Republicans in that chamber voted no on the legislation, with an additional two members opting to pass.

Meanwhile, 13 members in the Kansas House would need to change their minds in order to overturn the veto. Fourteen members, including 11 Republicans, weren't present for the first vote.

Lawmakers return to Topeka next week for the ceremonial end of session, although they can take up legislative business if needed.