The Kansas Senate on Monday unanimously passed a bill that would create a $60 million low-interest loan program for businesses struggling from the economic fallout of the coronavirus pandemic.
The bill also would allow banks to deduct interest income from agricultural loans and single-family housing loans in rural areas with populations of less than 2,500 people outside a metro area.
The legislation also expands the geographical area that credit unions can serve.
Credit unions, under state law, cannot serve geographic areas totaling more than 1 million people. The bill now expands that area to 2.5 million people.
It was vetoed by Gov. Laura Kelly, who said she couldn’t provide tax breaks for banks in light of a looming budget shortfall.
State revenue officials estimate that this year’s bill will cost the state $2 million in fiscal 2023, $3.9 million in fiscal 2024 and $3.9 million in 2025.
The bill redirects idle money from a loan program established more than a decade ago to help build new housing during the Great Recession.
The proposal would take money the Legislature allocated for the program in 2008 and use it to offer low-interest loans to struggling businesses.
The money for the program in 2008 came from the Pooled Money Investment Board, which invests money available from the general fund.
The state would loan the money to the banks, credit unions or Farm Credit at 0.25%, and the banks could make the loans to the businesses at up to 3.25%.
The program would make loans up to $250,000 to each business for up to 10 years.
Funds from the loan program must be used by small businesses or agriculture operations in Kansas.
The Legislature must review the program in January 2024 to ensure funds are available and are used to support recovery efforts from the pandemic.
The loans are limited to businesses operating in Kansas with no more than 200 full-time employees.
The bill originally limited the loans to businesses with 100 workers, but it was amended on the floor to increase the limit to 200.
The loan program was an outgrowth of a dispute the banks had with credit unions.
The banks and the credit unions had been engaged in a fight since 2019 over whether there was an even playing field for taxes.
In 2019, the banks introduced two bills aimed at credit unions, claiming they were encroaching on their business.
Lawmakers set aside one bill that would have levied taxes on the business lending income of credit unions with assets of more than $100 million.
They advanced a second bill allowing banks to deduct interest income from business loans and single-family housing loans in rural areas of the state.
The banks and the credit unions ultimately agreed on a compromise that was reflected in the bill that passed the Senate on Monday.