Kansas repeals law mandating regular audits of all economic development programs

Kansas lawmakers and Gov. Laura Kelly have repealed a law requiring regular audits of all the state's economic development programs.

Kelly on on April 12 signed House Bill 2483, which eliminates various statutory requirements for the Legislative Division of Post Audit. That includes repealing a law mandating that all economic development incentive programs be reviewed every three years.

Kelly didn't comment on the bill when she signed it into law, and it received little debate in the Legislature. It passed the House unanimously and passed the Senate with only one no vote.

The bill was requested by the Legislative Post Audit Committee, a group of legislators that requests and reviews audits. Rep. Sean Tarwater, R-Stilwell, said in a January House commerce committee hearing on the bill that the purpose was to free up more staff time for audits requested by lawmakers.

"The audits that are demanded in statute take up a tremendous amount of time, and so therefore we can't really focus our auditors on the things that are most important to the Legislature," Tarwater said. "This does not keep us from auditing anything in the Department of Commerce or the 911 system, it just removes the automatic audits that are somewhat boring, for the most part, that reoccur automatically and we don't really receive a lot of information because they're not as targeted as we'd like to be."

Under changes in HB 2483, new incentive programs will still be audited but on a later timeline, as selected by a legislative committee. Legislators can also ask for audits of specific programs, which Tarwater said would be conducted in "a better way" than the statutorily mandated ones.

"That's all this is meant to do," he said.

Audit division director Chris Clarke said in Senate Commerce Committee testimony in February, "We typically receive more requests for audits than we have capacity for."

Opponents didn't want less oversight of subsidies

The Legislature's nonpartisan auditing arm conducts audits of government operations as required by law and at the direction of legislators.

By law, the regular economic development audits were intended to enhance the Legislature's oversight of state subsidies, with analysis of various areas, including their return on investment and their opportunity costs.

Sen. Tom Holland, D-Baldwin City, was the lone no vote against the new law. He said that with Lt. Gov. David Toland also serving as Commerce secretary, "The Commerce Department's economic development programs need more external oversight, not less."

Kelly and Toland have made economic development a major focus of their administration, but audits of some prominent programs — like a 2021 one on STAR bonds and 2023 ones on Promoting Employment Across Kansas and the High Performance Incentive Program — have sometimes led to lawmakers debating their merits.

The Pew Charitable Trusts didn't testify on the bill but voiced opposition in a statement last month.

The organization said Kansas has benefited from evaluating incentives by helping lawmakers "identify ways to improve their return on investment for incentive programs, protect themselves from fiscal risk, and amend incentive programs that aren't working." They viewed eliminating the mandatory audits as putting "at risk the millions of dollars Kansas spends annually on economic development incentives."

"Economic development incentives are an expensive investment — lawmakers should know whether these investments are benefiting the state," said Chaaron Pearson, a Pew senior manager. "Incentive evaluation is a proven way for states to improve their economic development incentives. We strongly encourage Kansas legislators to consider other solutions that could free up resources while still ensuring policymakers have the evidence that they need to make informed decisions about the state's incentive programs."

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These are the mandatory audits that lawmakers repealed

At its October meeting, the audit committee directed the drafting of legislation to eliminate certain mandated audits.

That included the three-year recurring audits of economic development programs, as legislators thought they could make a better use of staff resources by directing which programs to audit themselves. That audit requirement was put in law in 2019.

Additionally, they wanted to change the law on required audits of new programs. Legislators and staff suggested those audits were not particularly useful because they were conducted too early to capture much measurable activity.

Legislators moved to repeal the required five-year audits of the 911 system implementation, which is essentially complete after the audit requirement originated in 2011, and the required three-year audits of the Kansas Public Employees Retirement System, as KPERS administration has improved since the requirement was put in law in 1992.

More: Audit: Projects using hotly debated Kansas economic development tool not hitting key benchmarks

More: How effective are Kansas' economic incentives? Audit sheds light amid megaproject debate.

Jason Alatidd is a Statehouse reporter for the Topeka Capital-Journal. He can be reached by email at jalatidd@gannett.com. Follow him on X @Jason_Alatidd.

This article originally appeared on Topeka Capital-Journal: Kansas repeals law requiring audits of economic development programs