Kansas House gives initial OK to bill to restrict borrowing by universities, state agencies

State agencies and universities will be unable to borrow money without legislative approval under a bill that was approved by the Kansas House Friday.

SB 249, which passed by an initial voice vote, stems from a controversy surrounding the University of Kansas’ decision to issue $327 million in bonds earlier this year through a Wisconsin agency.

The bonds are being used to finance a massive redevelopment project on the university’s Lawrence campus. The university was able to avoid the need for legislative approval by going out of state. It would be prevented from doing so for future bond issues if the bill becomes law.

The bill also is meant to place tighter restrictions on Gov. Sam Brownback’s administration after it struck a $20 million deal with Bank of America to finance a new power plant for state office buildings in Topeka without lawmakers’ knowledge. The administration had put up a government building named after former Gov. Alf Landon as collateral in the deal.

The project has since been abandoned following legislative backlash.

“I think it’s no secret that on both of those projects the Legislature was cut out of that process,” said Rep. Mark Hutton, R-Wichita, who crafted the legislation.

The bill would require state agencies and universities to seek legislative approval before they could:

▪  Borrow money on the credit of the State

▪  Contract any indebtedness on the credit of State, except those redeemed within 90 days

▪  Issue bonds

▪  Acquire real estate by gift, devise or bequest, which is part of a public-private partnership

▪  Contract with a third party to construct or maintain a state facility if the amount is $2 million or more

▪  Expend funds to construct, maintain or improve a state facility if the amount is $2 million or more

▪  Pledge as collateral any state-owned institution, facility, property or future rental stream

▪  Enter into any lease obligation for which the annual liability is $1 million or more or the term is greater than five years

▪  Lease state-owned property to a private entity at less than fair market value

The Kansas Department of Transportation and the University of Kansas Hospital would both be exempted from these restrictions. Hutton said that he had numerous conversations with the Board of Regents, Wichita State University and Kansas State University while crafting the legislation.

“KU for some reason just isn’t talking to me,” Hutton said with a laugh.

KU did not immediately comment about the initial passage of the bill Friday afternoon. A final House vote on the bill will take place Monday. It would then move to the Senate.

This story was originally published March 18, 2016 at 8:03 PM with the headline "Kansas House gives initial OK to bill to restrict borrowing by universities, state agencies."