Kansas to borrow $900 million, may delay payments to school districts

Kansas will have to borrow $900 million to get through next fiscal year and may have to delay payments to school districts to get through the current year.

It also will take more money from the highway fund and could tap a Medicaid fee fund.

The state faces a $45 million budget hole for the current fiscal year, which ends June 30. That could grow if June tax revenues fall short, budget director Shawn Sullivan told the State Finance Council on Wednesday.

Gov. Sam Brownback blamed the shortfall on the global economy, though a top Democrat pointed to the governor’s 2012 tax cuts as the cause.

Sullivan said the state would take $16 million from the state’s highway fund, the last dollars that can be tapped from that revenue source. It could also take money from a $45 million Medicaid fee fund to get through the current fiscal year.

Another $3 million can be taken from the Kansas Department of Corrections, Sullivan said.

He floated the possibility that the state would be forced to delay part of its June payment to school districts until July, the beginning of the new fiscal year.

The state also will have to take out a record $900 million certificate of indebtedness for the next fiscal year to plug holes in the budget when cash runs scarce. The council voted 8-1 to approve the measure.

The money is borrowed from the Pooled Money Investment Board, a state board that manages the state’s investments, and is then deposited into the state’s general fund. The money must be paid back by the end of the fiscal year by statute.

“Essentially borrowing from ourselves,” Sullivan said.

Senate President Susan Wagle, R-Wichita, who for several years has pressed Brownback to pursue deeper budget cuts, was the only member of the council to vote against the certificate.

“This isn’t the way I manage my finances. This isn’t the way I manage the finances of my business. … This is like me putting groceries on a charge card and praying that the money comes in,” Wagle said.

“We’re here because we haven’t cut expenses enough,” she continued. “And now we’re being asked to cover our operation expenses on a certificate of debt and it’s not going stop unless you increase taxes or cut spending.”

The size of the short-term debt is usually seen as an indicator of the state’s fiscal health.

“We’ve got to take some responsibility for why we’re in the situation we’re in,” said Senate Minority Leader Anthony Hensley, D-Topeka.

Hensley said the state was in “a downward spiral,” noting that last June the council approved a certificate of indebtedness of $840 million – a record at the time – to get the state through the current year.

He blamed the state’s cash flow problems on income tax cuts the state enacted in 2012, Brownback’s signature policy.

Brownback pushed back against the criticism, contending that the state’s poor revenues in recent years were a result of global factors, such as dropping oil and agriculture prices. He said the state’s budget would have been worse shape had the tax cuts not gone into effect.

Asked after the meeting if the debts reflected on his fiscal management, Brownback replied, “It reflects on the nature of what’s going on in the economy.”

Budget problems in other states show that something larger is at play, Brownback said, adding that his administration has enacted budget cuts in response to the problem but that he does not have sole control over that process.

“At the end of the day … the budget is the operation of the Legislature, as far as what they approve. The appropriations process is part of the legislative process by the Constitution. It’s not something that I can personally do,” Brownback said. “It involves everybody.”

The governor proposes a budget at the start of each legislative session and ultimately decides whether to sign what the Legislature passes into law.

This story was originally published June 22, 2016 at 10:48 AM with the headline "Kansas to borrow $900 million, may delay payments to school districts."