Kansas Gov. Kelly unveils budget: Special ed funding, tax cuts and state worker pay raise
Kansas Gov. Laura Kelly on Thursday proposed a budget that will put hundreds of millions of new dollars into K-12 special education over the next five years to fully fund the program for the first time in more than a decade.
The Democratic governor is also calling for a 5% across-the-board pay raise for most state employees, a plan that drew immediate Republican concern. Kelly, who began her second term on Monday, also wants $108 million in new spending for higher education with the goal — but not guarantee — that colleges and universities will hold down tuition hikes.
The budget proposal sets aside an additional $500 million for a “rainy day” fund to fortify the state against an economic downturn, bringing the fund total to $1.5 billion. And it includes Kelly’s tax agenda, which calls for immediately eliminating the state sales tax on food and creating a back-to-school sales tax holiday in August.
The $9.4 billion state general fund annual budget comes amid a historic budget surplus in Kansas. Under the proposal, the state would end the next budget year with $1.9 billion in unallocated revenue – a massive pot of cash that marks the latest step in a five-year financial turnaround after lawmakers rolled back deep income tax cuts in 2017.
“My budget reflects my plan to responsibly cut taxes, continue growing our economy, fully fund education, and strengthen our infrastructure and workforce,” Kelly said in a statement. “We’re building a better Kansas for working families and retirees -- all while maintaining a balanced budget.”
Kelly’s budget, released during a legislative hearing, attracted more attention than usual after the governor’s annual State of the State speech, which had been scheduled for Wednesday, was postponed after Kelly tested positive for COVID-19.
The budget also includes $500 million in tax cuts over three years. Most of that amount is the immediate elimination of the state sales tax on food. Lawmakers last spring approved ending the tax over time, but Kelly wants the rate brought to zero right away and a tax elimination for diapers and feminine hygiene products. Republican legislators haven’t fully embraced an immediate elimination.
Kansas Senate President Ty Masterson, an Andover Republican, said Monday he was inclined to instead consider immediately eliminating sales tax on healthy foods only.
“There’s conversations about what is healthy and go ahead and take healthy food to zero because that’s what you’re trying to incentivize,” he said. “There’s a conversation there that might find a path.”
Kansas Budget Director Adam Proffitt, who reports to Kelly, emphasized that the budget continues to set aside funds to safeguard against a future recession while focusing on one-time spending that won’t commit the state to large ongoing increases in expenses. Ongoing spending would grow by 3.2% – less than half the current inflation rate, Proffitt said.
Still, the budget includes additional funding for an array of programs and priorities.
“This budget has something for everyone,” Proffitt told legislators.
The budget is only a starting point, kicking off months of negotiations and deliberations among lawmakers. The Republican-controlled Legislature will ultimately approve a budget, which will likely include some but not all of Kelly’s proposals. For example, the governor’s budget each year includes expanding Medicaid to provide health coverage to an additional 100,000 Kansans or more, but lawmakers have consistently declined to approve expansion.
State Rep. Troy Waymaster, a Bunker Hill Republican who chairs the House Appropriations Committee, said he was happy with Kelly’s decisions to pay down debt and put money into the rainy day fund. But he cautioned against over spending and as some economic forecasts predict a recession in the coming months.
While there were many places for agreement, Waymaster said there would be significant discussion over pay raises, special education funding and higher education funding. Kelly’s request for Medicaid expansion, he said, was a “non-starter.”
“We really don’t want to add ongoing expenditures that could be detrimental to the state in future years,” Waymaster said. “I have to say, her budget did focus a lot on one time expenditures.”
Waymaster said he would be happy if the state put $1 billion rather than $500 mill
The budget would set Kansas on a path to fully funding special education in K-12 schools in five years. State statute requires Kansas to fund 92% of the excess costs of special education not covered by the federal government. However, the state hasn’t fulfilled that obligation since at least 2011.
The budget would add an additional $72 million each year to funding for special education to bring Kansas into compliance.
Public school advocates say the underfunding has stretched school budgets in an unsustainable manner, forcing districts to reallocate funds intended for the general student population to cover the needs of special education students. But some Republican lawmakers have been skeptical of spending more money on K-12 education, which accounts for about $6.4 billion in the state’s roughly $22 billion budget.
Top GOP lawmakers have advocated for rewriting the state statute on special education funding and reallocating existing public education dollars to special education.
State Rep. Kristey Williams, an Augusta Republican who chairs the House K-12 Budget Committee, said she planned to introduce legislation establishing a task force to study special education funding in Kansas.
“It’s the statute’s got flaws so rather than just add money to a flawed statute let’s fix the statute and then address the funding and make sure it’s fair for everyone,” she said.
For public colleges and universities, the budget allocates an additional $108 million – nearly $66 million in base funding increases and $42 million in one-time spending.
The increase in ongoing spending includes $20 million to expand financial aid and nearly $22 million to mitigate the effects of inflation. The one-time spending includes $20 million to address deferred maintenance, $12 million for information technology and cybersecurity improvements, as well as $10 million for demolition of buildings.
Past funding increases put forward by Kelly have come with the expectation that the Board of Regents, which governs the state’s universities, will block tuition increases for in-state residents or hold them to low levels.
In her latest budget, Kelly did not include that requirement.
Kelly is asking for a 5% pay raise for most state employees, as well as pay raises to bring certain jobs within 5% of market pay rates. Proffitt said it accounted for about 5,000 state employees and would include a wide variety of state workers including accountants, administrators and groundskeepers.
Waymaster, the GOP appropriations chair, said he wasn’t inclined to support the across the board raise. In recent months, Waymaster has advocated for targeted raises impacting only those positions below market rate.
“We have positions that are over market and they are going to get that 5% pay increase,” Waymaster said.
In the private sector, “you didn’t have a 5% pay increase unless it was based on performance,” Waymaster said. “We need to start looking at not doing across the board pay increases and actually having it based off the individual’s performance.”
This story was originally published January 12, 2023 at 12:54 PM with the headline "Kansas Gov. Kelly unveils budget: Special ed funding, tax cuts and state worker pay raise."
