A bill that would prevent state agencies and universities from borrowing or entering into certain contracts without legislative approval got a hearing before Kansas lawmakers on Thursday.
HB 2703, crafted by Rep. Mark Hutton, R-Wichita, is a response to the University of Kansas’ decision to go out of state for a $327 million bond issue and to Gov. Sam Brownback’s administration’s quashed efforts to finance a state power plant through a $20 million lease-purchase agreement with Bank of America.
These moves, which took place right before lawmakers convened their 2016 session and without legislative approval, have angered some lawmakers who say that the state’s finances need more oversight. Hutton’s bill would prevent similar future deals without legislative oversight.
The bill, which was reviewed by the House Appropriations Committee on Thursday, is not about stopping projects but is aimed at making sure they get a review, Hutton said.
It says state agencies and universities could not take these actions without approval from the Legislature or the State Finance Council, a special committee that includes the governor and legislative leaders:
▪ Borrow money upon the credit of the state
▪ Contract any indebtedness on the credit of the state
▪ Issue bonds
▪ Acquire real estate
▪ Contract with a third party to construct or improve any institution or facility on state-owned property.
▪ Make expenditures for construction or improvement for any institutions or facilities
▪ Pledge as collateral of any type of state-owned institution, facility or property
▪ Enter into an agreement in which rent payments are pledged as collateral
▪ Enter into a municipal lease obligation
The State Finance Council could approve projects that cost up to $25 million. Projects above that would require legislative approval.
Hutton said he would offer an amendment when the committee moves forward with the bill to ensure that universities can still accept real estate as gifts.
"I think we’ve already made a lot of headway on that with Wichita State. I’ve had some very direct conversations with Kansas State University," Hutton said. “KU’s not talking to me. They’re still a little miffed at me.”
The Legislature added a provision to the budget to restrict KU’s spending in response to the out-of-state bond deal.
Rep. Barbara Ballard, D-Lawrence, a member of KU’s faculty, said she is concerned that the legislation is aimed only at KU.
"Let’s look at it honestly. This bill was written to restrict," she said. Ballard said she wants to make sure that KU and other universities have input on the legislation before it moves forward.
Blake Flanders, CEO of the Kansas Board of Regents, which approved the KU bond deal, told the committee that the state’s universities want to work with lawmakers and help ensure transparency in debt financing.
However, he also said universities face a “war for talent” and need to able to improve their campuses to compete. He said this can be difficult with tightened state spending.
Brownback cut $17 million from state’s universities earlier this week in the face of a revenue shortfall.
“We do want transparency, but we just feel like the backdrop has changed,” Flanders said.
He suggested that lawmakers appoint a commission to study the issue before moving ahead with the bill.
Brownback said at a news conference last week that his administration followed the law when it brokered the power plant deal. Lawmakers have already passed legislation to kill that deal.
Secretary of Administration Sarah Shipman, who is at the center of the power plant controversy, said she had not had a chance to read the amendments Hutton plans to attach to the bill.
She said that she would communicate with Hutton and the committee’s chair, Rep. Ron Ryckman, R-Olathe, to make sure that if the legislation moves forward it still allows the agency to function in day-to-day operations.
The Kansas Department of Transportation would be exempted from the bill. Hutton also said that local school districts, though funded largely by the state, are not considered state agencies and would therefore not be affected by this bill.