Gov. Sam Brownback signed a budget Friday that will fall nearly $50 million short of balancing without additional cuts.
The budget bill, SB 161, was intended to fix a shortfall for the current and next fiscal year, which begins in July. But after tax revenues fell far short of expectations last month, the state will face a negative cash balance for the current fiscal year unless the governor proceeds with additional cuts.
Brownback announced a $17 million cut to higher education earlier this week. Even so, state leaders would need to cut about $30 million more to end the year with zero.
Those numbers don’t include the cost of complying with a recent Kansas Supreme Court order to fix inequities in funding between school districts. That order could cost the state more than $100 million over two years, according to early analysis by the Kansas Department of Education.
The budget bill empowers the governor to delay payments to the state’s pension fund, which could free up $100 million for the current fiscal year. He would be required to pay it back by September with 8 percent interest.
Current retirees would not see a reduction in benefits, but critics of the policy say delaying payments would affect the state’s ability to pay off the pension system’s unfunded liability, which stands at more than $9 billion.
The budget also enables the governor to make targeted cuts of state agencies.
“I want to thank every member of the Kansas Legislature for their hard work in passing this budget quickly,” Brownback said. “I look forward to working with the Legislature in the coming weeks as we focus on managing spending and growing the Kansas economy.”
Rep. Ron Ryckman, R-Olathe, the House budget chairman, said the budget bill allows the governor to be strategic when making cuts instead of cutting across the board, which he is able to do under statute. He said he and the governor’s office were “still in communication, looking at different agencies to find areas that can still be trimmed.”
‘I don’t see any path out of this’
Senate Minority Leader Anthony Hensley, D-Topeka, called it irresponsible and reckless to sign an imbalanced budget.
“At every step during his time as governor, Sam Brownback has mismanaged our state, leading to disastrous consequences,” Hensley said in a statement. “Kansas is in a crisis created by this governor and his allies in the Legislature, and they refuse to fix it. They are making our children pay for their political experiment with their education and their future.”
Rebecca Proctor, executive director of the Kansas Organization of State Employees, said it shouldn’t be an option for the state to delay KPERS payments. “Two years ago Lt. Governor Colyer told the house pensions committee the only way to get Kpers out of the unfunded liability hole was to ‘stop digging,’” she said. “Deferring contributions runs directly contrary to that advice.”
Sen. Jim Denning, R-Overland Park, said the governor could be forced to pause construction projects by the Kansas Department of Transportation.
“I don’t see any path out of this. He’s going to have to go deep into KDOT,” said Denning, who serves as vice chair of the Senate budget committee.
Denning was among GOP lawmakers who advocated for closing an income tax exemption for pass-through business owners last year, which the governor threatened to veto.
“Now the governor owns this after he shut us down last year,” Denning said, adding that the exemption had created a nearly $250 million hole in the budget.
Use of STAR bonds
The governor vetoed a provision in the budget that would have blocked his administration from luring the American Royal, a Kansas City, Mo., event that involves rodeos and barbecue contests, with sales tax revenue bonds.
STAR bonds rely on sales tax generated from tourist attractions to pay off the bonds used to construct those projects. Many lawmakers have called for stronger oversight of the program, which is run by the Kansas Department of Commerce, and have criticized the governor for pursuing the likely costly American Royal project in the face of the state’s revenue woes.
Lawmakers could seek to override the veto. That requires a two-thirds majority of both chambers.
Hensley said last week that Brownback and Republican lawmakers were so divided on the STAR bonds issue that the governor’s staff sought the support of Democratic lawmakers to uphold a veto. He said Friday he had yet to discuss the matter with his caucus.
Denning, the architect of the STAR bonds restriction, said the governor’s veto makes it even more urgent that lawmakers pass STAR bonds reform this year, saying there’s “a lot of taxpayer money at risk here.”
The governor also vetoed SB 250, which was passed nearly unanimously by the Legislature. It was meant to kill a building project that Brownback’s administration planned to finance through a $20 million lease-purchase agreement. The money was meant to construct a new power plant for state office buildings in Topeka after the Docking building adjacent to the Capitol was demolished.
The governor said the contract to build a new power plant had already been severed and called the bill unnecessary. Ryckman said the intent of the bill was to place the state in the strongest negotiating position to exit the contract and that it had “served its purpose.”