Stop sweeping fee funds

A court challenge could end a long-standing state budget practice of seizing money from fee funds. If so, it’s about time.

Those fees were paid to cover the cost of licenses or programs, not to help cover the state’s budget shortfalls.

More than a dozen groups, including the Kansas Bankers Association and Kansas Association of Realtors, filed a lawsuit in 2010 objecting to the state taking more than $20 million from various fee funds in 2009. A district court judge initially dismissed the lawsuit, ruling that the plaintiffs lacked legal standing. But an appellate panel reversed the dismissal in 2013, and the Kansas Supreme Court sided with the panel late last month, enabling the case to proceed.

When the lawsuit was filed, most of the attention was on the plaintiff’s attorney, Mike O’Neal, who was speaker of the Kansas House at the time. Democrats and others questioned the appropriateness of O’Neal suing state government when he was a leader of the legislative branch that authorized the sweeps.

But the question behind the lawsuit was important: Does the state have the authority to seize these funds?

It’s a question that still matters, because the fee sweeps have continued. In fact, the Legislature passed a bill last session giving Gov. Sam Brownback’s budget director expanded authority to sweep balances out of those funds, the Lawrence Journal-World reported.

Some lawmakers complained about the practice at a meeting last month of the Joint Committee on Administrative Rules and Regulations. Rep. Jim Ward, D-Wichita, argued that some agencies – such as the Kansas Securities Commissioner’s Office and the Board of Cosmetology – now want to increase their licensing fees, either to make up for the fund sweeps or as a backdoor tax increase for the administration.

“The purpose isn’t to pay the costs of the agency,” Ward said. “That’s not what this is about. This is about raising money that they expect to be swept into the state general fund.”

The state contends that, because agency fees are deposited in the state treasury, those funds are public money and can be used by the Legislature, the Hutchinson News reported. But the Supreme Court said that case law doesn’t support that claim.

“Money in the Bank Fund cannot be used to build a bridge or to pay the governor’s salary,” the court said.

O’Neal, who is now president of the Kansas Chamber of Commerce, was pleased with the court’s decision. He told the Topeka Capital-Journal that the ruling was good news for those paying fees into funds and was a strong warning against the sweeps.

“We’re one step closer to putting an end to these types of fee sweeps,” O’Neal said.

But the Legislature and the administration don’t need to wait on a final court ruling. They should resolve today to keep their hands off other people’s money.

For the editorial board, Phillip Brownlee

This story was originally published September 7, 2015 at 7:07 PM with the headline "Stop sweeping fee funds."