Archive for Monday, January 9, 2012

Kansas lawmakers face big issues, but no deficit

January 9, 2012

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— For the first time in nearly five years, lawmakers won't face a gaping hole in the state budget when they return to the Kansas Statehouse on Monday.

While they have several meaty issues on their plate — including tax cuts, Medicaid reform, rewriting the school funding formula and changing the public employee pension system — a budget deficit isn't one of them thanks to the state's rebounding economy. The unemployment rate also has been improving, dropping to 6.5 percent in November from 6.7 percent in October and 6.9 percent in November 2010. The December rate hasn't been announced yet.

Last year, lawmakers came back to a budget shortfall of nearly $500 million. Federal stimulus spending was running out, and state revenue growth was anemic, at best. This year, the state is expected to have a budget surplus of close to $200 million.

"It certainly is a relief that we don't have to make more cuts," said House Minority Leader Paul Davis, a Lawrence Democrat. "The past three sessions we've had this cloud hanging over us and it hasn't been pleasant to any of us."

Along with spending cuts, lawmakers and Republican Gov. Sam Brownback borrowed $200 million from the state transportation program to close last year's budget gap.

Sherriene Jones-Sontag, the governor's spokeswoman, said while the situation has improved, the state needs to stay "focused on our priorities and living within our means — and preparing for our future."

Brownback repeated a statement last week that he has made for the past year, saying Kansas shouldn't rely on federal dollars to support state programs. He cited defense cutbacks that Boeing Co. blamed this week in announcing its decision to close its Wichita plant and eliminate 2,100 jobs by the end of 2013.

"You have a federal budget reality, and that's why I'm going to propose a state budget here that is a strong state budget," Brownback said, "to get us in a stronger fiscal position for these sorts of things that are going to increasingly happen."

He said current federal spending isn't sustainable and Europe's debt problems are "migrating this way."

"We would not be prudent if didn't prepare for this," Brownback said.

Without a deficit to address, Brownback said he plans to devote more attention this year to cutting taxes. Brownback has said he would like to reduce marginal income tax rates to create a better business climate and attract new jobs from out of state. He's also promised the plan would be revenue neutral, meaning any changes would not result in more budget cuts.

The governor was expected to offer more details in his State of the State address Wednesday night before a joint session of the Legislature.

"Flatter, simpler, fairer is how the governor described it," Jones-Sontag said of the plan.

Brownback has said he hopes to find more savings by reforming Medicaid and awarding contracts to at least three private companies to manage the system. The goals is to find enough efficiencies through better coordination of health care services to slow the growth in Medicaid spending over the next five years by some $800 million.

The governor's staff also recently outlined a new school finance formula, the first major revision in nearly two decades. Jones-Sontag said the governor's proposed budget will include an additional $24 million during the current fiscal year and $21 million during fiscal 2013 to keep base state aid for public schools at the current $3,780 per pupil.

"We have to put more money into schools," she said.

Brownback has already said he'll seek a $45 million increase in fiscal 2014 as part of his plan to overhaul the school finance system.

Jones-Sontag has already said the governor hopes to propose a 7.5 percent ending balance for fiscal 2013.

"The general philosophy is that an ending balance gives the state a savings account so if something unexpectedly happens — you know, a Greensburg tornado, a disaster, a flooding event — the state will be able to step in financially and assist Kansans in need, or make sure it can pay its bills if suddenly we have another recession," she said.

A group of 28 Republican and Democratic senators have proposed Kansas go a step further, reviving a plan to amend the state constitution to require a 5-percent rainy day fund. The plan calls for setting aside 0.25 percent of all state revenues each year in the fund, which could only be accessed by a super-majority vote of the House and Senate for emergencies.

Anything above 5 percent in the account would be returned to the state's general fund for government programs.

Senate Vice President John Vratil said planning for lean economic times works best if the money is locked away until there's a legitimate need. Right now, the state tends to grab fees generated by certain agencies or raiding transportation funds.

"In an economic downtown, the rainy day fund could then be used to prevent tax increases and to provide a bridge for our state to get by until revenues recover," said Vratil, a Leawood Republican.

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