Topeka Gov. Sam Brownback and legislative leaders on Thursday approved borrowing $675 million from idle funds to shore up the state general fund over the next fiscal year, setting off a sharp political debate over the direction of the state's fiscal condition and economy.
That amount is more than double the $300 million in "certificates of indebtedness" the state issued for the current fiscal year, which ends June 30. And it is closer to the record $775 million borrowed in fiscal year 2009 during the Kathleen Sebelius administration, just after the beginning of the Great Recession.
Rep. Paul Davis, D-Lawrence, who is challenging Brownback for re-election this year, said the increase in borrowing represents a "deteriorating fiscal situation" for the state.
"When we have a projected ending balance (next year) of $56 million, when we have had revenue declines over the past few months of $310 million, and what unfortunately nobody is talking about here is what the future of our fiscal situation looks like," Davis said.
As the House Minority Leader, Davis serves on the State Finance Council that authorized the borrowing. That's a group that includes the governor and other legislative leaders who are authorized to make financial decisions for the state when the Legislature is not in session.
But Brownback stuck to his position of blaming the Obama administration for raising capital gains taxes early in 2013, prompting investors to sell off assets before that tax hike took effect, resulting in lower capital gains revenues for states a year later.
"What we got last year (when revenues exceeded projections) was we got the bump off the fiscal cliff, that President Obama raised taxes and people moved their money a year earlier," Brownback said. "We're in a far better situation today. We've got a record number of people working in the state of Kansas. ... And if we hadn't cut taxes, particularly for small business to create jobs and opportunities, we wouldn't be in near as good a situation as we are."
Davis, however, countered that the impact of changes in federal tax law affected all states that have income taxes. But while other states saw an average 7 percent drop in income tax collections in recent months, Kansas had a 22 percent drop. He said that was the result of the large income tax cuts that Brownback and the Republican-controlled Legislature approved in 2012.
But Brownback defended those tax cuts.
"We cut taxes to create growth," he said. "We always told you that there would be a dip in revenues for a couple of years before it pulled back up, but the focus was always getting more money in people's pockets.
Senate President Susan Wagle, R-Wichita, said she doesn't think most Kansans are concerned about the state having less money to spend.
"Government has less money to spend, but that's what people are asking for," she said. "They want more money in their pockets."
Senate Democratic Leader Anthony Hensley, of Topeka, argued that the reason the state's financial condition improved soon after Brownback took office was because the previous Legislature, and Democratic Gov. Mark Parkinson, approved a 1-cent sales tax increase for three years.
But Brownback shot back: "If you're proposing raising taxes again, that's up to you and Rep. Davis. You can choose to propose that if you choose to propose that. I don't think it's a wise route to go."
Thursday's action marks the 16th consecutive year that the finance council has authorized certificates of indebtedness. The borrowing is intended to make sure the state has an adequate balance on a day-to-day basis to meet cash-flow needs because revenues flowing into the state tend to come in irregular intervals.
By law, the certificates have to be paid back before the end of the fiscal year in which the money is borrowed.