Budget panel strikes back at KU over bond deal

This concept drawing from Kansas University's 2014-2024 Master Plan shows Innovation

? Kansas University could have severe restrictions placed on its budget next year as punishment from the Kansas Legislature over its decision to issue $327 million in bonds through a Wisconsin agency without first getting legislative approval.

“They seem to have the idea that it really doesn’t matter what the Legislature feels about stuff, sometimes they can go ahead and do it anyway, and that’s what I felt like they did here,” said Rep. Marc Rhoades, R-Newton, who sponsored the amendment.

“There’s got to be a hammer,” he said. “For anybody. I’m not singling them out, but they seem to be the ones that keep coming up over and over again, saying it doesn’t really apply to us. And I beg to differ with that.”

The bonds that KU issued in January will finance construction of the Central District development project. That’s a collection of new science buildings, residence halls, apartments, a Student Union facility and a parking facility in an area of campus just south and east of Daisy Hill.

Rhoades’ amendment would put a proviso in the state’s budget for the next fiscal year that essentially puts a limit on how much KU can spend out of special revenue funds. Those include funds from student tuition and campus fees, housing fees, parking fees or any other source of revenue except grants and federal funds.

Rep. Marc Rhoades, R-Newton, is sponsoring a budget amendment that would restrict how much Kansas University can spend out of tuition revenue and other funds. He says it's in response to KU's decision to issue 27 million in bonds through an out-of-state entity without getting legislative approval.

When drafting budgets, lawmakers typically do not put limits on those types of funds because they can vary widely in any given year. But universities typically do provide estimates of how much they expect to spend from those funds, and the governor includes those estimates in his budget proposal.

The House Appropriations Committee agreed to insert Rhoades’ amendment into the House version of a budget bill. But it still has to be approved by the full House, and it then will have to be negotiated with the Senate and approved by Gov. Sam Brownback before it becomes final.

If that happens, however, KU would be limited to spending only what was included in the governor’s budget recommendation for those funds. That means if KU ever wants to spend more than what was in that estimate, it would have to seek legislative approval.

“Today’s amendment is a targeted attack on the University of Kansas,” KU Vice Chancellor for Public Affairs Tim Caboni said in a statement released late Thursday. “For the past few years, Kansas lawmakers have asked us to find new ways to operate without additional state funding. We did exactly that by developing an innovative public-private financing model for our Central District project – a model that enables us to serve Kansas without a single additional dollar from taxpayers – and now lawmakers are punishing us for it.”

Caboni also said earlier this week that Gov. Sam Brownback had urged KU to seek outside funding for new facilities, as it did with the new School of Business building that is now under construction. But Brownback’s office said it never suggested going as far as KU did by issuing bonds through a Wisconsin public financing authority.

“There is a big difference between funding the School of Business project largely with private donations and using another state’s finance authority to issue more than $326 million in bonds,” said Brownback’s press secretary Eileen Hawley.

KU says the bonds for the Central District project will be repaid with fees generated by the new facilities and savings the university will realize by closing older, less efficient facilities.

But Rhoades and some other lawmakers say they’re worried that if anything goes wrong with the project, state taxpayers will ultimately be forced to pay for it.

“We are going to be on the hook,” he said. “If they for some reason couldn’t pay for it, we would be on the hook for it.”

Some members of the committee opposed the amendment, including Rep. Amanda Grosserode, R-Lenexa, who said she was concerned about unforeseen consequences.

“I would like to have a hearing before I make a vote on something of such magnitude as this,” she said. “I’m not going to vote for something that I don’t completely know how it’s going to impact the school.”

In his statement, Caboni said the ramifications of the amendment would stretch far and wide.

“In addition to hamstringing KU’s ability to make basic budgeting and financial transactions and serve Kansans, this amendment sends a signal nationally that Kansas is not a state that’s receptive to business and development,” he said. “While more than 30 states have passed legislation encouraging this type of financing model, Kansas now stands alone in being the only state trying to restrict it.”