Budget deal may raise constitutional questions

The Kansas Statehouse in Topeka

Kansas House and Senate budget negotiators struck a deal Saturday on a roughly $6.3 billion general fund budget for the fiscal year and the next fiscal year that begins July 1, even though hardly anyone really believes the state will have enough revenue to pay for it.

Although a final budget had not yet been approved Saturday evening, all of the options lawmakers were considering involved an assumption that Gov. Sam Brownback would sweep $150 million out of the highway fund and impose a 3 percent cut to the funding lawmakers approved for state universities.

In addition to that, many of the options would give Brownback authority to continue delaying a scheduled payment into the state pension system. And even with all that, the budget plans assume that Brownback will have to make additional cuts throughout the year to prevent the state general fund from ending the fiscal year with a negative balance.

While there may be a number of political problems with that plan, some lawmakers believe there may also be a legal problem: The Kansas Constitution says the Legislature isn’t supposed to do that.

Article 11, Section 4 of the Constitution states, “The legislature shall provide, at each regular session, for raising sufficient revenue to defray the current expenses of the state for two years.”

What all of the budget plans being considered this past week have in common is that they assume there won’t be enough money to cover those expenses and that the governor will have to cut the budget after lawmakers adjourn and go home.

“It would seem to me it at least violates the spirit that the Legislature would adjourn and go home, relying on the governor to make the final cuts,” said Sen. Tom Holland of Baldwin City, the ranking Democrat on the Senate Assessment and Taxation Committee.

In the history of the state, however, there have only been a handful of legal cases involving Article 11, Section 4. One of the few cases found in a historical search of Kansas Supreme Court opinions dealing with that provision said the state could not issue bonds to pay for ordinary legislative expenses. But that case was decided in 1868.

Bill Rich, a constitutional law professor at Washburn University, said that under modern standards what Kansas lawmakers have been debating this year has almost become routine.

“It would certainly seem (unconstitutional), and at the same time it’s quite in line with a whole series of things that have been done, where a combination of the Legislature and governor have been relying on deficit financing, just by other words, when they figure out ways to issue bonds or to not adequately provide for long-term retirement funds,” Rich said.

“If we’re looking just at the spirit of the Constitution, we’ve really gone past that line some time ago,” he said.

In the modern era, Kansas lawmakers have engaged in a number of financing and budget-balancing practices that some might call “creative” to keep the state general fund afloat.

One of the most common of those is transferring, or “sweeping,” cash reserves in other special-purpose funds, primarily the Kansas Department of Transportation’s highway fund, just to keep the state general fund afloat.

“When you look on the profiles, and when you look on the revenue sheets that are handed out, revenue comes from a variety of areas including transfers,” said Rep. Marvin Kleeb, R-Overland Park, who chairs the House Taxation Committee. “Transfers are also part of revenues.”

Since January 2011, when Brownback came into office, the state has taken more than $1 billion in “special transfers” out of that fund, according to KDOT officials.

But the practice did not begin with the Brownback administration. Since 1989 and the passage of the state’s first multiyear highway program, governors of both parties have, at one time or another, used the highway fund to pay for general government expenses.

The practice has become so routine, in fact, that many people now jokingly refer to the highway fund as “the Bank of KDOT.”

In January, though, the Brownback administration took that practice to another level, issuing $400 million in highway bonds in a deal structured so that the state will only pay interest on those bonds for the first 10 years.

KDOT officials said a major reason for that bond issue was to take advantage of historically low interest rates, which the Federal Reserve Board was expected to raise shortly after the bond issue. But the bonds also served to free up state sales tax revenues that are earmarked for highways, so those could be swept into the general fund without an immediate impact on highway projects.

“I don’t see that as categorically different in any meaningful way from what was the underlying point of the Constitution, which was that the state ought to maintain current revenue that matches, or comes close to, revenues,” Rich said.

Brownback’s office would not comment when asked whether he thinks the budget plans being discussed are consistent with the Constitution.

But former Gov. Kathleen Sebelius, a Democrat, said she believes the budget plan is questionable, if not unconstitutional.

“I’m not a lawyer, so I hesitate to talk about what is and isn’t constitutional,” said Sebelius, who was in Topeka Saturday for a Democratic Party fundraiser. “But I do know there is a requirement that the governor present to the Legislature a balanced budget and that the Legislature then pass a balanced budget. That’s what the framework is.

“So intentionally passing a budget, knowing that there isn’t the revenue, without some additional proposal to go with it, is very difficult,” she said. “But I’ve never seen anything like this in my life.”

Meanwhile, Senate Majority Leader Terry Bruce, R-Hutchinson, said he remains hopeful that the budget won’t be as far out of balance as the current estimates forecast and that revenues will pick up between now and the end of the next fiscal year.

“I would point out too that Monday (May 2), we should be getting the monthly revenue report, and there’s a lot of folks that have their eye on that, to see whether or not we’re meeting the new projections,” Bruce said.