Archive for Wednesday, January 11, 2017

Brownback budget relies on borrowing idle funds, continued raids on highway money; critics call it ‘delusional’

Budget Director Shawn Sullivan outlines Gov. Sam Brownback's budget plan during a packed joint committee hearing of the House tax and budget committees.

Budget Director Shawn Sullivan outlines Gov. Sam Brownback's budget plan during a packed joint committee hearing of the House tax and budget committees.

January 11, 2017, 10:04 a.m. Updated January 11, 2017, 3:58 p.m.

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— Gov. Sam Brownback offered his long-awaited plan Wednesday for digging the state out of its budget hole, suggesting the state should borrow from its idle funds and use other one-time sources of money to get through the final two years of his administration — a plan that critics blasted as 'delusional' and irresponsible.

The plan also calls for raising some taxes, particularly “sin taxes” on cigarettes, tobacco and alcohol, but does not include repealing the so-called LLC loophole that exempts more than 330,000 farmers and business owners from state income taxes altogether.

Republican leaders in the Legislature said it might form a “baseline” for the final budget that lawmakers pass, but Democrats called it “delusional” because they say it does not address the state’s long-term financial problems.

“There are some avenues that we’re probably going to be able to use as a groundwork for the budget that we’re going to craft,” said Rep. Troy Waymaster, R-Bunker Hill, who chairs the House budget committee. “There are some pieces that I just don’t think this body would be willing to entertain.”

Rep. Tom Sawyer, D-Wichita, the ranking minority member on the House tax committee, was more blunt.

“The governor is delusional if he thinks somehow we’re going to raise all these taxes again on working people and not touch those 330,000 business owners,” Sawyer said.

Current year’s budget

Lawmakers opened the 2017 session facing an immediate $340 million revenue shortfall for the remaining six months of the current fiscal year.

That means, in order to finish the year with any amount of ending balance in the general fund, they must cut $340 million in spending, or find that much in new revenue, or do a combination of both.

Brownback’s plan depends largely on using a one-time source of money that has rarely, if ever, been used in Kansas, borrowing out of state idle funds accounts and paying it back over seven years.

Brownback is asking to borrow $317 million in idle funds, typically fee-generated money held by various agencies and managed by the Pooled Money Investment Board.

He also proposes cashing in about $45 million in interest the state has earned on investments from the unclaimed property fund and collecting another $27 million in accrued interest on other PMIB investments and sale of the Kansas Bioscience Authority.

Additionally, he proposes freezing state payments into the Kansas Public Employees Retirement System at their 2016 levels, saving $86 million for the general fund.

That adds up to $475 million in additional revenue and reduced costs. But that would be offset by some additional expenditures, mainly related to formula-driven costs in Medicaid and K-12 school funding.

If the Legislature accepts that plan, it would leave the state with an ending balance of $99.6 million on June 30.

Fiscal Years 2018 and 2019

Brownback’s plan for the next two years, the final two years of his administration, calls for gradually rebuilding the state’s ending balances, but that plan also relies heavily on one-time sources of funding, coupled with some modest tax increases.

Chief among the one-time funding sources would be to sell off the state’s future tobacco settlement payments in exchange for a lump-sum payment of about $530 million, which would be spread out over both years.

It also calls for continuing to siphon money out of the state highway fund: $288 million next year and $293 million the year after that.

In addition, Brownback’s plan would extend the freeze on KPERS payments for both years.

Brownback also is proposing to save money in future K-12 education costs by putting all public school teachers and staff into a single, state-run health insurance plan. Currently, those benefit packages are negotiated separately by each school district and its teachers union.

Meanwhile, there would be no increase in base K-12 education funding, and for higher education there is no provision to restore the 4 percent cut in base funding the governor ordered last year, which resulted in a $10 million funding cut for the University of Kansas’ Lawrence and Medical Center campuses.

The plan does, however, call for restoring the 4 perent cut in Medicaid provider reimbursement rates that were also part of the allotment cuts that Brownback ordered last year.

The plan would also continue to freeze state KPERS payments at the 2016 level, and the $92.6 million payment that was delayed at the end of the last fiscal year would not be repaid as originally planned. Instead, it would be added to the pension system’s unfunded liability.

Tax increases

Brownback also is proposing what he called “modest, targeted” revenue increases, although he remained adamant in defending the business tax cuts he championed in 2012, which is estimated to cost the state about $250 million a year.

One proposal would reimpose taxes on one form of nonwage business income, known as “passive” income, derived from rents and royalties received by people who are not directly involved in a business operation. That would generate an estimated $40 million a year.

Other tax proposals include:

• Freezing the bottom income tax rate at 2.7 percent, instead of allowing it to drop as scheduled a tenth of a point next year.

• Increasing the annual report filing fees on for-profit entities from $40 to $200.

• Raising cigarette taxes by $1 a pack.

• Doubling the tax on other tobacco products to 20 percent.

• And doubling the liquor enforcement tax to 16 percent.

All told, those taxes would raise an estimated $179 million next year and $199 million the year after.

Public and legislative reaction

As lawmakers were being briefed on the budget plan, hundreds of people from a diverse set of liberal and progressive interest groups were rallying in the Statehouse rotunda, with many of them focusing on the state’s conservative budget policies of the last several years.

“Our state’s disastrous deficit is not first and foremost evidence of failed fiscal policies. It is evidence of something far more perilous, evidence of a moral deficit,” said the Rev. Tobias Schlingensiepen, head of the Topeka Center for Peace and Justice and an unsuccessful Democratic candidate for Congress in 2012.

The rally brought together a wide range of interest groups that included advocates for education, health care and children’s programs — along with those interested in environmental issues, racial equality and LGBT rights, among others — uniting behind what they called a “Kansas People’s Agenda” that would be starkly different from the socially and fiscally conservative agenda that has dominated the Legislature during the Brownback administration.

Other groups also responded directly to Brownback’s budget plan, including Duane Goossen, a former budget director under Govs. Bill Graves and Kathleen Sebelius, and who is now a senior fellow at the Kansas Center for Economic Growth.

“Borrowing a lot of money, selling important assets, further de-funding roads and bridges, and canceling payments to our state retirement system are all temporary stopgaps that we’ve tried and failed before,” he said in a news release. “This is the 10th budget crisis Kansas has faced since the Governor’s tax plan took effect, and the budget offered today will all but ensure an 11th.”

Meanwhile, within the House and Senate, where Democrats and moderate Republicans made big gains in the 2016 elections, reaction to Brownback’s budget plan ranged from a “wait-and-see attitude” to open hostility.

“It is shocking how disconnected this governor is to reality,” said House Democratic Leader Jim Ward, of Wichita. “He raises taxes by almost $400 million and still continues to allow 330,000 people to pay nothing. It’s just totally disconnected from reality. “

Senate Minority Leader Anthony Hensley, of Topeka, said the plan is designed only to get the state through the end of Brownback’s term in January 2019, and that it would leave the state with huge bills to pay after he is gone.

“This guy is the most irresponsible governor and leader I’ve ever seen, in terms of leading our state, and I have served with eight different governors, Democrats and Republicans,” Hensley said. “I had my problems with (former Gov.) Mike Hayden (1987-1991), but right now Mike Hayden’s looking pretty good to me.”

Waymaster said there are parts of the governor’s plan that might pass the Legislature, including the idea of borrowing $317 million from idle funds this year. But he said it is unlikely that lawmakers will go along with the plan to cash out the state’s future tobacco settlement payments.

In addition, he said that he believes lawmakers will not go along with Brownback’s proposed tax increases without at least considering repeal of the so-called LLC exemption.

“A lot of members were probably elected mainly on that point, and they would like to have a vote to see if we can reinstate the income tax on LLCs and other businesses that currently aren’t paying income taxes,” he said.

Senate Vice President Jeff Longbine, R-Emporia, was skeptical that Brownback’s plan did not appear to offer a long-term solution to the state’s financial problems.

“At first blush, it looks like there’s some of it that’s kicking the can down the road,” he said. “I’d much rather face the music and structurally fix the problem.”

Longbine was less optimistic than Waymaster that borrowing from idle funds would pass the Legislature, but he said most senators, like most House members, will insist on voting to repeal the LLC exemption.

“I think that’s a vote that a majority of our caucus wants,” Longbine said.

Continue checking ljworld.com for further updates on this story throughout the day.

Comments

Greg Cooper 1 month, 1 week ago

Taking money from kids (and expecting the near bankrupt general fund to make it up); putting KPERS at risk of bankruptcy; no school funding increase (that will be ordered by the Supreme Court); delaying until next budget year the payment of $75M to schools (which will have to be made up eventually); essentially raising taxes on the lower income earner (surprise, surprise); totally ignoring the 330,000 or so "businesses" that aren't contributing to the general fund (why? no appreciable job creation or tax producing result has been realized); reinstating the fee cut to Medicare providers (after all, they are businesses, to, right?); drastically raise tobacco and liquor taxes (they are flat now, so how is that considered to be an income enhancement?).

This is what we have to work with, folks. This is what Brownkoch does with his time rather than get down to brass tacks and figure out what has gone wrong and really advance a plan to fix it. in the end, the burden for repairing the Kansas economy falls on the middle and lower income classes to batten down the hatches and patriotically give until it hurts (more).

What a tragic mistake we have to make up for, Kansas. What a seriously, undeniably tragic mistake.

Dorothy Hoyt-Reed 1 month, 1 week ago

These radical Republicans do not know anything about governing and money. They have ruined our state, either deliberately or stupidly. Either one, I think they all should move out. Maybe to Florida or Texas. The sooner the better. Our state used to be governed by Republicans who cared about the state, and about Democrats who worked with the Republicans to actually do their job. These radicals have replaced programs, including school funding, that worked quite well, but that wasn't their goal was it? They went around fixing things that weren't broken, then proceeded to break them. More and more people are waking up. Why the others aren't I don't know. Maybe those in Western Kansas will wake up when they have no schools for their kids, and they have to send them to a boarding school.

Gary Pomeroy 1 month, 1 week ago

Rearranging the deck chairs on the titanic is an understatement.

Randolf Fellows 1 month, 1 week ago

It's all pretty disturbing, but the KPERS is especially disturbing. The goal here is to withhold the funds and then later argue that the state has no means to catch up and so benefits must be reduced. Brownie has no plan for how he's going to make up the money he's stealing. He's just selling the state off piece by piece to try to finish out his tenure before we face a major crisis. And his moves to stem the tide are going to make things worse for whoever takes over.

Dylan Riley 1 month, 1 week ago

Can someone hand the man a damn fiddle already?

Neal Kingston 1 month, 1 week ago

I was particularly intrigued by the following quote, "Sullivan said the $317 million loan would be repaid over the next seven years with payments of about $45 million a year." Given that 7 times $45 million = $315 million that is one heck of a loan deal the state is expecting in order to balance the budget.

David Keith 3 weeks, 1 day ago

Brokebacks em...."math" on the endless booze and cigs tax increases is nonsense. People in KC,Ks need to pay those added taxes?? Hardly...they just drive a few miles into Missouri.
Hardcore smokers in the Wichita area will just make a road trip 50 miles south to Oklahoma. Notice this will be the SECOND time he'll raise those taxes if approved just showing you it DIDN'T work the first time around.

Fred Whitehead Jr. 1 month, 1 week ago

Cheer up!!!!!! Trump is set to do for the entire country what Brownbackwards has done for Kansas. (see the Kansas members of his "government" that should tell you a lot!!!)

Great days are a comin"!!!!

Jack Brown 1 month, 1 week ago

its only kansas where brownback sucks harder then tornadoes

Richard Heckler 1 month, 1 week ago

With corporations routinely defaulting on their pension promises, more and more workers must rely on their individual wealth to make up the difference.

The stock market collapse at the turn of the millennium wiped out much of the financial wealth of middle class Americans, and the collapse of the housing bubbles has wiped out much of their remaining wealth.

Making any cuts to Social Security now, either by raising the retirement age or cutting benefits, would have a huge impact on their remaining retirement income and are not necessary to “save the system.”

Richard Heckler 1 month, 1 week ago

BORROWING MONEY THAT THE STATE DOES NOT HAVE IS LIKE SETTING KANSAS UP FOR A LEVERAGED BUY OUT SCHEME WHICH PLACES KANSAS INTO A BANKRUPTCY SCAM THEN THE GOVERNOR SELLS OFF THE STATE SERVICES TO THE KOCH BOYS AND SOME OF THEIR CLOSE ASSOCIATES.

WHICH WILL PROBABLY KICK BACK SOME SPECIAL INTEREST CAMPAIGN MONEY.

ALL CONVENIENTLY DESIGNED BY THE AMERICAN LEGISLATIVE EXCHANGE COUNCIL WHICH HAS BEEN APPLIED IN A FEW OTHER STATES. ALL OF WHICH ARE WATCHING THEIR ECONOMIES SINK.

NORTH CAROLINA DID TAKE THEIR PUBLIC EDUCATION SYSTEM BACK FROM THE ANTI AMERICAN PROFITEERS.

Eddie Talbott 1 month, 1 week ago

Brownback continues to prove that he will gladly stiff the working man in order to preserve the tax breaks he gave his buddies. KS education and infrastructure will continue to deteriorate while he calmly guts the states finances.

Dorothy Hoyt-Reed 1 month, 1 week ago

This is comparable to asking your boss to give you a cut in pay, then to pay your bills you use up all your savings, buy groceries with a credit card, and selling off furniture. Brownback is irresponsible at best and trying to bankrupt the state at worse.

Joe Blackford II 1 month, 1 week ago

"I'll gladly pay you next Tuesday for the Whopper I told you today"

Again, apologies to Popeye & Wimpy

http://www2.ljworld.com/news/2014/oct/24/brownback-unveils-urban-opportunity-zone-plan/#c2445978

Joe Blackford II 2 years, 2 months ago

"In the urban zones, residents who move in from out of state would receive a five-year income tax exemption and help with student loans. Half of $15,000 in loan help would be covered by the state and the other half by local public or private sources.

"The program would also allow property tax revenue generated by new housing projects to be diverted to developers' infrastructure costs for 15 years.

"Brownback proposes including certain high-poverty ZIP codes in Wichita, Topeka and the Kansas City area. THE PLAN MUST BE APPROVED BY THE KANSAS LEGISLATURE."

http://www.bizjournals.com/wichita/morning_call/2014/10/brownback-announces-new-urban-opportunity-zone.html

"I'll gladly pay you Tuesday for a vote today"

Apologies to Popeye & Wimpy

A recurring joke involves Brownback's attempts to con Kansans into voting for him.

Brandon Devlin 1 month, 1 week ago

"A recurring joke involves Brownback's attempts to con Kansans into voting for him."

Except, that, they continue to do so. . .

David Keith 3 weeks, 1 day ago

And WORSE they keep electing Republicans in the legislature who APPROVED this nut job, zero tax, ponzi scheme in the first place.

Richard Heckler 1 month ago

Bankrupting Kansas is following guidelines provided by the American Legislative Exchange Council which in effect makes this situation premeditated and calculated.

The American Legislative Exchange Council is the leader pushing privatized government services for big profits. The big attraction is the tax dollars that fund state services which will still be the case if more state services are sold. This selling off of state services represents a major tax increase.

Privatization also represents deregulation which is a Fascist Laissez Faire form of government in which corporations essentially own our government services with tax dollar funding still in tact.

The privatized prison system is among those systems which have been privatized. This system demands 100% occupancy for maximum profits and the privatized prison system write the rules which in essence keeps it prisoners locked up for full term in the interest of maximum profits = isn't there something wrong with this picture?

Why does state government allow such? Perhaps kickbacks to campaign cookie jars? Which is essentially our tax dollars funding campaigns.

David Keith 3 weeks, 1 day ago

As stated plainly in the article,Brownback will continue this looking under the sofa cushions behavior until he can run the clock out on his second term and then BLOW town. When the new Gov takes office it will be a re-run of the fiscal DISASTER Obama walked into in Jan 2009.

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