Brownback announces $280 million in allotment cuts to fill budget shortfall
Topeka ? Gov. Sam Brownback’s administration announced plans Tuesday to fill a $280 million shortfall in the current fiscal year’s budget, but officials insisted the cuts will not affect K-12 education, higher education or public safety.
But those cuts will do nothing to address the additional $436 million shortfall projected for the fiscal year that begins July 1. That job will fall to the Kansas Legislature, which convenes Jan. 12 for the start of the 2015 session.
To address longer-term funding issues, budget director Shawn Sullivan said the state will need to consider “structural reforms” to the school finance formula and additional changes to the Kansas Public Employees Retirement System.
But Senate President Susan Wagle, R-Wichita, issued a statement saying she was disappointed in how the cuts were made.
“We are still studying the details, but there is no doubt the governor’s announcement has put the Legislature in a difficult position,” Wagle said. “I would have preferred to see the burden spread evenly throughout the state. That would certainly be a more fair approach than picking winners or losers and asking the Legislature to fill the gap.”
The plan unveiled Tuesday calls for, among other things, sweeping $201.5 million out of various other funds into the state general fund, including $95.7 million from the state highway fund, and reducing the state’s KPERS contribution by $40.7 million.
It also calls for cutting $6.9 million, or 4 percent, out of the operational budgets of state agencies for the last six months of the fiscal year.
Sullivan said state agencies have been planning for that possibility since the start of the fiscal year and so the cuts should not result in job losses.
The cuts and fund transfers are the result of the latest budget estimates released in November showing revenues are expected to fall about $280 million short of budgeted expenditures in the current fiscal year, which ends June 30.
By law, the governor is authorized to make direct budget cuts, known as allotments, when the Legislature is not in session if the budget director certifies that without cuts the state would end the fiscal year with a negative balance. That’s because the Kansas Constitution requires the state to balance its budget each year.
The shortfall is largely the result of sweeping tax cuts that lawmakers approved in 2012 and 2013. During the recent election campaign, Brownback defended those tax cuts, saying they would spur economic growth, and he rejected suggestions that the cuts would cause huge budget shortfalls that would force cuts in education spending and other programs.
Senate Democratic leader Anthony Hensley, of Topeka, made note of the governor’s campaign statements and accused Brownback of making false promises in his bid for re-election.
“While accusing his opponent (Rep. Paul Davis, of Lawrence) of lying, it’s Sam Brownback who lied to the people of Kansas,” Hensley said in a statement released Tuesday afternoon. “There is no fault to be placed anywhere but on Sam Brownback’s failed economic agenda. He is attempting to balance the budget on the backs of wage earners, public employees and children all for the sake of his income tax cuts for wealthy taxpayers and businesses.”
Rep. Tom Burroughs, D-Kansas City, the new House Democratic leader, echoed that criticism.
“It’s disappointing that it took Governor Brownback only one month to break every promise he made to the people of Kansas throughout the 2014 campaign,” Burroughs said. “Instead of offering constructive solutions to fix his failed tax plan, the governor is making destructive cuts to infrastructure, children’s programs and the state pension plan. Unfortunately, this is only the beginning. He has made his priorities very clear, and there’s no doubt that our public schools will be next on the chopping block.”
But Sullivan said Tuesday that the latest budget estimates included higher than expected increases in two areas, one of which was an additional $63.4 million in “equalization” costs that help fund the local option school budgets, capital outlay expenses, and bond and interest payments for less wealthy school districts.
“That surprised us,” Sullivan said in an interview explaining the allotment cuts.
During the 2014 session, the Kansas Supreme Court ordered the Legislature to increase equalization funding for capital outlay and local option budgets, saying the old formula was unconstitutional because it forced poor districts to either cut programs or levy higher taxes to achieve funding levels comparable to those of wealthy districts. But the cost of increasing the equalization formula proved to be more costly than anticipated.
“We have got to make structural reforms to the (school finance) formula, and we will be working with legislators to do that,” Sullivan said. “Because we cannot continue to sustain $60 to $80 million of increases year over year to nonclassroom spending to those three categories.”
Sullivan said the administration was also surprised by an additional $46 million in projected Medicaid expenses this year.
The largest of the proposed transfers is $95.7 million out of the state highway fund to the general fund.
Sullivan said that was made possible because the interest rates on bonds issued to fund road projects have come in lower than expected, and the bids on many projects have also come in below projections. As a result, he said, the sweep will not affect any projects planned under the 10-year highway program known as T-Works.
Other fund sweeps include $55 million in pharmacy rebates from the state’s Medicaid program and $14.5 million from the Kansas Endowment for Youth, or KEY fund, which receives the state’s share of tobacco settlement money, and $500,000 from the Children’s Initiatives Fund.
Money from the KEY fund is typically transferred to the CIF to pay for specialized projects involving children’s health and early-childhood education.
Sullivan said those two sweeps should not affect any of the projects being funded this year. He said the KEY fund received more tobacco money than was expected this year, and the sweep out of the CIF is only a small part of the $55 million that was appropriated this year.
But Christie Appelhanz, vice president of the advocacy group Kansas Action for Children, said she was disappointed by the action.
“Just a few months ago, Gov. Brownback vetoed a transfer of $5 million from the KEY Fund, saying that fund was established specifically for early-childhood programs and should remain available for such purposes in the future,” Appelhanz said. “We’re deeply distressed by the governor’s change of heart. The current budget crisis is of his own making, and it shouldn’t be paid for by our state’s youngest and most vulnerable children.”
The $40.7 million cut in KPERS contributions means the state will be contributing only 9.5 percent of employees’ salaries into the pension system instead of the 12.12 percent that was budgeted.
In 2012, lawmakers passed a major overhaul of the KPERS system to address a long-term, unfunded liability. It included increased contributions from both the state and current employees, as well as a change that results in reduced retirement benefits for employees hired after the first of this year.
Sullivan said the cut in KPERS payments this year is only a short-term fix, and the administration believes there needs to be additional changes to the system.
“That one, I’ll say, is the same as schools. We need to make additional reforms to KPERS,” Sullivan said. “There are a couple of ideas that have been out there between legislators we’ve talked to, so we’ll be studying those over the next couple of months.”
Among the ideas that have been proposed is to convert KPERS to a 401(k)-style defined contribution plan, an idea that employee groups and teachers unions have strongly opposed.