photo by: AP Photo/Charlie Riedel

Kansas Gov. Laura Kelly delivers her State of the State address, Wednesday, Jan. 15, 2025, at the Statehouse in Topeka, Kan.

TOPEKA — The proposed state budget crafted by Gov. Laura Kelly features a 2.5% pay raise for state employees, expands Medicaid eligibility for 150,000 lower-income Kansans and fully finances K-12 public education.

Kelly’s blueprint contained a $30 million surge in appropriations for water resource programs and called for appointment of a special task force to develop a 10-year plan for conserving the precious resource. She also proposed $10 million in matching grant funding to further spur expansion of child-care capacity statewide.

Adam Proffitt, the governor’s budget director, briefed the House and Senate budget committees Thursday on a budget outline that held base budget spending increases at 2%. The governor’s budget wouldn’t substantially deflate the robust balances of $1.2 billion in the general state treasury and $1.7 billion in a separate state emergency fund, he said.

“With the limited resources that we have available this year for enhancements, the governor has focused on high-impact policy areas,” Proffitt said.

In the governor’s State of the State speech on Wednesday night, she warned the Legislature not to push ahead with unsustainable tax reductions on heels of the 2024 law cutting $1.2 billion in taxes over three years. Senate President Ty Masterson and House Speaker Dan Hawkins, both Republicans, expressed keen interest in reducing property taxes through passage of legislation and a state constitutional amendment.

Kansas governors must adhere to a constitutional requirement to annually submit a balanced budget bill to the Legislature. This year, however, the Republican-led House and Senate worked in late 2024 on their own budget plan that has been introduced in bill form for consideration by the 2025 Legislature. It’s unclear whether state lawmakers would stick with their own plan by ignoring Kelly’s spending priorities.

The Legislature’s leadership has taken the unusual step of asking state agencies to prepare lists of potential budget cuts to match a 7.5% reduction in funding. Not since 2020 has the Kelly administration asked agencies under its direction to compile a roster of budget-cut targets.

“I’m a fiscal conservative, which is why, once again, I’m proposing a budget that is balanced, maintains fiscal stability in the future and ensures Kansans have access to the services their government has promised them,” Kelly said in a statement.

Her approach to the new budget recognized the state enjoyed several years of robust revenue collections, in part due to the surge of $1.6 billion in federal dollars, and the expectation state revenue growth would return to normal levels of 1.5% to 2% annually.

Pay hikes, education

Proffitt said the governor endorsed a 2.5% pay adjustment for most state employees. The amount was designed to align with inflation and would cost the state treasury $37 million. A separate provision for state prison and hospital workers would permit 5% increases to incentivize recruitment and retention of staff.

“This body has recognized that state employees work hard,” Proffitt said.

Kelly’s outline didn’t include enhancements to address specific state government jobs that had fallen behind market rates, he said.

In terms of public education, Proffitt said the governor’s budget would for the seventh year fully fund K-12 schools — an achievement following decades of school-finance litigation. Her K-12 budget also included expenditure of $5.5 million to cover the cost of breakfast and lunch meals for 36,000 low-income students who currently paid a reduced rate of 30 cents for breakfast and 40 cents for lunch at school.

Kelly proposed allocating $500,000 to waive the Advanced Placement exam fees for low-income students taking those pre-college tests.

The Democratic governor urged the Legislature to advance a multi-year plan that would bring the state into compliance with a law requiring the state to pay 92% of the extra cost borne by local school districts when educating students in special-education programs.

In 2024, the addition of $73 million in state aid brought the contribution percentage to 75%, leaving local school districts to absorb the remaining expense. Kelly said the Legislature should continue with this effort over four consecutive years to bring Kansas into compliance in the 2029 fiscal year.

The governor’s budget earmarked a $10 million, one-time appropriation for infrastructure and cybersecurity projects at public universities and community colleges.

Proffitt said the budget included $35 million promised by the Legislature for water resource investments. Kelly also suggested the state develop a 10-year program — modeled after the state highway programs — to bring better organize and direct water initiatives. She recommended appropriating $30 million in seed money to begin that effort and would pay for it by drawing upon interest earnings from the state’s rainy-day fund. That special fund generates about $70 million annually in interest income for the state.

Medicaid expansion

Under the governor’s recommendations, the Legislature should vote to approve expansion of eligibility for Medicaid. Her idea would be to initiate benefits for about 150,000 Kansans on Jan. 1.

Due to legislative opposition in the past decade, Kansas remained among 10 states to not expand Medicaid offerings. Missouri, Nebraska, Oklahoma and Nebraska agreed to extend Medicaid services to secure additional federal resources.

“Kansas is quite literally an island. Kansas is one of three states west of the Mississippi that has not yet expanded Medicaid,” Proffitt said.

He said concerns about the state’s cost share were overblown because federal incentives would provide Kansas, if expansion occurred, with an additional $450 million in supplemental Medicaid funding. That influx of federal dollars to the state would pay for expansion costs for years, he said.

In addition, the governor’s budget included a request for $9 million for the Kansas Department for Children and Families to make up the loss of funds that have historically been redirected to the agency from foster children eligible for Social Security benefits. Instead of pulling that money into the state agency, Kelly signed an executive order directed the cash go into special accounts created for children in the foster care system.

Kelly’s budget didn’t include $114 million for construction of a new headquarters for the Kansas Bureau of Investigation to replace administrative buildings in Topeka. KBI officials have asked the Legislature to appropriate funding to develop a more efficient and secure campus for the law enforcement agency.

Republican leaders of the Legislature indicated they wanted to end the 2025 session by mid-April, which would be before the state typically produced revised tax revenue forecasts. Typically, the session wraps up after publication of the adjusted revenue estimates to prevent lawmakers from overspending.

“I will say this is the first time in my five years as budget director that I’ve seen a proposal for sine die adjournment prior to April revenue estimates,” Proffitt said. “It would be beneficial, I think, to have a full picture of revenues.”

— Tim Carpenter reports for Kansas Reflector.