Tim Carpenter
July 30, 2015

Gov. Sam Brownback sheared or shifted almost $63 million from the state budget Thursday to appease Republican legislators who ended the longest session in Kansas history by attacking a deficit with a politically distasteful bill raising taxes, trimming itemized deductions and siphoning cash from highways and pensions.

The Republican governor, who responded previously to budget shortfalls since winning re-election in November by enacting spending cuts or proposing tax hikes, complied with the Legislature’s edict to curtail spending by at least $50 million. He exceeded that mark with $38.4 million in expenditure reductions and $24.2 million in cash transfers.

The biggest change among two dozen amendments was replacement of $17 million in state dollars with federal money for the health program serving uninsured children with parents who don’t qualify for Medicaid.

In addition, the governor withdrew $8 million from the Kansas Department of Transportation in response to “efficiencies in agency operations.” Documents released by the governor’s office asserted this raid on KDOT wouldn’t alter ongoing road building projects.

“Some will say, ‘You didn’t cut enough,’ ” said Shawn Sullivan, the governor’s budget director. “We have the authority to make up to $100 million in changes.”

Brownback declined to impose across-the-board cuts, preferring targeted reductions that limited the impact on K-12 schools, higher education, the state pension system and the capacity to pay down debt.

The latest round of adjustments to the state’s $15 billion budget are to be imposed immediately. The action falls one day before publication of the first state revenue report of the new fiscal year, which serves as a monthly reality check on the administration’s financial forecasts.

House and Senate GOP members, including dozens who signed no-tax pledges during previous campaigns and face re-election in 2016, inserted language into a pivotal budget package requiring the governor to personally reduce expenditures by $50 million.

It was perceived as a tangible way for legislators to draw the governor — not on the ballot next year — closer to the flame while balancing the state budget.

“Finding savings is not an easy job, but we are failing if we are not always trying to get better, which is a principle that applies both to business and state government,” said Rep. Ron Ryckman Jr., chairman of the House Appropriations Committee. “I’m glad to hear that the cuts announced today will not touch core state services or impact K-12 education.”

Senate Minority Leader Anthony Hensley, D-Topeka, said absence of the governor at the news conference hosted by Sullivan reflected the chief executive’s reluctance to be held personally accountable. Hensley said the situation contrasted with the actions of Democratic Gov. Mark Parkinson in 2009 and 2010 when making hundreds of millions of dollars in cuts.

“It’s a stark contrast in leadership,” Hensley said. “Parkinson was there to take all the heat. Brownback doesn’t want to do that. I think it’s pretty typical of his leadership style.”

While Sullivan was recasting strategy for meeting the state’s expenses through June 2016, the governor was in Wichita for private meetings with business executives. The news conference on the budget was to occur Friday, but was moved up one day. Brownback had planned to skip that event, too.

Eileen Hawley, spokeswoman for the governor, said advancing the budget announcement allowed for the material to be woven into a document destined for potential buyers of state bonds. That investor summary must be finished by Friday.

The Legislature granted authority to issue $1 billion in bonds and invest the proceeds in the market to generate revenue for the state’s pension system. The Kansas Public Employees Retirement System is struggling to reduce its multibillion-dollar unfunded liability.

Annie McKay, executive director of the Kansas Center for Economic Growth, said Kansas government hadn’t made budget cuts in July since 2009 amid the global economic downturn. Tax policy of the Republican Legislature and Brownback took a budget surplus and rendered it into a deficit, she said. The state government, she said, is living paycheck to paycheck.

“Kansans don’t provide for their families by giving up their income, spending down their savings accounts, taking out payday loans and crossing their fingers that it will all work out,” McKay said. “It’s time for state lawmakers to learn from the people they represent.”

The state’s most recent budget woes resulted from decisions in 2012 and 2013 to aggressively reduce income taxes. The supply-side economic move, described by Brownback as a “real live experiment,” was designed to produce economic prosperity and make the recession nothing more than a dark memory. However, state revenue collections haven’t matched expectations and triggered spending rollbacks in 2014 and 2015.

Brownback exited the re-election campaign to realization that Kansas had a deficit of about $300 million in the fiscal year that ended in June. In December, he pulled $150 million from transportation and public health programs and imposed a 4 percent cut on most state agencies. He seized $15 million earmarked for youth education programs.

In January, he recommended the Legislature raise cigarette and liquor taxes, divert cash from highway and retirement funds and diminish tax deductions. Consensus on raising taxes, especially for Republicans elected on platforms emphasizing fiscal conservatism and lower taxes, was hard to find. At one point during the session, lawmakers approved an emergency bill to avoid state employee furloughs.

The climax of the 2015 session occurred in June when the House and Senate approved a bill with the bare minimum of votes — 21 in the Senate and 63 in the House — hiking taxes to close a yawning projected deficit in the current fiscal year that started July 1. The deal pumped about $400 million into the state treasury and required $50 million in cuts by the governor.

Under the measure, the state sales tax moved to 6.5 percent to score about $165 million annually. Other modifications included a $97 million reduction in itemized deductions, implementation of a $47 million fee on managed-care organizations, a $40 million hike in the cigarette tax and a $30 million tax amnesty program. The state’s personal income tax rates were frozen at 4.6 percent and 2.7 percent, which upended a plan to glide to zero.

Brownback signed the bill and defended the action by declaring taxes on consumption less onerous than taxes on income. The governor welcomed the measure because it protected from revision his landmark policy eliminating income tax on 330,000 companies and implementing income tax rate reductions for individuals.

Read more from the Topeka Capital Journal here.

Lisa OwenTOPEKA CAPITAL JOURNAL: Brownback orders $62.6 million in state budget adjustments