Power Struggles, Transparency and the Long Slog Toward Stability
by Paul Johnson with Mary Fund
The 2019 Kansas State Legislature, which usually goes out like a lamb, adjourned May 29 after taking one last swipe at the State budget signed by Governor Kelly a week earlier—and not without some excitement and political theater.
Senate proceedings were disrupted by a small group of protesters chanting, singing, and urging consideration of Medicaid expansion. The group, accused of “pure obstructionism” by Senate leadership, was escorted out by security, but not before the news media was also asked to leave –under threat of losing access to future Senate proceedings. This act prompted an angry response from the Topeka Capital Journal editorial page, aimed at Senate leadership who they argue appear “more interested in obfuscation than transparency and more devoted to rhetoric than simple facts”.
Also, it was not lost on anyone following the legislature this year, that when it comes to “obstruction’, Senate leadership has tirelessly obstructed Medicaid expansion. But once the drama calmed down, both House and Senate overrode the Governor’s veto of an unscheduled $51 million contribution to the Kansas Public Employee Retirement system (KPERS) and a cut to mental health crisis programs. However, they failed to override the Governor’s veto to an income tax cut benefitting primarily multinational corporations.
The Governor had argued that the extra KPERS payment was not necessary and urged stopping “non-essential” spending in an effort to get the state on track to fiscal stability. She also argued that appropriate funding already existed for the mental health programs, and that it was more important to set aside some funds for unforeseen emergencies.
The Legislature had included the $51 million for KPERS as an extra payment to make up for shorting the state’s annual contribution for several years when the State faced shortfalls during the Brownback years. Supporters claimed to be protecting education. Critics of the override were quick to note the irony that the same Legislators who had voted to skip or delay KPERS payments over the past 9 years were now suddenly “pro-education” and champions of KPERS.
But while the Republicans won on the $54 million in funds for KPERS and mental health programs (total state budget is around $18 billion), the attempted override of the tax cut, which would have granted multi-national corporations a state income tax exemption on overseas earnings, failed. Opponents of the tax cut argued that to enact the income tax exemption would have been a step backward to the Brownback economic plan which decimated state program coffers and pushed the State to the brink of insolvency.
The tax cut also included a modest approach to reducing the sales tax on groceries over time, which was intended to lure in more support as it would have impacted all Kansans. While Kansas desperately needs to reduce if not abandon its grocery sales tax, would that small victory paired with the income tax for wealthy corporations be enough to justify a return to the Brownback era plan?
The battle over the State budget and revenues is far from over as supporters for the above income tax cut and more will return in the 2020 session and beyond. Below we take a look at more details of the State budget and the 2019 legislative year.
State Budget. The new State budget made some headway in reversing cuts to essential state services made over the last five years. Increased funding for public education was a bi-partisan success that responded to constitutional concerns by the Kansas Supreme Court. The other primary battle was over Medicaid expansion – which enjoys broad support by lawmakers and the public – but could not overcome Senate leadership opposition.
Political sniping over Medicaid expansion continues as a promised interim committee study may or may not happen, and the waters muddy over who is in charge. The long-term view for the State’s budgetary picture over the next few years remains challenging.
The 2019 Kansas budget totaled $17.2 billion with $7.1 billion from the State General Fund (SGF) and an ending balance of $866.3 million (12.2%). The 2020 budget comes in at $18.4 billion with $7.7 billion from the SGF with an ending balance of $550 million (5.4%). At present spending and revenue projections, the ending balance for 2021 falls to $180 million, and by 2022 and 2023 there will have to be spending reductions of $300 million in 2022, and a small ending balance in 2023.
State law requires a 7.5% ending balance, which was met in 2018 and 2019, but waived in the years 2010 to 2017, and 2020 forward. The Governor is establishing a task force to completely analyze existing tax policy and recommend a new revenue plan going forward.
The Governor’s proposed 2019/2020 budget was passed close to the spending recommendations but the revenue proposals were altered significantly. The Kansas Legislature speeded up a $115 million back payment to the Kansas Public Employee Retirement System (KPERS) in 2019. The Kansas Legislature refused the proposal to re-amortize KPERS payments over
30 years saving Kansas $145 million in payments yearly.
Despite the stark budget and revenue projections, the Kansas Legislature passed a corporate and individual tax cut bill in the waning days of the session. The tax cut would cost $246 million over the next three years. Given the revenue and spending projections, the Governor had no alternative but to veto this tax bill and expand the debate into a reasonable revenue plan going forward. Both House and Senate, as described above, were unable to override the Governor’s veto.
School finance. The decision on the constitutionality of school finance is now before the Kansas Supreme Court since the written briefs and oral arguments have been presented. Senate Bill 16 responded to the issue of inflation adjustment raised by the Court. The question now is whether an adequate inflation adjustment has been achieved?
School finance from 2002 – 2005 declined slightly to inflation, while the 2005 Gannon decision increased funding from 2005 to 2009 but declined sharply in 2010 after the 2008-2009 recession before school funding increases began in 2018. The increases in 2018 and now 2019 add over one billion dollars up to 2023 for a total of $5.178 billion.
When adjusted for inflation from 2002, the ‘inflation adjusted’ spending is actually $4.658 billion in 2023. The inflation adjusted spending in 2009 – right before the recession
and major spending cuts – of $4.81 billion is one hundred and forty million over the proposed spending in 2023. It seems likely that the Court will accept this increased funding for now but may not dismiss the court suit in order to continue to assess the progress of actual funding. The Court did settle the Gannon lawsuit in 2005 but the promised funding by the State was not completely paid. Economic projections four years out are uncertain given whether a recession is on the horizon and depending on actual inflation rates.
Higher Education & Foster Care & Corrections. Some budgetary reparations were made. The State Board of Regents were given a $33 million increase for higher education while the Governor requested just $10 million and the Regents requested $50 million to start recovering from the $75 million in state funding reductions since 2011. The Department of Children & Families was given 42 new child welfare positions over two years to respond to the foster care crisis.
The corrections system is having tremendous staffing problems with vacant positions, turnover, mandatory overtime, uncompetitive salaries and overcrowding. The Governor requested $27 million in additional spending that the Legislature agreed to but appropriated the funds under the control of the State Finance Council (that the Governor chairs but is dominated by Republican leadership).
Other. The State Water Plan (SWP) received an increase in State funding from just $1.4 million in 2018 to $4.5 million in 2020. There were certain health care cost increases for nursing homes, hospitals, disability waiting lists, home and community based services, medical provider rates and community mental health centers.
The transportation dilemma continues on. A Joint Task Force on Transportation, comprised of lawmakers and numerous stakeholders, met all last year and proposed legislation for this session. One bill that passed was greater authority for communities to build toll roads with State authorization. The car registration fee was increased for electric and hybrid vehicles.
T-WORKS is the existing 10-year transportation plan that has been slowed given the transfers of $1 billion from the highway trust fund to the SGF. There are four new construction projects that were on T-WORKS list that will be completed. The development of the next 10-year plan is just starting. The Joint Task Force did not address the fundamentals of finance but nixed any plans to increase the fuels tax. Federal funding is critical but what infrastructure plan will come from Congress and when? In the 2020 budget, $238.1 million was transferred from the Highway Fund to the State General Fund (SGF) with a proposal from the Governor this transfer end in 2022.
The Transition. Gubernatorial transitions are dramatic especially when party control changes. The Governor is elected the first week of November and has to start building a staff and propose a State budget by the second week in January. There are hundreds of positions to fill as the previous department heads and key staff head for the door. The agenda for the first year of governing is usually set during the election.
Governor Laura Kelly was clear on her priorities of adequately funding public schools, expanding Medicaid, fixing the morale mess in many State agencies, opposing any new tax cuts (or increases), stabilizing the revenue picture and reducing the raid on the Highway Trust Fund. Given the Governor’s extensive background legislating on the State budget, she warned it would take some time to reverse the damage and build a sustainable path forward.
The Governor did most of the hard lifting in this legislative session. Neither the Democratic or Republican legislative leadership produced their own legislative list of priorities. The Democrats just left the priorities to the Governor while the Republicans with a more conservative caucus were intent on confronting the new Governor.
The Democrats could have carved out their own priorities such as affordable housing or election law reform and used public pressure via weekly press events to leverage committee hearings and floor debates. Hundreds of filed bills were given no committee hearings. Most of the committees did not meet a third of the time and always took most Mondays and all Fridays off. The Speaker of the House and President of the Senate hold dictatorial power over their selected committee chairpersons and the members placed on key committees.
Committee chairs now initiate their own committee procedural rules as to which bills get a hearing, testimony protocols and recording committee actions. Transparency is a nice campaign slogan but is lost under the Capitol dome.
As the session winds down, conference committees take more liberty to bundle related legislation into one bill without much if any public input. These conference committee reports are brought to the floor of the chamber with no provision for amendments, which was how the State budget was handled in the veto session. The House and Senate rules need a transparent vetting with special attention to the latitude given to Committee chairs.
Citizen engagement matters little if powerful leadership positions can limit debate, control the agenda and disallow open public debate. During the time when the Legislature is not in session, citizens need to keep up the pressure to end the power struggles, improve transparency and continue working toward State economic
Contact Paul Johnson at
and Mary Fund at email@example.com.