Kansas governor proposes to set aside $600M, spend reserves

TOPEKA, Kan. (AP) — Democratic Gov. Laura Kelly proposed Wednesday that Kansas put $600 million of its surplus revenue in a rainy day fund and spend nearly $1.8 billion of the excess revenue on a long list of projects.

Parts of Kelly’s proposed spending blueprint for state government through June 2023 are likely to meet strong resistance from the Republican-controlled Legislature. It assumes that Kansas will expand its Medicaid health coverage for the needy, elderly and disabled, which GOP lawmakers have repeatedly blocked, and give a one-time $250 income tax rebate to Kansas residents who filed state income tax returns last year.

Republicans have said they want to pursue recurring income tax cuts and use as much as $1 billion of the surplus revenue to shore up the state’s pension fund for teachers and government workers. Before Kelly’s budget director outlined her proposals to a joint meeting of the House and Senate budget committees, Republicans suggested that the state’s good economic fortunes could sour quickly.

Kelly would spend the excess revenue to replace an aging state health department laboratory in Topeka, to renovate a government building in Topeka and to buy aircraft for the Kansas Highway Patrol, among other things. The money would also go toward paying off bonds early and undoing financial maneuvers that lawmakers used to deal with previous budget shortfalls, such as changing the timing of state aid payments to public schools.

Yet Kelly’s proposals to spend much of the excess revenue also left room for her to propose increased spending on public schools, higher education, social services and law enforcement, as well as a 5% pay increase for state workers.

“It’s a comprehensive and well-balanced budget,” Kelly’s budget director, Adam Proffitt, said after briefing lawmakers. “We’re covering a lot of ground. The governor’s making investments and one-time expenditures — tax relief for Kansas citizens, and funding core programs.”

Repeated monthly surpluses in tax collections have left the state on track to have $3.9 billion in treasury reserves at the end of June 2023. Kelly’s proposed expenditures would shrink that figure to $671 million.

“We are maybe spending a little too much,” House Appropriations Committee Chair Troy Waymaster, a Bunker Hill Republican, said of the governor’s proposal.

The $3.9 billion in projected reserves would amount to 43% of the $8.9 billion that the state would contribute to Kelly’s proposed budget for next fiscal year and would be the largest percentage of the overall amount in decades.

With spending financed by fees and federal dollars, the revised 2022 state budget would total almost $23 billion — 12% higher than the $20.5 billion lawmakers approved last year. The 2023 budget for the 12 months beginning July 1 would be $22.6 billion as one-time spending dropped.

Kelly’s proposal to put $600 million in a rainy day fund would give the state an extra cushion in future years, which top Republicans have said they want to do.

Kelly portrayed the state’s economy as booming in her annual State of the State address Tuesday evening, touting business growth and low unemployment despite the ongoing COVID-19 pandemic.

Kansas experienced persistent budget shortfalls during a nationally notorious GOP tax-cutting experiment from 2012 until June 2017, when lawmakers repealed most of it.

“The budget is in a completely different position,” Proffitt told reporters during another briefing. “It’s more stable.”

The governor faces a tough reelection race this year, with three-term Attorney General Derek Schmidt as her presumed Republican opponent. He and other Republicans argue that the state’s good economic times have been fueled by billions of dollars in federal COVID-19 relief funds and high inflation that has boosted tax collections.

“These dollars can disappear really, really quickly,” said Senate budget committee Chair Rick Billinger, a Goodland Republican. “We cannot afford reckless spending.”

Besides proposing a one-time income tax rebate, Kelly also has proposed that Kansas eliminate its 6.5% sales tax on groceries, which is one of the nation’s highest rates. While the idea has bipartisan support, top Republicans said Tuesday that they want to consider lowering the sales tax on all consumer goods.

Kelly also called Tuesday for freezing tuition at Kansas colleges as relief for pandemic-stressed students. Proffitt said Kelly’s proposed budget would restore the state’s higher education spending “to pre-pandemic levels,” with an extra $46 million to head off tuition increases.

The governor’s tuition proposal follows years of concerns about rising college costs — and efforts by legislators and the state Board of Regents to contain them. The board, which oversees the state’s higher education system, froze fall tuition last year at five of the state’s six universities but allowed a slight increase at Kansas State University.

Schmidt on Sunday proposed putting $1 billion of the state’s cash reserves into the Kansas Public Employees Retirement System. Senate President Ty Masterson, an Andover Republican, endorsed the idea Tuesday night, suggesting that he and his fellow Republican lawmakers will pursue it seriously.


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John Hanna
John Hanna
Kansas government and politics reporter