Hineman: no choice but to adopt one-time budget fix
Kansas lawmakers knew they were facing a steep climb before the legislative session with a huge budget deficit and a pending decision from the Supreme Court on school funding.
That climb didn’t get any easier this past week when Gov. Sam Brownback’s veto of a new tax plan was nar-
rowly sustained in the Senate and with the Court’s ruling that the current school funding plan is adequate.
House Majority Leader Don Hineman (R-Dighton) remains optimistic that the legislature can find solutions on both fronts before this session is scheduled to wrap-up at the end of the month.
“We aren’t back to ground zero,” emphasizes Hineman, who appeared at several town halls this past week during a legislative recess.
However, the legislature does face the task of closing a gap of about $325 million in the current budget year which ends June 30, passing a fully funded budget for the following year and offering a school finance bill that will meet the Supreme Court’s approval by June 30.
Close Budget Gap
Of immediate concern was closing the shortfall in the current budget year that will be approximately $325 million. The House has opted to borrow $317 million from its investment portfolio, which also includes another $45 million in additional capital gains money.
This plan had earlier been offered by Brownback.
The House plan now goes to the Senate where Hineman anticipates it will be approved given the lack of alternatives.
“This is a lousy choice, but it’s better than the other two options,” he says.
It comes down to choosing between options which Hineman says are bad and worse.
He describes tapping the investment portfolio as cashing in an IRA to pay one’s household bills. “It’s not a responsible thing to do. It’s not a conservative thing to do,” he emphasizes.
Furthermore, tapping that fund comes at a cost.
First of all, the state will need to repay the principal over the next 6-7 years, during which time it’s not producing any interest revenue of roughly $9 million a year. Over the next six years, the budget will need to budget about $52 million annually to repay this “loan” in addition to interest.
“We’re creating a burden for future legislatures,” Hineman says.
Raising taxes to cover the approximately $325 million shortfall isn’t an option because it’s too late in the budget year and not enough revenue can be generated.
This leaves the legislature with only two other one-time fixes that could be used to fill a budget gap - neither of which Hineman says lawmakers have a desire to do.
One of those is to cash in tobacco revenue that’s currently targeted for the Kansas Childrens’ Initiative. Under the current payment plan, the state receives $55-$60 million in perpetuity which it could trade for a one-time payment of about $500 million.
“There are no legislators willing to do that,” Hineman says confidently.
Another option is to make three quarterly payments instead of four to KPERS each year for the next several years.
“It was in 2012 that we passed a bill recognizing that KPERS is underfunded,” Hineman says. “It would be distasteful if we backed away from that obligation now.”
No More Cuts
Hineman says that despite calls by some ultraconservative lawmakers and right-wing organizations to cut spending even more, the state has reached a point where further cuts are no longer reasonable.
“People need to understand that today we have only two functions in state government that are spending more than they did in 2012,” he notes.
One of those is human services - Medicaid, area mental health centers, assistance for the elderly, Temporary Assistance for Needy Families (TANF), etc.
He says funding for K-12 and higher education has been “basically flat.”
“The governor and those in charge of the appropriations process aren’t tax and spend liberals. They were looking for places to cut,” Hineman says. “If there were easy cuts to be made they’d have done them by now.
This legislative session has also been noteworthy because of some issues which the House debated and, in some instances, passed.
For example, the House approved a tax increase (vetoed by the governor), bringing back teacher tenure and Medicaid expansion, in addition to discussing an anti-diabetes initiative.
That’s a reflection of primary and general elections last fall which knocked out a number of incumbents and brought a number of newcomers to Topeka.
Hineman doesn’t describe it as a “lurch to the left, but a return to the center where Kansas has traditionally governed from.”
“I’m encouraged by the willingness of House members to tackle these issues,” says Hineman. “We have a responsibility to deliver to the people the functions of state government they need and expect.”
And Hineman feels that constituents understand the challenges being faced by lawmakers.
“In all of the town hall meetings this past week, there’s been grudging acceptance that we need to fix this mess,” he says. “People don’t like the uncertainty of what their tax bill will be or wonder if a function of state government will be there if they need it.”
Despite major issues such as the budget and school funding which need to be addressed, Hineman believes the legislative session can be completed with the allotted 90 days.
“It’s still possible to end this session on time. I believe that’s a minority view at this point, but it’s possible,” he adds.
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