TOPEKA CAPITAL JOURNAL: Kansas House committee considers selling off tobacco assets to help fix budget deficit

By Katie Moore
June 1, 2017

The House budget committee scrutinized a measure Thursday selling bonds backed by tobacco litigation settlements to help fill the next two fiscal years’ projected $900 million deficit.

Gov. Sam Brownback floated a similar proposal in the 2016 legislative session, but it was met with resistance.

Andover Republican Sen. Ty Masterson spoke in favor of House Bill 2430, which would allow the sale of a portion of the state’s annual payment from the national tobacco settlement of a lawsuit. He suggested the state could generate $320 million immediately for the budget by selling off about $19 million in annual revenue for the next 30 years.

Masterson said such a deal would provide an infusion of cash to cover the past two years of deferred state payments to the Kansas Public Employees Retirement System.

“It’s the difference between being behind on my mortgage and caught up on my mortgage,” Masterson said.

Rep. Larry Campbell, R-Olathe, and Rep. Barbara Ballard, D-Lawrence, questioned during a meeting of the House Appropriations Committee the astuteness of a plan that captures $320 million now rather than $530 million.

“Are we willing to give away $530 million over time for $320 million today?” Campbell asked.

Attorney General Derek Schmidt said in a statement the bill is a “bad financial trade” that weakens the state’s ability to protect future tobacco settlement revenue.

A portion of the money currently received from the tobacco settlement is allocated to the Children’s Initiatives Fund.

Ballard said she thought selling off $19 million for 30 years would negatively affect three decades of young peoples’ lives and doubted the proposal would be considered if the state weren’t facing a budget crisis.

Eric Stafford, vice president of government affairs with the Kansas Chamber of Commerce, testified in favor of the measure.

“We just want to express support for efforts and ideas that balance the budget without requiring tax increases,” Stafford said.

He faced tough questions from the committee.

“While this seems to be a proposal that would balance the budget for the near term, it seems like it may cause further imbalance in the future,” said Rep. Don Schroeder, R-Hesston. “I’d like to ask you then, would you care to share with us where you would prefer to cut the budget in order to make it balanced?”

Stafford said they were the elected officials who have the duty to review budgets — a reply with which Schroeder wasn’t satisfied.

“Little bit of credibility loss,” Schroeder replied.

Rep. Erin Davis, an Olathe Republican, pointed out that the measure wouldn’t be enough to fill the state’s deficit and tax increases would still be necessary.

The bill to sell off, or securitize, the tobacco payments is opposed by a number of youth- and health-related organizations and the Kansas Attorney General’s Office.

“On the 104th day of the 2017 legislative session, we repeat our request that we started with in January and respectfully ask the committee reject any proposal to securitize any portion of the tobacco settlement,” said Annie McKay, president and CEO of Kansas Action for Children.

McKay and Rep. Monica Murnan, D-Pittburg, voiced support for programs created by the Children’s Initiatives Fund.

“If we invest early in little kids as we had intended to, we will save the state a great deal of money in the long run,” McKay said.

Programs supported by the children’s fund served about 200,000 children in the state last year, according to McKay.

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