By Bryan Lowry
January 13, 2016

Gov. Sam Brownback will pursue a combination of budget cuts and transfers from dedicated funds to shore up the state’s finances.

His budget proposal, unveiled Wednesday, does not propose a tax increase or cuts to K-12 education.

Instead, Brownback plans to move money from the Kansas Department of Transportation and money earmarked for early childhood programs to the general fund to help fill the state’s projected $190 million budget hole.

He proposes charging some families to participate in Parents as Teachers, a program that serves children from birth to 3. He suggests requiring Medicaid patients to try inexpensive drugs before being approved for more expensive treatment options.

And he plans to sell the assets of the Kansas Bioscience Authority, which is being privatized, for $25 million.

The governor’s budget cuts spending by $105.7 million. It does not propose pay raises for correctional officers or money for more Kansas Highway Patrol officers, two things some lawmakers had called for before the session started.

The state has struggled to balance its budget since income tax cuts went into effect in 2012 and 2013. It faces a projected $190 million shortfall for the next 18 months. The proposal would leave the state with a projected cash balance of $87.9 million at the end of June 2017.

Brownback did not mention the budget during his State of the State address Tuesday night, which irked some lawmakers.

Here’s a rundown of some of the proposals.

Children’s fund sweep

The budget proposes sweeping $50.6 million from the Children’s Initiative Fund.

Money the state receives each year from a settlement with tobacco companies is deposited into the fund to support early childhood programs, such as Early Head Start and Parents as Teachers. Money that is not spent is meant to be set aside to ensure long-term funding for the programs when the tobacco settlement money runs out.

Shannon Cotsoradis, president and CEO of the advocacy group, Kansas Action for Children, warned in an e-mail that sweeping the Children’s Initiatives Fund would “dismantle one of Kansas’ most innovative, forward-thinking legacies.”

Shawn Sullivan, the governor’s budget director, said the state still would fund the programs, but that moving the money into the state’s general fund would be more accountable for taxpayers.

The state would still spend $6.5 million on early childhood programs out of the $50.6 million it takes from the fund. The leftover money will stay in the general fund rather than being saved in the children’s fund for future years.

That “dooms those early childhood programs,” said Sen. Laura Kelly, D-Topeka, because if the state faces a shortfall again, the money for the children’s programs will be gone.

“We’re grasping at straws to plug holes,” said Sen. Marci Francisco, D-Lawrence, a member of the Senate Ways and Means Committee.

The governor also proposed charging parents with a household income of more than $50,240 – or more than 200 percent of the federal poverty level – to participate in the Parents as Teachers program. Parents who earned less than that would participate for free, with the cost paid for out of the Temporary Assistance for Needy Families federal grant the state receives each year. The program has been supported out of the children’s fund.

Highways

The governor plans to sweep an additional $27 million from KDOT in the next 18 months.

The state has repeatedly taken money from KDOT. The Kansas Contractors Association recently put up billboards depicting a man in a ski mask with a gun, calling the sweeps “Highway Robbery.”

“Despite the rhetoric and the billboards, the highway system is still in good shape,” Sullivan said, adding that lawmakers should worry not about “the bank of KDOT” but instead about “the bank of Kansans.”

“We’re trying to grow the economy and not the Kansas budget,” Sullivan said.

KDOT, which has seen more than $1 billion swept to the general fund since 2011, recently issued $400 million in bonds to pay for construction projects. Last year, the Legislature suspended a statutory cap on how much debt the department can have.

“I’m not sure anybody likes the sweeps from KDOT. Does anybody like that? I don’t think so. That’s always problematic,” said Rep. Dan Hawkins, R-Wichita, a member of the House Appropriations Committee.

Moving money from the highway and children’s funds makes it easier for the general public to track the state’s finances, said Sen. Ty Masterson, R-Andover.

“It’s like Kansas having two different bank accounts. It’s not robbing,” Masterson said. “… The general fund holds the highest level of accountability. It’s what everybody is looking at both in the Legislature and the general public. When you have these special revenue funds, people tend to breeze over it.”

Cuts, savings

The governor plans to make $105.7 million in budget cuts for the 2017 fiscal year, including $23.9 million from the state’s pension system.

That won’t affect benefits for state employees or teachers, Sullivan said. School districts have hired fewer new employees this year than the Department of Education had initially forecast, meaning that pension spending didn’t need to grow as quickly as expected.

Brownback proposes a $25.5 million cut to SCHIP, a program that provides health coverage to children from low-income households. That would be offset by increased federal funding.

When the state made a similar cut to SCHIP in July, Sullivan said that the money could have been used to enroll more kids in the program. Asked about that Wednesday, Sullivan said the money could go toward whatever the Legislature wanted.

The Kansas Department of Health and Environment plans to save $10.6 million by enacting step therapy for Medicaid recipients. That means patients must try lower cost drugs first to see if they work before being approved for more expensive treatments. The change would require legislative approval.

The proposed termination of the KanCare Health Homes program would save $13.4 million. The pilot program, created when the state privatized Medicaid, wes designed to provide long-term services for people with chronic conditions.

The governor plans to cut $12 million from the Kansas Bioscience Authority over 18 months. If lawmakers approve a move to privatize it, the state could end up with an estimated $25 million more.

Rep. Marc Rhoades, R-Newton, asked Sullivan how much the state had invested in the Bioscience Authority since its creation a decade ago. Sullivan said about $240 million, but the state could not expect to get that amount back if the agency becomes private.

The Kansas Department of Revenue also will try to collect about $49 million in back taxes over the next 18 months. Efficiency consultants hired by the Legislature said Tuesday that hiring more auditors and revenue officers could bring in more than $300 million over five years.

Hawkins predicted that the final budget approved by the Legislature would have a combination of ideas from the governor’s proposal and recommendations from the consulting group, Alvarez & Marsal.

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