By Jonathan Shorman
May 18, 2016
Medicaid, universities and state agencies fell under Gov. Sam Brownback’s budget-slashing axe Wednesday as he moved to reduce spending by nearly $100 million.
The Republican governor opted to target two of the state’s biggest spenders — higher education and Medicaid — as he spared the state’s largest budget item, K-12 education.
The state’s two largest universities, the University of Kansas and Kansas State University, will bear the brunt of the cuts to higher education, and both institutions proposed tuition hikes in response. Meanwhile, many providers for the state’s Medicaid program will see a 4 percent reimbursement reduction, a development that advocates fret will harm patient access.
The governor’s office revealed the cuts as Brownback signed budget legislation that also calls for an additional $150 million sweep of the state highway fund and delays a payment to the state’s pension system.
After cuts and legislation, the state is expected to have an $87.5 million ending balance during the next fiscal year, which begins July 1 — assuming the state meets its revenue projections, which it has often failed to do over the past two years.
The bulk of the $97 million spending reduction comes from cuts to KanCare, the state’s Medicaid program. The provider cut itself is expected to save about $38 million. Other changes will push the total to $57 million.
The other largest component of savings comes from the cut to higher education. Kansas will avoid spending about $30 million through reduction of the Kansas Board of Regents budget.
The state’s two largest universities, KU and K-State, will experience a disproportionately larger cut, however, because of a measure passed by the Legislature. Both institutions will see a 5.1 percent cut. By contrast, Wichita State University is being cut 3.8 percent.
In announcing the cuts, state budget director Shawn Sullivan acknowledged that revenue coming into the state has continued to underperform expectations. He pointed to economic headwinds facing the state, saying exports have been down.
The administration gave no hint that it would reconsider its tax policy, which many say has contributed to the state’s inability to meet revenue expectations.
The governor’s office stressed that his budget actions seek to protect K-12 education spending. It noted that the Kansas Supreme Court could order $40 million of additional spending on schools.
“The three main drivers of budget growth continue to be education, Medicaid and KPERS,” Brownback said in a statement. “We are working to slow the growth of government spending and our projected FY 2017 expenditures are less than FY 2015 actuals. Kansans cannot afford the explosive growth of state government spending that has occurred in the past.”
The Medicaid provider rate cut spares community-based service providers and nearly 100 rural and critical access hospitals. Sean Gatewood, with the KanCare Advocates Network, expressed gratitude that community-based service providers had been spared but said acting like cuts will not have an impact is “not living in reality.”
Senate Minority Leader Anthony Hensley, D-Topeka, slammed the reductions. He argued Brownback is shielding his tax policy while harming Medicaid recipients.
“He would rather continue to protect wealthy business people at the expense of the health of Kansans,” Hensley said. “That’s a very sad commentary about the priorities of this governor, probably more so than anything other thing he’s done in these allotments.”
When KanCare was launched in 2013, it was sold in part as a way to help avoid provider rate cuts. The program came after Democratic Gov. Mark Parkinson issued a 10 percent rate reduction amid the Great Recession.
Sullivan said that generally that promise was only good for the first round of contracts with the managed care organizations — deals that lasted three years.
“We said that we weren’t going to reduce rates, services, restrict eligibility. In general, that commitment was made for the life of the three-year contract,” Sullivan said.
Soon after, Sullivan added: “Do we like reducing provider reimbursements? No, we don’t.”
State agencies will, in general, see a 4 percent reduction under the allotments made by Brownback.
A handful of agencies involved in public safety are exempt: the Department of Corrections, Kansas Bureau of Investigation, the Kansas Highway Patrol and state hospitals.
“Our economy continues to face challenges with declines in oil and gas production, agriculture and aviation, our three major industries,” Brownback said in a statement. “This budget recognizes those challenges while protecting K-12 education and public safety and finding government efficiencies that put more money back in the hands of working Kansans.”
But other major agencies — such as the Department for Children and Families and the Department of Commerce — are not exempt. Sen. Laura Kelly, D-Topeka, said the cuts will add to the challenges those agencies, which she said are already understaffed.
“It will just add to the chaos,” Kelly said.
The Children’s Cabinet, which administers funding to children’s programs, will see a $3 million cut, out of $42 million budget. That amounts to about an 8 percent cut.
Incoming Kansas Action for Children president Annie McKay slammed the decision, saying the state’s youngest and most vulnerable citizens will absorb the cut.
“This comes on top of the more than $100 million that the Governor has already taken from investments in early education and health since he took office. How much longer will children be asked to foot the bill for failed tax policy?” McKay said.
Brownback will also move forward on delaying a nearly $100 million payment to the state’s pension system. However, the governor vetoed a provision of the budget bill that would have put extra tobacco settlement funds toward making the payment.
Instead, those additional funds will go to the state’s general fund in an effort to increase its end balance.
K-12 public education spending is protected from cuts under budget legislation signed by Brownback. The decision comes as the Kansas Supreme Court mulls whether to declare a bill passed this spring unconstitutional.
Lawmakers approved the bill in response to an earlier ruling by the court that found the state’s school funding system inequitably distributes funding among districts. The governor’s office suggested that if the court strikes down the law, it could order an additional $40 million to schools.
Such a move might prompt additional cuts to Medicaid and higher education, the governor’s office said.
Brownback also preserved spending for state hospitals. Larned and Osawatomie state hospitals both face staffing challenges, and Osawatomie does not currently have federal Medicare certification.