TOPEKA — Gov. Sam Brownback and top state lawmakers voted Wednesday to authorize a record $900 million in borrowing of idle reserve funds to carry the state treasury over low-cash periods in the next fiscal year.
The decision by lawmakers on the State Finance Council reflected a view of government budget analysts that more wiggle room was required than allowed by the $840 million certificate of indebtedness issued for the current fiscal year. The new certificate is designed to carry the state until July 1, 2017.
In 2015, the state set the previous record for IOU borrowing despite infusion of hundreds of millions of dollars from adoption of an elevated statewide sales tax.
Shawn Sullivan, the governor’s budget director, said the state had to issue a larger certificate because the projected starting balance in the general fund on July 1 would be more than $50 million less than last year. He projected the state would have between $5 million and $15 million in the general fund to begin the new fiscal year.
“We’re essentially borrowing from ourselves. We’ve had a certificate every year since 2000,” said Sullivan, who expected October to be the low point in the upcoming fiscal year with expenses exceeding revenue by $830 million. “It’s not an exact science.”
Senate Minority Leader Anthony Hensley, D-Topeka, said the state’s cash-flow situation had been compromised by aggressive business and individual income tax cuts championed by Brownback and conservative Republican allies. The reductions were signed into law by Brownback in 2012 and 2013 in what the governor called an experiment in supply-side economics.
“How can we avoid this from happening again next July?” Hensley said.
“Reduce expenditures or increase revenue,” Sullivan said. “One of those two things would have to happen if we’re not hitting our revenue estimates.”
“I have been on this finance council for 20 years, and I have voted for 20 certificates of indebtedness,” Hensley said. “This is a tough thing to do. This will be my 21st certificate of indebtedness. What’s the alternative?”
He asked Brownback when the time would come for the governor to acknowledge mistakes in management of the state government’s fiscal affairs had contributed to challenges paying basic expenses such as payroll and utility bills.
Brownback said revenue increases sought by Hensley to improve revenue collections would damage the state’s economy, which is fragile because of problems in aviation, agriculture and the oil and gas industries. The 2015 Legislature made budget cuts and adopted substantive tax increases to close a wide budget deficit.
“You didn’t see fit to support it. A lot of people did,” the governor said. “Your three primary legs of the Kansas economy have been in great difficulty all together. Fortunately, the Kansas City area has been doing well. It’s not enough to carry it when the rest of your economy is having so much difficulty.”
Hensley, Brownback and every other member of the council voted in favor of the certificate with the exception of Senate President Susan Wagle, R-Wichita.
“This isn’t the way I manage my finances. This isn’t the way I finance my business. This is like me putting groceries on a charge card and praying that the money comes in,” Wagle said.
The vote among the House and Senate leaders was 8-1 in favor of a resolution to issue the certificate of indebtedness.
“It’s a necessary tool in times when the numbers are tight,” said Sen. Ty Masterson, a Republican from Andover who chairs the Senate Ways and Means Committee.
The council approved the sale of an armory in Wichita for $505,000, approved a legal settlement without publicly discussing the arrangement and voted to lift the cap on four special fee funds at the University of Kansas.
The council agreed, with the lone dissenting vote cast by Wagle to lift the lid adopted by state lawmakers as punishment for KU securing bond financing in Wisconsin for a large campus project. The fee accounts were tied to revenue from tuition and special assessments for health and law enforcement training.
“I have a difficult time coming in as one person overriding what my Senate did. I will be a ‘no,’?” Wagle said.