Kansas legislators concede unpopular budget move may be their best option

Kansas lawmakers said Wednesday they have concerns about taking money from a long-term investment fund to solve the state’s immediate budget problem.

But both Republican and Democratic House members said the move may be their best option as the state faces a roughly $342 million shortfall this year.

The long-term investment fund has around $364 million, according to the state treasurer’s office.

“That then is the money that we are considering using as perhaps the best of bad alternatives,” said Rep. Steven Johnson, the House tax committee chairman.

If they don’t use the money, legislators fear that budget cuts may have to be made with roughly six months left in the fiscal year.

Gov. Sam Brownback’s budget proposal calls for moving the investment money to the state’s general fund, and then paying the money back over a seven-year span.

The state is technically loaning itself more than $300 million of its own money to get through the rest of the year.

State Budget Director Shawn Sullivan told the House budget committee on Wednesday morning that the negative side of the move was that it was a one-time budget fix.

But he said it would keep the state from making larger cuts this late in the year.

“You’d have to do $300 to $400 million in cuts in order to get above zero for this fiscal year,” Sullivan said.

Legislators have criticized the governor for using short-term fixes to fix budget gaps, rather than proposing a long-term solution.

“This may be the best of a very bad set of alternatives,” said Rep. Kathy Wolfe Moore, a Kansas City, Kan., Democrat. “We have bad and we have worse. This is probably bad.”

A handout provided by the treasurer’s office at Wednesday’s meeting with lawmakers said that Kansas State Treasurer Ron Estes “does not endorse the governor’s loan proposal.”

But Scott Gates, the general counsel with the treasurer’s office, said, “If (lawmakers) introduce a bill, we’ll be neutral on the bill.”

Lawmakers have to give legislative approval to move most of the money.

The fund is technically called the Treasure’s Unclaimed Property fund, despite the fact that it does not actually contain unclaimed property.

The state takes unspent money, according to the treasurer’s office, and invests it in that portfolio.

“Let’s try to rename that,” Gates told lawmakers about the confusion. “I think a better name for that portfolio is the treasurer's long-term investment portfolio.”

State officials made it clear that people would still be able to claim property from the state, even if the misnamed fund is used to help the state’s finances.

Officials said the state has not made a move like this before to fix such a large budget shortfall.

Brownback has challenged lawmakers to get him a bill by the end of the month that fixes the 2017 budget.

Rep. Larry Campbell, an Olathe Republican, asked state officials Wednesday about how they decide where they invest money like the millions included in the fund.

“Have you ever invested in any organization with as low a credit rating as the state of Kansas?” Campbell asked, as laughter erupted in the committee room.

This story was originally published January 18, 2017 at 12:23 PM with the headline "Kansas legislators concede unpopular budget move may be their best option."