Gov. Sam Brownback signs budget bill but vetoes ban on STAR bonds for American Royal project

Gov. Sam Brownback signed a bill Friday meant to balance a Kansas budget that’s newly in trouble this week, and he vetoed language that blocked the use of a bond program for an American Royal project in Wyandotte County.

The Republican governor’s bill-signing message did not address the fresh funding woes.

After disturbing news Tuesday that the state’s February tax receipts fell $53 million short of estimates, Brownback cut the state’s allocation to the state’s university system by 3 percent, or $17 million. But that means the current budget still faces a shortfall of more than $30 million without more cuts or a revenue boost.

While reducing overall spending, the budget bill increased pay for officers in the Kansas Department of Corrections and in the Kansas Bureau of Investigation.

“I want to thank every member of the Kansas Legislature for their hard work in passing this budget quickly,” Brownback said in a written statement. “I look forward to working with the Legislature in the coming weeks as we focus on managing spending and growing the Kansas economy.”

About his veto, Brownback there was no precedent for halting sales tax revenue bond projects, or STAR bond projects, in one county while they remain available elsewhere in the state.

In the bill, lawmakers put the brakes on a proposed STAR bonds project that would relocate the American Royal, the renowned horse and livestock exhibition, from Kansas City to western Wyandotte County.

Legislators were concerned that sales tax revenue no longer dedicated to the Village West development would be redirected to the American Royal project rather than flowing back into state coffers starting Jan. 1, 2017, as originally planned.

Brownback said at a recent news conference that he agreed the STAR bonds process had gotten “loose” and needed review. But he objected to the budget provision that blocked, at least temporarily, any American Royal project. He said he would work with the Legislature to revise the process.

Although the administration has been mum on the American Royal project, it reportedly could include a hotel, a children’s museum and a 5,000-seat hockey arena.

The STAR bonds program erupted into a dispute recently between Brownback and lawmakers.

“It goes without saying I’m disappointed,” said Sen. Jim Denning, an Overland Park Republican, about the veto. “I think it was unnecessary.”

Legislators will be considering several reforms to the program in coming weeks, he said. Lawmakers discovered that $42 million in sales tax revenue no longer needed for the Village West development was slated for a possible American Royal project, but that money should be directed to the state’s struggling budget, Denning said.

“We realized very quickly that the STAR bonds legislation needs some serious reform and some serious legislative oversight,” Denning said. “It has very little. Now the pressure is on us. We’ve got to get that done” before the end of the session, he said.

The Legislature could attempt an override of Brownback’s veto, but that requires a two-thirds majority.

Brownback also vetoed a provision in the budget bill relating to mental health screenings, and he vetoed a separate bill related to the Docking State Office Building.

The governor can make targeted agency cuts, and the budget bill gave him the authority to delay payments to the state’s pension fund. That could make $100 million available for the 2016 fiscal year, which ends June 30, but the money is required to be paid back in the fall with 8 percent interest.

Senate Minority Leader Anthony Hensley, a Topeka Democrat, said Brownback’s budget decisions were “irresponsible and reckless.”

“At every step during his time as governor, Sam Brownback has mismanaged our state, leading to disastrous consequences,” Hensley said in a statement. “Kansas is in a crisis created by this governor and his allies in the Legislature and they refuse to fix it. They are making our children pay for their political experiment with their education and their future.”

In February, individual income tax receipts were about $27 million below projections. Sales tax receipts were off by $12 million, and corporate income taxes were $7.7 below estimates.

The budget bill passed by the Legislature last month and signed Friday by the governor had closed projected budget shortfalls through June 2017, but it left only a $6 million ending balance for the 2016 fiscal year. The state’s annual budget is about $16 billion.

Brownback and legislative allies blamed a lackluster economy, particularly the state’s agriculture and oil and gas sectors, for the revenue woes and rejected charges that Brownback’s tax policy is to blame.

But critics said ongoing revenue shortages are the result of the Brownback-led income tax cuts in 2012 and 2013, plus the elimination of income taxes for several hundred thousand businesses that are limited liability partnerships.

Brownback said the answer is to control spending, not to revisit income tax policy. Senate President Susan Wagle backed across-the-board spending cuts.

“The time has come to cut every government-funded entity,” she said.

The Legislature also must deal with a recent ruling by the Kansas Supreme Court ordering the Legislature to equalize funding among school districts. The remedy could require an extra $100 million over the next two years.

This story was originally published March 4, 2016 at 4:10 PM with the headline "Gov. Sam Brownback signs budget bill but vetoes ban on STAR bonds for American Royal project."