Kansas Gov. Laura Kelly plans worker pay raises, cash for social services in 2023 budget
Flush with a massive state surplus, Gov. Laura Kelly is proposing infusions of cash into social services and a cleanup of Kansas’ finances.
Her administration laid out its budget proposals Wednesday, offering details and figures for the broad plans the governor outlined in her state of the state address Tuesday night.
Kelly would funnel $600 million into the state’s reserve funds and $556 million to pay off debt. She would also end the state’s long-held practice of borrowing from the state highway fund.
She proposes millions for expansion of mental healthcare, juvenile justice and higher education. The money would also underwrite raises for state workers, a $250 one-time rebate to Kansas taxpayers, elimination of the food sales tax and expansion of Medicaid.
Republicans have rejected the $250 tax rebate and indicated they plan to tie cuts to the food sales tax to broader decreases in Kansas sales taxes across the board.
Although the state has received large amounts of money in federal COVID relief, the budget is designed to be sustainable for years to come, said budget director Adam Proffitt.
“There’s been strong economic activity in Kansas, unemployment’s low, the labor market participation is high, wages are up, there’s a lot of good news as it relates to the economy,” he said.
Republicans indicated there was much in the budget they could agree with Kelly on but said they were not likely to support a clean food sales tax bill (meaning one without other measures attached to it) and Medicaid expansion.
The budget, they worried, didn’t leave a large enough surplus to protect the state moving forward.
“A lot of the discussion topics that we had during the interim in our legislative budget committee actually focused on the items addressed in the Governor’s budget,” Rep. Troy Waymaster, a Bunker Hill Republican, said. “Are we going to be able to do all the proposals in the Governor’s budget? No, there’s going to be adjustments and changes made.”
“We are maybe spending a little too much.”
Social Services
Kelly asked the Legislature to approve $23.9 million for improved mental healthcare services, $20 million for creation of additional moderate income housing, $70.7 million for higher education and $21 million in restored funding to juvenile justice programming.
House Speaker Ron Ryckman said some of those funding choices (mental health and additional support for the state highway patrol) already had the support of Republicans but had been rejected by Kelly in the past.
“We’re appreciative of her change of tone suggesting these things. We look forward to looking at that a little closer,” he said.
The juvenile justice funding will be returned to a designated fund for evidence-based alternatives to youth incarceration. Kelly and lawmakers opted last year to move half the $42 million fund into the state general fund - state analysis, however, showed that move would leave the fund bankrupt by 2024.
A housing survey completed last year found that Kansas lacks sufficient housing for moderate-income families.
Sen Rick Bilinger, a Goodland Republican, said $20 million for housing may not be enough.
“This doesn’t seem like a lot,” Billinger said, noting the rising cost of building materials.
In his budget presentation, Wednesday, budget director Proffitt acknowledged that the funding may not go far but called it a “good first step” to remedying the issue.
Kelly also asked lawmakers to both expand Medicaid and medicaid coverage for pregnant women from 2 months to 12 months post-partum.
Expanding Medicaid, Proffitt said, would save Kansas $68.5 million next year through federal incentives offered to the 12 states that have not yet expanded eligibility.
Legislative leaders, however, have rejected Medicaid expansion as too expensive for the state in the long run.
“I don’t know how we’re going to handle inflation now and it’s being caused by the money that Joe Biden’s put into the system,” Ryckman said. “Federal money does not solve problems.”
Caution for the future
Though optimistic about the opportunities surplus funds created, Proffitt and lawmakers acknowledged that the good times may not last.
“I’m cautioning everyone here to remember that these dollars can disappear really, really quick,” Billinger said. “We appreciate all the input, the ideas on how to get rid of all this money but we can’t afford just to spend it. We can’t. We’ve got to be responsible. We need ending balances. We need some money for the future.”
Josh Goodman, a senior officer at Pew Charitable Trusts, said states saw a similar windfall of cash in 2008 from federal relief policy but then encountered budget shortfalls when the funds disappeared years later.
States, Goodman said, need to balance long term investments — such as the proposed pay raise for employees and sales tax cuts — with short term projects and budget maintenance.
To be best prepared, Goodman said, states should have long term revenue estimates to predict when windfalls may hit. Kansas’ estimates only project through 2023.
“The concern is any priority that policy makers want to achieve requires a sustained investment,” Goodman said. “There will be another recession at some point but we don’t know when.”
Kelly’s budget attempted to accomplish that through infusion of funds into the rainy day fund, paying down debts and financing planned capital improvements with cash.
Her proposed $8.9 billion budget leaves a $671 million surplus at the end of the calendar year.
“I think it’s a good use of one-time money and preparing us so that we do have some flexibility in some ways so we can be nimble moving forward,” Senate Minority Leader Dinah Sykes said.
This story was originally published January 12, 2022 at 4:18 PM.
