Kelly issues line item vetoes to help keep state spending in check

Topeka – Kansas Governor Laura Kelly has signed House Substitute for Senate Bill 25, the state’s budget bill for Fiscal Years 2019 and 2020. In her budget message to the Kansas Legislature, the Governor thanked Kansas lawmakers for their bipartisan efforts to restore investments that had been eroded in the previous eight years.

“There is a lot to celebrate in this state budget,” Kelly said. “We can accomplish so much good for the people of Kansas when reckless tax policy does not leave our state embroiled in a perpetual budget crisis. I appreciate the bipartisan work of lawmakers to pass a budget that takes meaningful strides to rebuild Kansas – including investments in public education, public safety, infrastructure, and the foster care system – all without raising taxes.”

While Kelly applauded legislators’ work, she expressed concern about new spending. In January, Kelly recommended a structurally balanced budget that left a 9.1 percent ending balance – the largest ending balance in 20 years. The Kansas Legislature added roughly $182 million of spending from the State General Fund to Kelly’s budget proposal, pushing the ending balance below the statutorily required 7.5 percent in FY20.

“When I built my state budget proposal, it was tempting to approve every spending request made by agencies and organizations because all had endured severe budget cuts in recent years,” Kelly said. “But I felt that fiscal restraint was absolutely critical to sustaining Kansas’ recovery. Now, to keep spending in check so we can rebuild our rainy day fund and weather any unexpected emergencies, I eliminated some non-essential spending with line item vetoes.”

“Pursuant to Article 2, Section 14 of the Constitution of the State of Kansas, I hereby return H. Sub. for SB 25 with my signature approving the bill, except for the items enumerated below,” Kelly said. “The net effect of these line item vetoes will increase the FY19 ending balance to $871 million, or 12.2 percent, and increase the FY20 ending balance to $606 million, or 7.8 percent.”

Board of Pharmacy
● Section 27(a) and (b), transferring $705,000 from the Medical Programs Fee Fund for K-TRACS in FY20, has been line-item vetoed.

While I am a strong proponent of the K-TRACS program, my original budget recommendation did not include SGF funding for this program because it is inconsistent with the structure of fee-funded agencies. Sweeps from the Medical Programs Fee Fund must be backfilled by the State General Fund, making this transfer to K-TRACS an SGF appropriation. The Board of Pharmacy indicated that it will likely receive a federal grant to cover the cost of this line item. In the event that this grant is not awarded, I have instructed my administration to maintain open lines of communication with the Board of Pharmacy in its effort to identify alternative, non-SGF sources for K-TRACS.

● Section 56(e), requiring an additional $51 million transfer from the State General Fund to KPERS in FY20, has been line-item vetoed.

The very first piece of legislation I signed into law repaid an extra $115 million in debt incurred to the Kansas Public Employees Retirement System. This extra payment fixed past mistakes, when emergency steps were taken to pay for failed tax policy. However, given the large number of critical, unmet needs still facing state government, it is not prudent to add an additional KPERS payment that goes beyond the regularly scheduled payments already being made. In fact, this could actually harm the state’s ability to make full, timely KPERS payments in the very near future. This line-item veto provides an essential cushion to the state ending balance so that Kansas can continue to pay its bills and rebuild the state more sustainably.

Department for Aging and Disability Services
● Section 84(a), $1,885,000 for community mental health centers supplemental funding & community aid, as well as $38,646 for the Client Assessment Referral and Evaluation (CARE) program, both in FY19, has been line-item vetoed.

I am pleased to support $5 million in additional funding for CMHC grants in FY20. In an effort to more evenly distribute reinvestment in Kansas government, I do not believe it is responsible to further increase CMHC funding in FY19. This veto does not eliminate $196,304 included to expand the Clubhouse Model and Breakthrough House in FY19.

Department of Education
● Section 90(a), $1,200,000 for evidenced-based or research-based reading programs, $80,000 for Technical Education incentives, and $261,000 for Teach for America, all in FY20, have been line-item vetoed.

Increasing funding to Kansas public schools was my top budget priority and proudest accomplishment as governor in 2019. However, in a continued effort to establish fair expectations of accountability and efficiency throughout state government, I felt it inappropriate to earmark education funds through the Kansas Department of Education. I encourage local districts to use their new State Foundation Aid to participate in these programs as they deem appropriate.

In total, these line item vetoes will increase the State General Fund balance by $54.4 million between FY19 and FY20. The new ending balance also complies with the statutory requirement to leave 7.5 percent of the State General Fund in reserve.

“This budget does not accomplish all the goals of my administration, but it’s a good start,” Kelly said. “My Cabinet will continue the hard work of rebuilding Kansas during the interim. In the coming months, we will share the findings of agency audits that I directed in January, and we will couple those findings with new solutions and efficiencies that continue to propel our recovery forward. It will take more than one year for Kansas to recover from the last eight, but I am confident we are headed in the right direction. I thank the Legislature for their partnership in this endeavor.”