Top Republicans refused to borrow millions from other state accounts to cover bills

John Hanna

Associated Press Writer

TOPEKA (AP) — Kansas has suspended income tax refunds and may not pay its employees on time, state officials said Monday.

The state doesn’t have enough money in its main bank account to pay its bills. That means payments to public schools and doctors who provide care to needy Kansans under the Medicaid program also could be delayed.

The cash crunch prompted Democratic Gov. Kathleen Sebelius to propose borrowing $225 million from other accounts throughout state government. But such a move required the approval of legislative leaders, and top Republicans refused Monday.

Sebelius immediately accused Republicans, who hold majorities in both chambers, of blocking the accounting maneuver to “play political games.”

The state often faces cash flow problems when the economy slumps, because revenue isn’t collected at the same time bills come due, and it’s not uncommon for the state to borrow money from its other accounts to solve the problem.

But GOP leaders said it’s illegal under Kansas law to shift the funds around as long as the state continues to face a projected deficit in the budget for the fiscal year that ends June 30. The Legislature has approved a bill to eliminate the shortfall, but Sebelius hasn’t received the bill yet and hasn’t said whether she will sign it.

“We do want to dot our ’i’s’ and cross our ’t’s,”’ said House Speaker Mike O’Neal, a Hutchinson Republican. “This is important work, and we do intend to comply with the law.”

Republicans said Sebelius could impose emergency budget cuts to pay the state’s bills on time. But Budget Director Duane Goossen, a Sebelius appointee, said only shifting funds around will pull enough cash into the main bank account quickly enough.

“What we’re short of is revenue,” Goossen said.

The state’s 42,000 employees are supposed to receive their biweekly paychecks Friday, the same day Medicaid reimbursements are supposed to go to health care providers. But the state actually sets aside the money Wednesday.

“If we don’t pay our bills on time, we put our credit ratings at risk,” said State Treasurer Dennis McKinney, a Democrat appointed by Sebelius to fill a vacancy in that elective office.

The state needs a total of $56 million to meet payroll, make the Medicaid payment and pay tax refunds that were pending when the state suspended them Friday, according to Goossen. As of Monday morning, the state had about $10 million in its main bank account, Goossen said.

He said he wasn’t sure if the state would make its regular payroll and noted that income tax refunds already had gone unpaid.

Republican leaders said they’re willing to consider shifting funds around state government to meet the cash crunch once revisions to the current budget become law. The bill they approved last week makes $326 million worth of adjustments, a little less than half of them spending cuts.

Key provisions in that bill would trim $32 million from aid to public schools, about 1 percent of what the state has promised them.

Sebelius and fellow Democrats have said it will be difficult for educators to absorb those cuts so late in the school year. Republicans argue the cuts for schools are necessary to avoid deeper cuts in other parts of the budget, including public safety and social services.

The bill hasn’t reached Sebelius’ desk, because the Legislature’s staff is still proofreading it. But Senate President Steve Morris said the measure could be ready for Sebelius to consider Tuesday evening.

“I would hope that we would make the payroll and all the other obligations,” said Morris, a Hugoton Republican.

Democrats accused Republicans of trying to force the governor to accept all the budget changes, including the school funding cut.

“Frankly, I think this is about as irresponsible an action as I have seen,” said Senate Minority Leader Anthony Hensley, a Topeka Democrat. “It’s blackmail at its worst.”

Shifting funds into the state’s main bank account requires a special certificate approved by the State Finance Council, which consists of the governor and the Legislature’s top eight leaders, six of them Republicans.

The council issued certificates in July and December, totaling $550 million. Sebelius called a council meeting for Monday, seeking another certificate to move $225 million in funds. She called off the session after O’Neal and Morris told her Republicans wouldn’t approve a certificate.

Under the law, for a certificate to be issued, the budget director must agree that the money will be paid back by the end of the fiscal year. Goossen didn’t have a problem borrowing the money, but Republican leaders doubted that it could be paid back.

GOP leaders noted that in the 26 years the state has issued such certificates, it’s never had three in a single fiscal year. Also, the total internal borrowing for a fiscal year has never reached $775 million.

“We have to make absolutely sure that we’re doing everything that needs to be done to protect the state’s financial stability,” Morris said. “We’re in a precarious situation — we know that — but we do not want to make that situation worse by doing that is against statutes.”

But Sebelius said in a statement: “The Republican legislative leadership is jeopardizing our citizens’ pocketbooks for no other reason than to play political games — games in which the only ones set to lose are Kansas families, workers and schools.”

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