DALLAS - The Kansas Finance Council on Monday approved a request by Gov. Mark Parkinson to transfer $700 million from various government accounts into the general budget fund so the state can make scheduled payments to school districts and taxpayers.
The resulting $700 million in certificates of indebtedness must be repaid by the end of the current fiscal year in June 2010. State law requires Kansas to show it can pay back internal borrowing before the council can approve the certificates.
With the transfer, the state will post a year-end balance for fiscal 2009 of $1.1 million from a $13 billion budget.
Kansas generated significant surpluses from fiscal 2002 through 2007, Parkinson noted, but those reserves have been depleted over the last two years.
The state collected $5.6 billion in fiscal 2008, he said, but spent $6.1 billion. Expenditures in fiscal 2009 also exceeded revenues by $500 million.
"So, in just those two fiscal years we spent about $1 billion more than we took in," the governor said. "We spent the surplus we had built up over the five previous good years. Unfortunately, this year there were no surpluses left."
Kansas halted already-delayed tax refunds and state aid to public schools last week for the second time in a month after revenue for the final months of fiscal 2009 totaled $129 million less than expected.
The state sent $130 million to local school districts on June 30 that should have been distributed on June 1, but had to defer $73 million in school aid scheduled for the last 11 days of June.
The financial infusion approved on Monday will enable the state to make the final school distribution for fiscal 2009. It will also allow the distribution of $31 million in state income tax refunds, which have been held for four weeks, to 35,000 taxpayers.
Parkinson, who heads the Financial Council, told the eight legislative members of the body that the state normally issues $200 million to $400 million in certificates of indebtedness because school aid is distributed in the summer but most tax revenue comes in later.
This year, he said, the transfer of funds is necessary because of declining state revenues.
"We face some challenging times with our budget," Parkinson said.
If revenues do not improve, Parkinson said he might call a special session of the Legislature to consider ways of raising revenue.
Approval of the $700 million of certificates of indebtedness came just days after the governor announced a series of cuts and revenue adjustments totaling $160 million, including 2% cuts to public and higher education.
When he made those changes, Parkinson said the state is facing "the most challenging economic times since the 1930s."
General fund tax revenues is fiscal 2010 are estimated at $5.4 billion, down $38 million from fiscal 2009.
Kansas has an issuer rating of Aa1 from Moody's Investors Service and AA-plus from Standard & Poor's.
