Kansas' Kelly wants to lower state debt, rebalance budget

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Kansas Gov. Laura Kelly’s first budget would end the practice of raiding highway funds to fill deficits and aims to reduce state debt after years of fiscal turmoil.

“It’s going to take time for Kansas to heal from the damage inflicted over the last eight years, so we don’t have a moment to lose,” the recently inaugurated Democrat and former legislator told her former colleagues. “I worked diligently to craft a balanced budget that will usher in a new era of shared prosperity and growth.”

During Republican Sam Brownback’s seven years as governor that ended a year ago, Kansas issued bonds backed by tobacco settlement revenues and $1 billion of pension obligation bonds to reduce the unfunded portion of the Kansas Public Employees Retirement System.

The Kansas Legislature, which is still controlled by Republicans, will take Kelly’s proposal as a guideline in planning spending for the next fiscal year.

The Kelly budget includes a statutorily required ending balance of $686 million. The 9.1% ending balance is the largest in a governor’s budget recommendation in 20 years, which Kelly called a reflection of commitment to fiscal discipline.

After Kansas accumulated a record level of debt to pay bills over the last eight years, Kelly proposes eliminating that debt in an effort to improve the state’s bond ratings.

Her proposal fully repays a $317.2 million loan issued in 2017 from the Pooled Money Investment Board. That would retire the debt five years earlier than planned.

During Brownback's administration, the state transferred funding for the state’s transportation system to the general fund to restore balance. Democrats and moderate Republicans blamed Brownback’s income tax cuts for undermining the state’s fiscal stability.

In 2017, Kelly was part of the Kansas Legislature that overrode Brownback’s veto of a tax increase designed to end years of revenue shortfalls. Raising the state income tax by $1.2 billion over two years, the vote was seen as a final rejection of Brownback’s plan to steadily reduce and eventually eliminate the state income tax.

“As problems piled up, we had to accept reality,” Kelly said in her State of the State address. “In 2017, we defied the odds, acknowledged the mistake, and hit “reset” in a historic act of bipartisanship.”

In her budget proposal, Kelly also seeks $92 million more for schools.

“It will not only meet state obligations to Kansas children, it will end the decades-long cycle of litigation over Kansas school finance,” Kelly said.

Kelly separated education funding from the rest of the budget and is introducing the plan as a separate piece of legislation. Kelly urged lawmakers to enact this plan by Feb. 28 to provide Attorney General Derek Schmidt time to comply with a court-ordered deadline.

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State budgets Laura Kelly State of Kansas Kansas Department of Transportation Kansas