Kansas Governor Proposes Tobacco Securitization, Efficiencies In Budget

Kansas Gov. Sam Brownback during his State of the State address.

By John Celock

Kansas’ governor has released a budget that will likely restart several battles with the state’s education community over new efficiencies.

State Budget Director Shawn Sullivan briefed lawmakers Wednesday morning about a budget proposal which will include a series of efficiency proposals including merging all school employees into the state health care plan, the merger of the state’s securities and insurance regulators and having school procurement go through a statewide procurement pool. The budget proposal also includes several tax and fee hikes, along with the securitization of the state’s tobacco settlement and using the state’s investment pool to cover a deficit in the current budget.

“To get through this year and to protect us from major cuts halfway through a fiscal year that we do not believe are feasible,” Sullivan said of the current $348 million budget deficit. “We already have four percent cuts in Medicare this year and other cuts. We propose using a Pooled Money Investment Board fund that is $365 million in long term investments.”

Sullivan’s presentation to the state House Appropriations and Taxation Committees focused on both plugging the current budget hole and the budgets for the next two fiscal years with the transfer of the investment funds as the highlight of the governor’s plan to cover the current deficit.

Sullivan said the transfer of the investment funds to the state treasurer’s office would earn the state $45 million in interest annually. He said that the budget proposal would include the state paying the funds back to the PMIB over seven years.

In terms of the tobacco settlement securitization, which would be for the 2018 and 2019 fiscal year budget proposals, Sullivan said that it would bring in between $480 million and $775 million to the state. He said that the securitization has been accomplished in other states.

The budget proposal also includes a tax on passive income from rents and royalties, raising cigarette taxes by a dollar a pack, increasing the tobacco products tax from 10 to 20 percent and raising the liquor enforcement tax from eight to 16 percent. The proposal also would hike corporate filing fees from $40 to $200 and freeze the lowest income tax at 2.7 percent. The proposal does not touch the state’s 2012 tax cuts, which have contributed to the state’s current budget deficit. In his presentation to lawmakers, Sullivan defended the cuts, which Brownback has defended. Lawmakers are considering proposals to rollback parts of the cuts.

The budget proposal includes several efficiency proposals, many that were contained in the Alvaraz and Marcel government efficiency report, which was delivered to lawmakers last year. Among the proposals is a plan to combine all of the state’s teachers and school employees into the state health care plan, which Sullivan says will save funds for local school districts with a larger pool instead of 286 local insurance pools. The proposal has received opposition in the past from education groups.

Sullivan also outlined a proposal to have school districts in the state do various purchases through the state procurement groups, which he says will provide savings with the bulk purchases. A similar proposal was crafted last year by the House Education Budget Committee and was rejected by the state House after a contentious debate. School districts have opposed the proposal in the past, saying it would hurt small businesses and local control over types of products to purchase.

Sullivan also outlined that the budget proposal includes a proposal to merge the state securities commissioner’s office into the state insurance commissioner as a cost savings. The proposal was first announced Tuesday by Brownback in his State of the State address. The budget proposal says that Brownback expects efficiencies to be seen from the merger with a cost savings over time, but does not outline the exact figures. The agencies regulating banks and credit unions would remain independent.