KS Senate passes rescission bill on 2017 budget

It was a pivotal week in the 2017 Kansas Legislative Session, getting the state one step closer to filling the $1 billion expected budget shortfall over the next few years. The Senate passed their rescission bill last Thursday, which makes adjustments to the FY17 budget and fills the $281 million hole. Lawmakers now have the green light to turn their attention toward the next biennial budget for FY18 and FY19.

FY17 Budget Rescission Bill

The Senate passed their rescission package at 9:15 p.m. last Thursday evening, Senate Substitute for House Bill 2052, by a vote of 27-13. The bill leaves the state $50 million in the black on June 30.

Key to the debate was the Senate’s rejection to again cut spending. In an attempt to reduce impending tax increases, Senate President Susan Wagle (R-Wichita) proposed a 2%, or $104 million, across-the-board cut to all state agencies retroactive to January 1, 2017. K-12 education would have seen a $65 million cut, and Senators showed little interest in light of the Kansas Supreme Court’s recent ruling that Kansas is not funding schools adequately. Wagle’s proposal – and subsequent spending cut amendments – failed by large margins.

The Senate’s rescission bill does the following:

  • Borrows from the state’s long-term investments at the end of the fiscal year to leave a $50 million ending balance. The remaining funds in the Pooled Money Investment Board are saved for FY18.
  • Delays and layers $150 million in FY17 payments to KPERS. The re-amortized repayment will begin in FY18 to still meet actuarial target dates.
  • Repays the $115 million eliminated KPERS payment from FY16 back with interest in FY18.
  • Delays a $75 million payment to K-12 education by one day, into the next fiscal year.
  • Deletes $40 million for Medicaid waiver services. The funds are expected to be included in the FY18-19 mega budget bill.
  • Transfers 10% of the State General Fund ending balance to the Budget Stabilization Fund on August 15, 2019.

The House passed their rescission bill last month, and a conference committee is expected to meet as early as this week to negotiate a final package.

Budget Stabilization Fund Implementation

The House Appropriations Committee heard testimony Thursday on Kansas’ newly- formed Budget Stabilization Fund. House Bill 2340 would authorize the transfer of State General Fund revenue in excess of the most recent consensus revenue estimates at the end of each fiscal year into this rainy day account. The bill also restricts fund expenditures to KPERS unfunded liability and debt service payments only.

The House has already included a trigger rule in their rescission bill that 10% of the State General Fund’s ending balance – after KPERS repayments are made – be transferred into the Budget Stabilization Fund starting in FY17. The Senate passed the same provision, except to not start until FY19.

Looking Ahead

With the passage of the FY17 budget fix, things are finally starting to speed up. Next week is already packed with a number of hearings or expected committee action on key bills. Here are a few we’re watching closely:

  • Mega Budget for FY18 and FY19 – Senate Ways and Means is beginning work on SB 189 and expected to finish up on Monday. HB 2364 will be worked in House Appropriations on Tuesday and Wednesday.
  • Flat Income Tax – House Taxation will hold hearings on HB 2385 (3.9%) and HB 2395 (5%) on Monday.
  • Motor Fuel Tax Increase – Senate Assessment and Taxation heard SB 224 (five cent increase) this morning. House Taxation will hear HB 2382 (eleven cent increase) on Thursday.

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