TOPEKA, Kan. (AP) — Democratic Gov. Laura Kelly outlined a proposed budget Thursday that would commit Kansas to higher spending on public schools, expand its Medicaid health insurance program — and cut the state’s annual funding for public pensions to help pay for her initiatives.
Kelly’s release of her proposed $18.4 billion spending blueprint for the budget year beginning in July gave Kansas residents a taste of what a divided state government is likely to look like. Her budget would be the largest ever, with total spending rising $1.2 billion, or 7.2 percent.
The budget plan also picks a political fight with top Republican lawmakers over their plans to pursue tax relief and in a statement she warned the GOP not to adjust income tax laws this year. Her budget director, Larry Campbell, told lawmakers that they should wait up to three years “for the ship to stabilize.”
GOP legislators questioned Kelly’s estimates for the state’s costs in expanding Medicaid and honed in on the pensions proposal as potentially dangerous for a system that is less than 70 percent funded. They also were frustrated that she produced no projections for how her plans play out after June 2020.
“I feel like I’m driving 70 miles an hour and can see only one car length ahead of me,” said Rep. Steven Johnson, an Assaria Republican and one of the GOP moderates whose support is crucial to Kelly’s plans.
The new governor’s proposals would leave the state with cash reserves of $686 million at the end of June 2020. Campbell argued that the reserves are a hedge against an economic downtown.
The cushion would also be there after Kelly funded her key priorities, including a proposed 2.5 percent pay raise for state workers. But that’s only with a 22 percent cut in the state’s funding of pensions to save the state $145 million during the next budget year.
Legislators have wrestled with pension costs for decades because of a long-term gap in the funding for benefits. A 2012 law committed the state to more aggressive increases in annual payments to close the gap by 2034, but lawmakers have struggled to keep the promises.
Kelly essentially proposes to refinance the remaining $8.9 billion debt over 30 years, closing the gap in 2049.
“This is one choice of making it manageable,” Campbell said.
But the choice upset Republicans because, as Campbell acknowledged, it increases the state’s total long-term cost in closing the pensions funding gap. Former Republican Gov. Sam Brownback — whose fiscal policies were frequently criticized by Kelly — proposed a similar idea in 2017, to no avail.
“We cannot keep kicking the can down the road and asking our children and grandchildren to foot the bill,” said State Treasurer Jake LaTurner, a Republican who serves on the pension system’s board.
Kelly’s proposed budget breaks with Brownback and former GOP Gov. Jeff Colyer most notably by funding an expansion of Medicaid to cover as many as 150,000 more low-income Kansas residents. Brownback and Colyer opposed an expansion allowed under the Affordable Care Act, viewing it as costly to the state, even with the federal government covering most of the expense.
Kelly’s budget projects the total cost of the expansion at $509 million during the next budget year, but that figure includes federal funds. Kelly’s budget estimates only $14 million would come from state tax dollars, and some Republicans were incredulous at the low estimate.
“I think you missed it by a decimal,” Senate Majority Leader Jim Denning, a conservative Overland Park Republican, told Kelly’s budget director during a briefing for the House and Senate budget committees.
Kelly’s proposed budget embraces a plan from the State Board of Education to phase in a $364 million increase on public schools over four years. Kelly and other Democrats argue that it will end an education funding lawsuit filed in 2010 by four local school districts.
Legislators boosted funding on schools last year, but the Kansas Supreme Court said it wasn’t enough because their law didn’t account for years of inflation. Kelly’s budget reflects the state school board’s best guess on what will satisfy the court, but top Republicans question whether the state can sustain the spending without a tax increase — which Kelly promised to avoid.
With the new funds, the state’s education funding would increase 5.5 percent during the next budget year, to nearly $4.4 billion.
Kelly’s budget also includes money for the State Department of Children and Families to hire an additional 55 social workers for the child welfare system and to fill vacancies in staff at state prisons. The department’s budget would increase 8.7 percent, to $727 million.
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