We reached the midpoint of the session last Friday, the deadline for considering all non-exempt bills in either chamber. We reconvene the House Tuesday to start considering exempt House bills and Senate bills that have come over. The week was highlighted by the signing by the Governor of our 2009 rescission bill, which provides for what we hope are sufficient cuts in the current fiscal year to end the year in the black, as required by law. With almost 5 months left in the fiscal year and with revenues continuing to fall, we tried to pass sufficient cuts to leave some cushion going into FY 2010, where we may need to trim as much as 10-12%from total state expenditures.
While the House & Senate had productive weeks, the Governor and her Secretary of Administration didn’t. The Governor’s office created a wholly unnecessary payroll and tax refund crisis last week with a belated attempt to issue debt instruments that weren’t legal. The Secretary certified on the Thursday before that state funds were insufficient to pay debts and so the Governor ordered a mere $3.5M in allotments, or cuts, in state spending to cover a single expenditure. On Monday, the Secretary and Governor sought to issue certificates of indebtedness in the amount of $225M, in addition to certificates already totaling $550M, for a whopping $775M in the current year.
Unfortunately, since it had already been determined there were insufficient funds to pay expenditures for the year, more certificates of indebtedness were not legal. After Legislative staff and Legislative leadership pointed this out to the Governor on Monday, she tried to cover by running to the press and claiming that the Legislature was holding up state employee paychecks and tax refunds by balking at her request to issue more debt. She also fired up her state e-mail account to have state employees on state time send 1000’s of hateful e-mails to legislators. All the Governor had to do was add to the $3.5M allotment from the week before to cover the amounts needed for the week. She has allotment power and had that power even before the session started in January when she knew we faced a deficit. No legislative approval is required.
House & Senate leadership quickly responded to her failure to act by expediting delivery of the rescission bill to the Governor so she could sign it and put us in a legal position to issue certificates. Why the Governor or her office failed to follow the law or make provision for the week’s payroll and tax refund liability remains the subject of much speculation. She did sign the bill, with some notable line-item vetoes, and payroll was met. Payroll was never in jeopardy but fumbling by the Governor’s office needlessly worried 1000’s of state workers.
Also last week, we discovered the Governor had authorized the sale of $14M in refinance bonds, including $10M in KPERS bonds. This was part of her plan to defer paying principal totaling $53M over the next two years by selling 3 bond issues. Incredibly, the bonds would be paid over 25 years at an interest cost of $68M! Our staff caught wind of the sale and upon discovering that part of the sale involved KPERS bond refinancing, alerted leadership to the fact that the law prohibits refinancing KPERS bonds without KPERS Committee and State Finance Council approval. Since the closing on the bonds was scheduled for next week, we were able to stop them and the Governor had to veto her own proposal in the rescission bill to refinance debt in the current year.
One of the Governor’s notable vetoes in the rescission bill was a veto of a demand transfer from the State General Fund to the Health Care Stabilization Fund. We have learned that this is apparently contrary to law as well since the transfer is not an item of appropriation subject to line –item veto. As to these legal miscues, it’s true that neither the Governor nor her Secretary of Administration are attorneys. However, she has legal counsel on staff who should be giving her sound legal advice before she acts.
Finally, another veto involved striking additional funding for the Wichita Center for Graduate Medical Education, a vital program to train doctors primarily for the medically underserved rural areas. This has left many observers scratching their heads as Governor Sebelius is said to be a prime candidate for appointment as President Obama’s Secretary of Health & Human Services. The veto would presumably give rise to some sharp questioning during the confirmation process. If the Governor fails in her bid to be selected, her actions of this past week will certainly be seen as having played a role.
Thursday, the House is scheduled to debate its comprehensive energy bill, where passage is assured thanks to broad bi-partisan support. Unfortunately, the Governor has threatened a veto even before seeing the comprehensive legislation. Prospects for a veto override are promising.

Last week we made great progress on the 2009 rescission bill. We were able to reach agreement with the Senate in Conference Committee and the compromise passed both Houses Thursday by healthy margins. It makes $325M in adjustments, including just over $200M in true expenditure cuts in the current year. Without the cuts, the State would end the fiscal year in the red, a constitutionally impermissible situation.
Although K-12 public education accounts for 51% of all state spending, it will take only a fraction of the cuts other agencies will take, including public safety and social services. We were able to hold our position to assist with additional funding for physical disability waivers, reducing or eliminating the current waiting list. We were, unfortunately, unable to get the Senate to budge off it’s refusal to add the additional funds the House added to help with the developmentally disabled waiting list.
Even with the limited cuts to education, the governor has threatened to line-item veto the school cuts. Friday she exercised her authority to make forced cuts in spending (allotments) to stop the payment of tax relief payments to local units of government, but she plans to then ask us Monday afternoon in the State Finance Council meeting to issue more certificates of indebtedness to address cash flow problems the State is having this month. Our chief fiscal analyst was left scratching his head over this maneuver. Before seeking an intra-governmental loan, the Governor simply needs to sign the budget rescission bill and allow those cuts to address cash flow. Her strategy is fiscally unsound and repeats the mistake she made before the session began when instead of ordering reductions in expenditures to come into line with revenues, she sought intra-governmental loans. It’s as though she does not yet grasp the extent of the fundamental problem the state is having with government spending greatly outpacing revenues.
The daily buzz over whether the Governor will be offered a cabinet position has created an unfortunate distraction at a time when there needs to be an unwavering focus on the budget. The so-called Stimulus package in Washington is also an unwelcome distraction. Some suggest this one-time infusion of federal funds is an answer to our current budget woes. Nothing could be further from the truth. We can ill afford to use federal borrowing to support agency budgets that would require a recurring source of revenue in future years when federal funds would not be forthcoming. No, what we need to do is simply get a handle on government spending that exceeds state revenues. Stimulus money may be helpful in shoring up our ending balances, paying down debt, creating an economic development incentives fund and addressing some infrastructure needs, but it is certainly not a substitute for making fundamental changes in the way we craft annual budgets.
We will be debating this week a comprehensive energy bill passed out of the Energy Committee late last week. It incorporates many of the provisions sought by Governor Sebelius and includes a broad mix of energy sources for future energy needs, from renewable resources such as wind, hydro and solar to the reliable and affordable base load energy sources of coal and nuclear power.
Also included in the legislation are provisions addressing and restoring regulatory certainty. The current Sec. of Health & Environment denied Sunflower Electric’s application to build a new state-of-the art power plant in Holcomb, even though Sunflower had complied with and/or exceeded all state and federal regulations that protect the public health and environment. He cited concerns over carbon dioxide emissions, even though there is no law regulating such emissions for even our numerous older existing plants. Holcomb would be the cleanest plant in the country when built, would provide a huge $3.8B boost to an ailing Kansas economy and would provide a steady, affordable and reliable source of energy for the future. For those interested in wind energy development, the Holcomb proposal includes a $100M investment in high voltage transmission lines to allow wind developers to move power load centers outside the region. I expect strong bi-partisan support for the measure and, ultimately, a veto-proof majority should this Governor or a new Governor continue to try to block this critically needed project.