Sebelius signs deficit bill, budget impasse ends
From Tribune Staff and AP Reports
TOPEKA -- A budget impasse holding up Kansas income tax refunds and threatened to delay state employees' next paychecks ended Tuesday when Governor Kathleen Sebelius signed a budget-balancing bill.
The signing fulfilled a key demand from Republican legislative leaders who had blocked the Democratic governor's plan to transfer $225 million into the state's main bank account from other accounts across state government. The state has too little money in its main account to pay its bills on time, and the internal borrowing addresses the cash crunch.
Leaders of the GOP majorities in the House and Senate argued the internal borrowing wasn't legal until the state had a balanced budget for the fiscal year ending June 30. They said the bill signing cleared the way for the borrowing, which is expected to take place Wednesday.
''I'm extremely pleased that she signed it, because that's what needed to happen,'' said House Speaker Mike O'Neal.
While signed, Sebelius used her power as governor to veto line items in the budget-balancing measure. Among other things, she reduced a $32 million cut in state aid to public schools to just $7 million, leaving school officials and many legislators pleased.
In a written release from Sebelius she stated the length of time passed in the 2009 school year was a major reason for the line vetoes.
"While I agree with the Legislature that reducing the 2009 budget by more than $300 million is appropriate, I believe that with so much of the school year already behind us, the cuts proposed to public schools are too deep," Sebelius said.
Kansas District 13 Senator Bob Marshall said Tuesday he has mixed feeling on the signing, as school officials will not have to worry about cuts with only 3 months of school remaining, but will likely face heavier cuts next year.
"I feel good about it (deficit bill) for the schools and for our educators," said Marshall. "But really we are just delaying the impact for 2010. Twenty-ten is going to be brutal. At least educators will be able to plan for the 2010 cuts."
Sebelius signed the bill during a news conference at 4:30 p.m. -- a half-hour before a key payroll deadline. She said the state's 42,000 employees should receive their biweekly paychecks on time Friday.
The state already had suspended income tax refunds. The impasse also threatened to delay payments this week to doctors and hospitals who treat Medicaid patients and distribution of state aid to Kansas' 295 school districts at the end of the month.
''I'm just sorry that we had to have high drama and worry a lot of Kansans about our ability to pay our obligations in order to get to the end of the process,'' Sebelius said during the news conference.
Shoring up the state's main bank account by borrowing from other funds isn't uncommon when the economy sours. The state often faces a crunch in February and March, when bills come due and the bulk of income tax revenue has yet to be received.
But the borrowing must be approved by the State Finance Council, made up of the governor and eight top legislative leaders -- six of whom are Republicans. Sebelius had called a council meeting Monday but canceled it when Republicans told her the borrowing wouldn't be approved.
Many lawmakers called the House leaders' decision to block internal borrowing an "irresponsible" tactic.
Kansas House District 4 Representative Shirley Palmer said Tuesday she felt it was "very unfortunate" that representatives were playing with Kansans' livelihood.
"Kansas will not be able to pay tax refunds to families, to pay employee paychecks, to pay health care providers for Medicare services, or to pay school payments until this certificate is approved," said Palmer. "The Legislative Leadership is jeopardizing our citizens' pocketbooks, our state workers lives, and potentially our schools for no other reason than to play political games."
Another council meeting is scheduled for 2 p.m. Wednesday. Republicans said the signing of the budget-balancing bill allayed their worries about the legality of internal borrowing.
''This action gives us reassurances that we will have the resources to repay this,'' said Senate President Steve Morris, a Hugoton Republican, noting that state law requires internal borrowing to be paid off by the end of the fiscal year.
Sebelius, her staff and fellow Democrats argued there was no legal obstacle to the internal borrowing, even before she signed the bill.
The Finance Council approved certificates in July and December, authorizing $550 million in internal borrowing. Sebelius sought even greater authority in December, but GOP leaders blocked it then, as well.
''We told them we'd be out of money by the middle of February, so this was not a surprise,'' Sebelius said. ''This was self-created drama.''
Link to Sebelius' letter regarding the state budget: