Monday, January 26, 2015

Tobacco fund sweep draws legislator’s ire

KHI News Service

KANSAS CITY, KAN. ---- A member of the House Social Services Budget Committee on Thursday objected to Gov. Sam Brownback’s plan for using $14.5 million from the Kansas Endowment for Youth to fill part of a $280 million hole in the current fiscal year’s budget.

“This is a problem, in my view,” said Rep. Stephanie Clayton, a Republican from Overland Park.

She asked the committee’s chair, Rep. Will Carpenter, a Republican from El Dorado, “Is there anything we can do to prevent this sweep?”

Carpenter, who’s new to the committee, said he wasn’t sure but would find out. The exchange came midway through an informational briefing on the state’s tobacco master settlement agreement revenues and how they are spent.

In keeping with state statutes, settlement revenues –between $50 million and $70 million, typically -- each year are deposited in the Kansas Empowerment for Youth (KEY) fund. Historically, most of the money in the KEY fund is transferred to the Children’s Initiative Fund where it’s used to underwrite programs and services that promote early childhood development.

But there’s been little to stop lawmakers from using KEY fund monies to offset projected shortfalls in the State General Fund.

Since 2001, lawmakers have tapped the KEY fund for more than $165 million outside of its intended purpose.

“This is a pet peeve of mine -- across the board, not just with the KEY fund,” Clayton said after the committee meeting. “I feel like we’re lying to the taxpayers. We tell them we’re going to use this money for this purpose, and then we sweep it for something else. I mean, from a transparency, populist, almost-Tea Party perspective we shouldn’t be sweeping, we shouldn’t be lying.”

Rep. Nancy Lusk, a Democrat from Overland Park, shared Clayton’s concern. “

The money needs to go to where it was intended to go,” she said.

In additional to taking $14.5 million from the KEY fund in the current fiscal year, which ends June 30, Brownback has proposed tapping the fund for $9.1 million from the fund in fiscal 2016; $8.2 million in fiscal 2017.

“That means we’re looking at a $32 million sweep over the next three years,” said Shannon Cotsoradis, president and CEO of the advocacy group Kansas Action for Children. In each of the three years, she said, the KEY fund will be depleted, setting the stage for significant reductions in children’s services.

Shawn Sullivan, the state budget director, has said that the proposals only transfer excess money out of the endowment above the amount traditionally needed to fund Children's Initiative Fund programs.

But the endowment is meant to hedge against depleting tobacco settlement revenue and Cotsoradis spent much of this week warning legislators that if the KEY fund is depleted and then settlement revenues fall short of projections, they will be forced to make deep cuts in current year spending.

“The way the Children’s Initiative Fund is set up, it’s spent before the payments come in, which is usually sometime in April,” she said. “So if, by chance, the payments – there are two -- come in at less than expected and the KEY fund is at zero, there will have to be substantial cuts made in early childhood programs in the final quarter of the fiscal year.

“There would be no hope for backfilling because the KEY fund will be empty,” she said, “and, as everybody knows, there’s no money in the State General Fund.”

The situation, Cotsoradis said, is due to worsen in 2017 with the phasing out of what’s known as the “strategic contribution” portion of the settlement payments.

“We’re looking at a reduction of 20 percent in 2017,” she said. “That’s just around the corner and there won’t be anything in the KEY fund.”

Since 1999, the state has received more than $817 million in master settlement payments and interest earnings.