By Megan Hart
March 8, 2016

No one speaking Tuesday to the Senate Ways and Means Committee argued the Legislature could be trusted to direct funds to their intended purpose.

The only question was what arrangement would make it least likely that lawmakers would use funds for children’s programs, highways and other designated purpose instead to plug holes in the state general fund budget.

The focus of Tuesday’s hearing was Senate Bill 463, which would abolish the Kansas Endowment for Youth and the Children’s Initiatives Fund and transfer the money to the state general fund.

All future revenue from the state’s master settlement agreement with the nation’s tobacco companies would go to the general fund rather than the Kansas Endowment for Youth and the Children’s Initiatives Fund. The two funds allocate money to programs focusing on child health and well-being.

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Sen. Ty Masterson, an Andover Republican and chair of the committee, said the state general fund receives more public scrutiny than pots of state money, and that the increased attention would reduce the likelihood the Legislature would divert funds from their original purpose.

“Transparency is the intention,” he said.

But Erick Vaughn, executive director of the Kansas Head Start Association, said recent fund sweeps from children’s programs have shown that legislators are willing to divert that money to balance the budget.

“The tendency of the Legislature is to take care of today’s demands rather than planning for the future with early investment,” he said.

Masterson referred to the separate funds as a “safety blanket” for advocates and charged they were trying to avoid public scrutiny.

“You’re trying to protect things from the representatives of the people,” he said.

Sen. Laura Kelly, a Topeka Democrat, agreed with Vaughn that moving all of the programs into the general fund would make it easier for the Legislature to avoid scrutiny if it diverted money from children’s programs.

“We won’t sweep it anymore, we just won’t appropriate it,” she said. “There’s no doubt that’s why we’re doing this.”

‘End up with nothing’

If the bill passed, the Kansas Children’s Cabinet could advise Gov. Sam Brownback’s administration on how to spend up to $50 million on children’s programs. The Legislature would have to approve any recommended spending.

Shannon Cotsoradis, executive director of Kansas Action for Children, said the bill established a maximum amount to spend on children’s programs but didn’t include a minimum. She also referenced unconfirmed reports that the state could sell its interest in the tobacco master settlement for an upfront payment of $400 million.

“At the end of the day, children could end up with nothing,” she said.

The Children’s Cabinet estimated the change would reduce the amount it manages by $26.1 million.

After the hearing, Eileen Hawley, spokeswoman for Gov. Sam Brownback, said state officials saw a presentation about “securitization” of future tobacco settlement money a few months ago, but “there is no deal or pending legislation to sell tobacco settlement money.”

To maintain current children’s programs, the Legislature would need to replace the state matching funds for the federal Early Childhood Block Grant and for programs focusing on child abuse prevention, child care and early childhood education.

The bill also would:

  • Transfer all liabilities from the various funds to the state general fund. The Legislature could, however, decide to reduce payments in the future.
  • Remove language that all money credited to the Children’s Initiatives Fund “shall be used for the purposes of providing additional funding programs, projects, improvements, services and other purposes directly or indirectly beneficial” to Kansas children.
  • Delete a provision that Children’s Initiatives Fund money not be used as a replacement for state general funds designated for a program in the previous year.

Closing the ‘Bank of KDOT’

SB 463 also would eliminate sales tax transfers to the state highway fund in fiscal year 2018. If the Legislature doesn’t replace that money, “it is likely that the scope of the T-WORKS Program would need to be re-examined,” the fiscal note attached to the bill said.

Budget Director Shawn Sullivan said the change would end the “shell game” of moving sales tax money from one fund to another purpose, which he blamed for recent credit downgrades.

“It allows for greater prioritization if it all goes in the state general fund,” he said. “The huge benefit for us is ending this ‘Bank of KDOT’ shell game we play.”

Opponents of budget transfers have used the term “Bank of KDOT” when referencing the Brownback administration’s shifting of transportation funds for unrelated expenses due to inadequate revenues.

If the Legislature chose not to continue appropriating funds for children’s programs, it would lose some matching federal funds, according to the Kansas Department for Children and Families.

For example, if the state stopped putting $5 million into its child care program, it would lose $6.6 million in federal funds, and if it didn’t spend $2.2 million on the family preservation program, it would lose $1.5 million in federal matching money.

The bill also would abolish the Economic Development Initiatives Fund and the Expanded Lottery Act Revenues Fund in July 2017 and transfer their balances to the general fund.

The bill remains in committee.

Read more from the Kansas Health Institute.