Kansas pays off $300 million cash-flow loan two years ahead of schedule

Kelly points to evidence of fiscal management; GOP expresses skepticism

By: - November 17, 2021 2:48 pm
Gov. Laura Kelly said the state government was able to pay off two years early a $300 million loan taken out in 2017 amid budget problems linked to steep cuts in state income tax rates. (Sherman Smith/Kansas Reflector)

Gov. Laura Kelly said the state government was able to pay off two years early a $300 million loan taken out in 2017 amid budget problems linked to steep cuts in state income tax rates. (Sherman Smith/Kansas Reflector)

TOPEKA — Gov. Laura Kelly said the state of Kansas repaid a $300 million government loan taken out in 2017 to comply with cash-flow requirements amid budget shortfalls driven by aggressive state income tax cuts.

Early payment of the full amount borrowed from the Pooled Money Investment Board coincided this month with revised state revenue projections potentially creating a $2.8 billion surplus in the general treasury. That forecast spurred the Democratic governor and other politicians to endorse repeal of a state sales tax of 6.5% on grocery purchases, a hit to the budget of $450 million annually.

“Government, just like every Kansan, has to balance its checkbook,” said Kelly, who is seeking re-election in 2022. “Thanks to three years of fiscal responsibility, we’ve paid off this debt, continue to fund our schools and roads, and we can afford good policy — like axing the state’s food tax — to provide tax relief to Kansas families.”

The Pooled Money Investment Board, or PMIB, is a state entity that manages and invests idle cash possessed by state and local units of government.

House Speaker Ron Ryckman, a Republican from Olathe, said the governor was following instructions of the Kansas Legislature on the loan repayment. He said Kelly had previously recommended extending the loan repayment period and also proposed financial changes to the Kansas Public Employees Retirement System.

“The governor’s about-face isn’t surprising with an election year looming,” Ryckman said. “Let’s be clear. Earlier this year, the Kelly plan was to delay paying off the PMIB loan for 10 years and mortgage the KPERS retirement plan. The Legislature fought back and passed a directive to pay off this debt early. So, the governor has merely followed the law the Legislature put in place and wants headlines for it.”

In 2017, during the administration of Republican Gov. Sam Brownback, the state took out a “bridge loan” from the PMIB to meet state laws regarding cash flow. In 2012, Brownback had signed legislation slashing state income tax revenue by about $1 billion. He didn’t approve comparable spending cuts, which eventually led to extreme budget problems. The GOP-led Legislature repealed much of his tax program in 2017.

Adam Proffitt, the governor’s budget director, said the PMIB loan was paid off two years ahead the original schedule.

“That’s no small task, especially during uncertain economic times,” Proffitt said. “Because of Governor Kelly’s leadership and due to her prudent fiscal decisions, the budget has not only stabilized, but re-energized the economy.”

The governor’s office said evidence of Kelly’s fiscal management could be found in full funding of Kansas public schools the past three years, creation of 30,000 jobs, $7 billion in new business investment and implementation of a statewide infrastructure program that included more than 130 projects to upgrade highways, bridges and broadband.

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Tim Carpenter
Tim Carpenter

Tim Carpenter has reported on Kansas for 35 years. He covered the Capitol for 16 years at the Topeka Capital-Journal and previously worked for the Lawrence Journal-World and United Press International. He has been recognized for investigative reporting on Kansas government and politics. He won the Kansas Press Association's Victor Murdock Award six times. The William Allen White Foundation honored him four times with its Burton Marvin News Enterprise Award. The Kansas City Press Club twice presented him its Journalist of the Year Award and more recently its Lifetime Achievement Award. He earned an agriculture degree at Kansas State University and grew up on a small dairy and beef cattle farm in Missouri. He is an amateur woodworker and drives Studebaker cars.