Kansas May Suspend Income Tax as Budget Deficits Pull the State Closer to Bankruptcy

Budget deficit woes go deep in Kansas

The Kansas budget crisis has taken on a starker tenor as agencies reportedly are considering suspending income tax refunds to manage budgetary shortfalls.

“It is rumored in the statehouse that the Kansas Department of Revenue has suspended income tax refunds,” Sen. John Vratil, R-Leawood, said Monday.

Vratil added that such a suspension would be Gov. Kathleen Sebelius’ or the Department of Revenue’s final decision, not the Legislature’s.

Vratil also said Monday that the state’s treasury balance stood at $5 million.

“That’s not very much in a $6.5 billion budget,” Vratil said.

Sebelius responded with criticism of Republican lawmakers for holding inter-governmental transfers of funds hostage until she approved the budget bill.

“Last week, I called a meeting of the State Finance Council to consider the issuance of a certificate of indebtedness, a routine action dealing with state cash flow, that allows us to move money from one account to another so we can pay our bills on time,” Sebelius said in a written statement. “… Today, the Republican leadership of the Legislature told me they would not approve the February certificate, only necessary because of their actions in December, until I sign the 2009 budget bill.”

Her statement added that the state could not pay tax refunds, that state employee paychecks are in jeopardy and that payments to health care providers and schools face delays.

“Through their refusal to act today, the Republican legislative leadership is jeopardizing our citizens’ pocketbooks for no other reason than to play political games,” Sebelius said. “Games in which the only ones set to lose are Kansas families, workers and schools.”

The Wichita Eagle

TOPEKA – Income tax refunds and state employee paychecks could be late after Republican leaders and the Democratic governor clashed Monday over how to solve a cash-flow problem.

Payments to Medicaid providers and schools also could be delayed.

“We are out of cash, in essence,” state budget director Duane Goossen said.

The move places state taxpayers, workers and schoolchildren in the middle of a political battle over budget cuts.

Republicans, who hold majorities in both chambers, blocked Gov. Kathleen Sebelius’ proposal to borrow $225 million from healthy state funds to cover shortages in accounts used to meet the state’s payroll and issue tax refunds.

GOP leaders said they won’t approve the IOUs until Sebelius either cuts the current budget herself or signs the bill they passed last week slashing $326 million — including $32 million for education — to balance the budget.

Republican leaders said they had no choice, that by law the state can’t borrow any more money from itself.

Sebelius and Democrats disagree and accuse the GOP of playing politics with people’s paychecks.

“Through their refusal to act today, the Republican legislative leadership is jeopardizing our citizens’ pocketbooks for no other reason than to play political games — games in which the only ones set to lose are Kansas families, workers and schools,” Sebelius said in a written statement.

Replied House Speaker Mike O’Neal: “While we all can agree that these are trying times for Kansas families, seniors and business owners, the Kansas House of Representatives respectfully disagrees with breaking the law in order to gain political capital.”

The Senate approved the budget-cutting bill Thursday, but the governor has yet to receive it. It is being proofread and could reach Sebelius as early as Tuesday.

Her spokeswoman has said she will carefully consider it. She could sign it, veto it or veto portions of it.