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UPDATE: Failed Kansas Governor Suspends Income Tax Refunds

Posted on 16 February 2009

Kansas has suspended income tax refunds and may not be able to pay employees on time, the state’s budget director said Monday.

The state doesn’t have enough money in its main bank account to pay its bills, prompting the failed Democratic Gov. Kathleen Sebelius to suggest transferring $225 million from other accounts throughout state government. But the move required approval from legislative leaders, and the GOP refused Monday.

Budget Director Duane Goossen said that without the money, he’s not sure the state can meet its payroll. State employees are due to be paid again Friday.

Goossen said the state stopped processing income tax refunds last week.

GOP leaders are hoping to pressure Sebelius into signing a bill making $326 million in adjustments to the budget for the fiscal year that ends June 30.

Legislators approved that bill last week, but it has not reached her desk.

Goossen said the state might also have to delay payments to public schools and to doctors who provide care to needy Kansans under the Medicaid program.

The state has transferred funds before when it has been short of cash in its main bank account. Most recently, the state issued the special certificates required in July and December for transfers totaling $550 million.

Each certificate requires the approval of the State Finance Council, which consists of the governor and eight top legislative leaders.

The council was scheduled to meet at 1 p.m. Monday, but Goossen said Sebelius canceled the meeting because Republican leaders told her that they would not authorize the internal borrowing.

Some Republicans question whether that borrowing would be legal. When the state issues a certificate, it must promise that the money can be paid back by the end of the fiscal year. But the state already is projected to have a deficit in the current budget.

The legislation approved last week is designed to fix that.

Goossen said Republicans told Sebelius they want her to sign that bill first. Senate Minority Leader Anthony Hensley, a Topeka Democrat, called the tactic “blackmail.”

Republican leaders planned a news conference to discuss what happened.

UPDATE:  Tuesday – 02/17/09

Here is additional information you need to know about the situation in Kansas:

• The governor has all the tools necessary TODAY to make payroll for state employees this Friday if she and the Department of Revenue decide to do so. She can do that by signing House Sub. for Sub. SB 23, (the bill is on her desk right now) or by issuing allotments by Executive Order.

• What the governor did yesterday was ask the legislature to break the law by illegally issuing certificates of indebtedness.

• Rather than withholding tax refunds or paychecks from hard working Kansans, the Governor should simply use her power to make the allotments, consistent with House Sub. for Sub. SB 23, to cut state spending.

• The Governor called a meeting of the State Finance Council to consider the issuance of a certificate of indebtedness. When it became apparent that the action of the State Finance Council would violate state law, the Governor agreed to postpone the meeting.

• The Governor asked the Legislature to be complicit in breaking state law by approving certificates of indebtedness outside of the parameters set in statute. Kansas law requires the Director of the Budget to certify that money will be present at the end of the year to pay off certificates of indebtedness, and there is no evidence that will be the case.

If you live in Kansas, call the Governor today and ask her to sign the 2009 Budget Recission Bill that is waiting on her desk.

Governor Kathleen Sebelius: 1-877-579-6757  or  785-296-3232

The Governor has demonstrated her inability to manage state funds and is now misleading state employees with the communications coming from her office because of her inability to manage the state budget.

State employees deserve some security. They have bills that need to be paid. It is abhorrent that the Governor would choose to prey on these fears and not take responsibility for fixing the budget, thereby ensuring that these employees receive their paychecks on Friday.