A bipartisan group of 28 Senators today announced plans for a budget stabilization fund that would protect the state and its citizens in an economic downturn. The proposal would create a Constitutional amendment requiring the Legislature, during periods of economic growth, to set aside money in an emergency fund.
“Congress may be able to carry a deficit, but that’s not how we do things in Kansas,” said Senate Vice President John Vratil, a co-sponsor of the proposal. “We balance the state budget every year, but that’s just one part of the strategy. We need a budget stabilization fund so that our state is equipped to deal with the impact of another national recession without jeopardizing critical services, like our schools, law enforcement, and our highway system. Just as our families strive to save for a rainy day, our state needs to do the same.”
According to The Tax Policy Center, most states have a balanced budget requirement, which means these state legislatures must balance their revenues and expenditures each budget cycle and cannot take on debt in order to do so. In conjunction with a balanced budget requirement, most states also have budget stabilization funds, commonly known as “Rainy Day Funds,” which allow money to be carried over from good years to lean years. Kansas is among those states with a balance budget requirement, but is one of only three states that do not have a budget stabilization fund in place.
“Kansas is among the few states without a budget stabilization fund in place,” said Senator Vicki Schmidt, another co-sponsor of the proposal. “We need to make sure Kansas has the same resources as other states to budget for unexpected emergencies.”
The Senate proposal would do the following:
·    Require the Legislature to set aside .25% percent of revenues in any year.
·    Money in the fund could only be accessed by a super-majority vote in both chambers.
·    If the fund grows to exceed more than 5% of the state’s budget, the Legislature could transfer the overage back to the general fund.
“As we emerge from this recession, we need to give voters the opportunity to create a Rainy Day Fund,” said Senator Laura Kelly. “The next time hard times hit, we can protect our state by drawing on a Rainy Day Fund rather than being forced to make a level of cuts that crowd our classrooms, lay off working Kansans, and close our nursing homes.”
Budget stabilization funds are considered critical to the operations of most state governments that have a balanced budget requirement. Since state governments cannot take on debt to balance their budgets, they must instead cut services. With a budget stabilization fund in place, states may rely on the savings in the fund to continue operations and prevent deeper cuts to essential services until typical revenues recover.
“With a budget stabilization fund, the state can put a little into savings during the good times and lean on those savings during the difficult times,” said Senator Dick Kelsey who is also co-sponsoring the proposal. “This plan, combined with common sense and fiscal restraint, will better prepare us for fluctuations in the economy.”
Co-sponsors of the Budget Stabilization Fund plan include 28 members of the Senate: Senators Pat Apple, Pete Brungardt, Les Donovan, Jay Emler, Oletha Faust-Goudeau, Marci Francisco, David Haley, Anthony Hensley, Tom Holland, Terrie Huntington, Laura Kelly, Dick Kelsey, Kelly Kultala, Jeff Longbine, Garrett Love, Bob Marshall, Carolyn McGinn, Steve Morris, Ralph Ostmeyer, Tim Owens, Roger Reitz, Allen Schmidt, Vicki Schmidt, Jean Schodorf, Mark Taddiken, Ruth Teichman, Dwayne Umbarger, and John Vratil.
“Saving for a rainy day only works if the Legislature commits to setting the money aside in a place where it can’t be touched until there is a legitimate need,” said Vratil. “This plan would Constitutionally require the state to save and to keep those savings locked away. In an economic downtown, the Rainy Day Fund could then be used to prevent tax increases and to provide a bridge for our state to get by until revenues recover.”
To successfully amend the state Constitution, a resolution must pass both legislative chambers with a two-thirds majority and then receive a simple majority of the voters in a general election.