Jill's Journal

May 26, 2009

Fun Things First….

Join Me in the Old Shawnee Days Parade, June 6th,10 a.m.

I will be a part of the 43rd Annual Old Shawnee Days Parade on Saturday, June 6th and would love to have you walk with me.  It is one of the largest parades in the state with over 10,000 people expected to attend.  I will have shirts for you to wear and candy and literature for you to pass out.  Simply reply to this email if you want to join me.  I’ll contact you with the details.

Down to Business…

I have given myself two weeks to decompress, enjoy family, and get a perspective on the 2009 session.  I found that, like last year, I returned home from the session with a lot of frustration over what the legislature did and did not accomplish.  My high expectations were dampened by partisan politics and the process itself.  I needed some time to put the accomplishments and the challenges in perspective.

In this newsletter are general comments on the budget and a summary of the final coal plant/energy/jobs bill.  Over the next few weeks, my newsletters will cover budget details, highlights, and finally the challenges of the session.

The Budget

Without a doubt the entire session was dominated by the budget deficit.  Dealing with the largest budget deficit in Kansas history resulted in four budget bills: 

• the 2009 rescission bill which pared down the already-in-place 2009 budget (House Sub. For Sub for SB 23),
• the mega bill for 2010 (HB 2354), 
• the omnibus bill for 2010 consisting of cuts to fill a portion of the projected $328M hole (Senate Sub for HB 2373), and
• revenue enhancements for 2010 (Senate Sub for Sub 2365).

Each of these bills required compromise.  There was a lot of dissention.  Tempers flared, patience failed, no one liked the choices before the legislature.  Agencies scrambled to make current year cuts and to put forth various scenarios for cuts in 2010.  There were many questions and just as many answers.  Could the budget be balanced with only cuts?  Were increases to revenue a part of the solution?  Were across the board cuts fair?  Were specific cuts to areas of known duplication and waste better?  In 90 days, how do you find the duplication, the excess, the “fat” that hides in the bureaucracy?

How did we get into this much debt? 

It is important to understand how we got into this budget deficit if we are going to fix the situation.  The obvious answer includes the downturn in the economy and the court-ordered increase in education spending but should also include the $143M in tax benefits given over the last 4-5 years.

ECONOMY:  The downturn in the economy has definitely added to our budget woes.  Kansas Personal Income which grew by 4.9% in 2008, is expected to decline by .5% in 2009.  This would represent the first annual reduction since World War II.  The Department of Labor estimates that the overall Kansas unemployment rate, which was 4.45% in 2008, will jump to 6% in 2009 and 6.3% in 2010.  November estimates of Kansas Growth State Product were 3.5% in 2009 and 5% in 2010; they have now been reduced to 1.5% and 2.9%, respectively.  Many forecasts indicate that this could be the longest and deepest recession in the last 70 years.

SCHOOL FINANCE:  Many are critical of the state’s increased spending for K-12 education. The 2003 Montoy et al vs. the State of Kansas Supreme Court decision said that the state had failed “to make suitable provision for finance” of public schools; in order to provide “adequate total resources,” the state has added over $750,000 in funding to K-12 education since 2005 (Kansas Legislative Research summary: skyways.lib.ks.us/ksleg/KLRD/Publications/2006_SupremeCtDecisionSum.pdf) This increased funding was much needed.  Achievement continues to be high. (Kansas Learning First Alliance brochure www.klfa.org/kansasshines.pdf).  Schools are making annual yearly progress as required by No Child Left Behind. (06-07 Adequate Yearly Progress report by the KS Dept. of Ed: http://www.ksde.org/Default.aspx?tabid=2354).  The efficiency of our school districts has been documented. (Standard & Poor’s 2007 study http://www.ksde.org/Default.aspx?tabid=1989).  In my opinion, this money was well spent and needs to be maintained.

SPENDING AND TAX CUTS/CREDITS: Many assume that the state overspent its way into this debt.  There is no doubt that there is budget creep in most areas of government and that the legislature needs a mechanism for saving, paying off debt, and regularly auditing agencies.  However, what is less widely recognized is that the state has returned more than $143M to Kansans via tax incentives and credits since 2005.  Without change in tax policy, this amount will increase to $1.1B by 2013.

Long-term solutions

The legislature succeeded in balancing the budget for 2010 (with essentially no ending balance) by making substantial cuts and temporary revenue enhancements and by using federal stimulus money.  Most of the revenue enhancements in the final budget bill are implemented for only 1-2 years.  Most of the stimulus money must be used by 2011. These measures are like putting a finger in the dike, a temporary fix. The state needs for the economy to improve and the legislature needs to make structural changes for a long-term solution.  Here are some options being considered:

Rainy Day Fund:  The House passed HB 2320 which would have established a budget stabilization reserve fund, requiring savings during years of surplus. The Senate did not consider the bill. 

Zero-based budgeting:  This is a method of budgeting in which all expenses must be justified for each new period. Zero-based budgeting starts from a “zero base” and then every function within an organization is analyzed for its needs and costs. Budgets are built around what is needed for the upcoming period, regardless of whether the budget is higher or lower than the previous one.  Because this is very time consuming, agencies are usually considered on a rolling basis. Proposed by the Government Efficiency and Fiscal Oversight Committee, HB  2273 saw no action in the House.

Perhaps the audit process needs to be strengthened.  Kansas has no State Auditor; instead, Kansas uses a Division of Legislative Post Audit that performs approximately 20-25 performance, compliance, or control audits yearly at the request of the legislature or the Governor.  Financial audits are contracted out; about 4-5 financial audits are done each year. Is this adequate?  Is action taken on the audit recommendations?

Coal/Energy/Jobs Bill (HB 2369) passes 103-18, Governor signs into law

As you know, Governor Parkinson negotiated a compromise that ended the legislative stalemate over the building of two coal-fired electrical plants in western Kansas and settled the lawsuit against all those concerned.  The compromise will result in:

• granting a permit for the building of one 895 MW coal fired plant to Sunflower Electric Cooperative; mitigating offsets are required and an additional permit can not be submitted by Sunflower Electric Cooperative for 2 years.
• limiting the permitting authority of KDHE Secretary Bremby to enforcement of standards no more stringent than the Clean Air Act and to specific emergency powers
• true net metering for those served by investor owned electric utilities (KCPL, Westar); cooperatives and municipal utilities are not required to participate
• a Renewable Portfolio Standard (RPS) that matches the more stringent voluntary standard already agreed to by KCPL and Westar, and
• transmission lines to the western grid (Colorado, Oklahoma).

As with any compromise, this one falls short of my ideal solution.  Some of my questions and concerns are:

Will the offsets actually decrease emissions?

Governor Parkinson used the previously issued 2003 permit (which was issued for one plant and would have allowed 6M tons of CO2 emissions yearly) as his standard.  He could allow a 895MW plant which would emit 6M tons of CO2 yearly and then improve upon that with offsets to lower total yearly emissions to 3M tons or less.  Some of those offsets are “potential” offsets at best---closure of two small coal plants in Garden City that have not been in use for many years; ”reasonable efforts” to advance the bio-energy center and algae reactor which holds promise but is years from being commercially feasible; and use of bio-fuels if technically and economically feasible. 

Who will oversee the cooperatives?

Changes in the Clean Air Act to include CO2 regulations are likely; some say eminent.  Therefore, it is likely that future permitting will be more stringent and will consider CO2 emissions even if Secretary Bremby is limited to enforcement of the Clean Air Act.   Still troubling to me, is that large cooperatives are now able to remove themselves from regulation by the Kansas Corporation Commission thereby removing the previous check on rate increases. 

Despite these reservations, I did support HB 2369.   It was important to put the true net metering and the renewable portfolio standard (RPS) in statute.  These green measures will be law even if the coal plants are not built.  They can be strengthened and expanded in the future.  Consideration of wind energy and comprehensive energy policy has been held hostage by the coal plant controversy for two years.  With stimulus money available for renewable energy and with investors showing interest in Kansas for wind manufacturing and wind farms, it was time to more forward.  With a meaningful RPS in place, these developers and investors should be assured that Kansas is committed to renewable energy development.

Will the coal plant be built?

It remains to be seen if the coal plant will be built.  Skeptics point to the threat of environmental lawsuits, increased costs both in building materials and in coal itself which could substantially increase the cost of the project, the hesitancy of investors to finance coal plants, and regulatory uncertainty on the national level. According to a Lawrence World Journal article, “Tri-State’s Anderson said ongoing uncertainty in both state and federal policies, and the economic downturn prompted the association to re-evaluate its long-term strategy and how coal-based generating units fit into that plan.”

I have had an outpouring of support for my votes to block the building of the coal plants from those of you concerned for the environment---well over 500 e-mails and postcards in this session!  The decision to support the final bill was a difficult one for me but the negotiated settlement essentially clinched the deal.  Rather than register a protest vote, I chose to support the positive measures of net metering and RPS.  

Swine Flu

Concerned about H1N1 2009 flu (swine flu)?  Keep up to date by checking the Kansas Department of Health and Environment’s website:  http//:www.kdheks.gov/H1N1/index.htm 

Serving the 17th District,

Jill Quigley, Representative

Lenexa & Shawnee

H:  913-541-9645

jill@jillquigley.com

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