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TOPEKA — State budget director Larry Campbell’s job duties mushroomed when Congress dropped $1.25 billion into Kansas for the COVID-19 pandemic.
Campbell, budget czar for Democratic Gov. Laura Kelly and a former Republican member of the Kansas House, was flooded with requests from municipal government officials who wanted a slice of federal funding to replace tax revenue lost in the economic slowdown.
"What I consistently hear is everybody wanting this money to go to revenue loss," he said. "The big problem out there is this: It can’t go to revenue replacement."
He created a "mother" account to track the bulk of CARES Act aid and dozens of subsidiary accounts for education, housing, child care, unemployment, economic development, airports and all the other categories. About $215 million went directly to Sedgwick and Johnson counties.
A maximum of 45% of the total sent to Kansas, or $350 million, will be available to city and county governments to cover expenditures directly tied to the coronavirus.
’I feel their pain’
Kelly said revenue shortfalls suffered by state, county and city governments should be remedied by passage of another round of federal disaster legislation in Washington, D.C.
A U.S. House bill passed Friday includes $500 billion for state governments and $375 billion for local governments. All four U.S. House members from Kansas oppose that legislation, and it stands little chance of being looked on favorably by the U.S. Senate.
"Whether you’re talking about state expenditures or local expenditures, we’re all in the same boat," Kelly said. "The state has significantly reduced revenues and I know that the cities and counties are facing the same thing. I feel their pain."
On May 7, the governor launched a COVID-19 recovery office led by Cheryl Harrison-Lee, who has held private and public leadership roles in Kansas and Florida, and Lyle Butler, a former chamber of commerce president in Manhattan, Dodge City and Greeley, Colo. Harrison-Lee will be the office’s executive director. Butler is chairman.
"Both Lyle and Cheryl have a keen understanding of the needs of local communities in Kansas, which will be paramount during the recovery effort and in the statewide distribution of CARES Act funding," Kelly said.
Kelly said the recovery team would include members of the Legislature.
Rep. Bill Sutton, a Gardner Republican, said the Legislature requires a large role in the process. He’s not convinced the governor’s relief panel will be sufficient.
"That looks to me like it’s happening off in a smoke-filled room," he said. "I would like to shine daylight on this and have the people elected to disburse funds be in charge of disbursing funds."
Other GOP ideas
The 2020 Kansas Legislature returns Thursday to Topeka. The one-day agenda includes legislation to bolster oversight of Kelly’s emergency orders and her decisions about pandemic spending.
Rep. Stephen Owens, a Hesston Republican, said he read a U.S. Department of Treasury document indicating a portion of federal COVID-19 aid could be dedicated to reimbursing Kansas businesses for losses suffered when Kelly ordered them closed for weeks. The governor’s order created an obvious financial liability for the state, he said.
"Governments absolutely have the discretion to use that $1.25 billion to offset the costs of small businesses that have been forced to close," Owens said.
Campbell, the state budget director, disagreed.
"The money cannot be used for that," he said. "You just can’t spend it for anything you want."
Rep. Shannon Francis, R-Liberal, said city and county governments should apply a portion of the $1.25 billion to cover matching-fund requirements for other sources of federal disaster assistance. On the contrary, Campbell said, rules and regulations don’t typically allow federal grant money to be used to qualify for federal grant money.
"I think there’s some hope it possibly could in this disaster," Francis said.
It’s necessary to establish a mechanism mandating Kelly to submit all financial actions on disaster aid to the Legislature, said Rep. Kyle Hoffman, R-Coldwater. It follows precedent after the Legislature required spending from the state’s $50 million coronavirus fund to be endorsed by the Legislative Coordinating Council, a bipartisan group of House and Senate members.
"It’s crazy we put something in place for $50 million, but yet it’s sounding like the administration doesn’t want us to put anything together for $1.2 billion," Hoffman said.
The Kansas Department of Health and Environment says testing revealed 7,886 cases and 172 fatalities linked to COVID-19 in 84 counties. Eight counties account for all but 1,050 of the cases, and 21 counties in the state have no reported cases of infection.
Rep. Kristey Williams, an Augusta Republican, said another option would be to increase size of the seven-person Legislative Budget Committee. That panel can review the executive branch’s spending and forward recommendations to the LCC, she said.
"We need to have our hands on it," she said. "We are going to be the ones who pay it back if it’s not used correctly."
Rep. Brenda Landwehr, R-Wichita, said it in not so many words: "We cannot be dictated to by one branch."
Democratic Rep. Henry Helgerson, also of Wichita, said it sounded like Republicans on the House Appropriations Committee had little interest in working collaboratively with the governor.
"What I hear is that members of this committee want to now start second-guessing whatever the decisions are by the administration," he said.
Erik Sartorius, executive director of the Kansas League of Municipalities, said Sunday there was considerable discussion in Washington, D.C., about retroactively making local government revenue losses an acceptable expense for CARES Act funding.
Direct assistance to cities and counties will play a role in maintenance of critical services, he said.
"Cities are not operating in a vacuum," Sartorius said. "We know well the challenges of residents and businesses. They’re watching closely the forecasts of continuing job loss, the headwinds in agriculture of low prices and supply chain difficulties, the shrunken aviation demand. And, the biggest question, when will people be comfortable returning to normal?"
The pandemic’s influence on city and county budgets is not fully known, he said. A preliminary estimate from several cities suggested sales tax revenue fell 10% to 20%, but the bottom line will depend on how many businesses in a city or county were considered essential and allowed to stay open.
Merchants send sales tax receipts to the state and the share for cities and counties is apportioned. The May payment from the Kansas Department of Revenue to local units of government will be the first look at pandemic impacts, he said.
In addition, cities and counties could be missing revenue from a decline in utility usage. There can be lower franchise fees paid by investor-owned utilities or a dip in revenue at city-owned utilities, Sartorius said.
He said a city on Interstate 70 discovered transient guest tax receipts fell 70% in March. In college towns, he said, the 10% liquor tax on drinks at bars and restaurants was diminished by cancellation of graduation celebrations. The loss of St. Patrick’s Day or Cinco de Mayo events will have a similar impact.
There have been furloughs and hiring freezes in city governments and the next step could be layoffs, he said.
The Kansas congressional delegation discovered bipartisan unity in their opposition to the U.S. House’s latest COVID-19 recovery bill.
The Democratic-led House passed the $3 trillion HEROES Act, for Health and Recovery Omnibus Emergency Solutions Act, on a vote of 208-199. It is likely dead on arrival in the U.S. Senate.
Kansas Republican Reps. Steve Watkins and Ron Estes, as well as Kansas Democratic Rep. Sharice Davids, voted "no." Rep. Roger Marshall, of the 1st District, didn’t participate in the vote because he was completing a quarantine related to volunteer work at a hospital in Liberal. He said the package was a mistake.
The legislation included a second round of direct stimulus payments of $1,200 to individuals and extension of the $600-per-week unemployment insurance supplement.
It featured $200 billion to raise hazard pay of essential employees; $500 billion for state governments; $375 billion for local governments; $116 billion for farmers and ranchers, farm markets and local food outlets; $100 billion for low-income rent assistance and $75 billion in mortgage aid; $75 billion for COVID-19 testing, contact tracing and isolation measures; $25 billion to the U.S. Postal Service; $3.6 billion for election security; and $850 million for child and family care of essential workers.
Watkins, of the 2nd District, and Estes, of the 4th District, said the legislation was House Speaker Nancy Pelosi’s attempt to take advantage of the pandemic to advance a socialist agenda.
"They call it the HEROES act," said Watkins, who served in the U.S. Army. "Now, I’ve seen heroism -- I ain’t one -- but I’ve seen it in Iraq and Afghanistan. There’s nothing heroic about this bill. It’s a collection of liberal ideas packaged with a coronavirus wrapping and sold for $3 trillion."
"Unfortunately, Nancy Pelosi’s taken a very partisan approach," Estes said. "She didn’t involve Republicans at all."
Davids, of the 3rd District in the Kansas City area, said the partisan origins and wide scope of the HEROES Act was doomed due to U.S. Senate opposition. She appreciated funding of state and local government, support for front line workers, improved small business relief with stronger oversight and open enrollment under the Affordable Care Act.
"We should use these measures as the foundation for a bipartisan relief package that delivers real solutions to the urgent challenges Kansans face in the wake of this public health crisis," she said.
Marshall, of the western Kansas 1st District, said in a statement the 1,800-page bill needed input from GOP lawmakers and White House officials working for President Donald Trump.
"Unlike Nancy Pelosi and House Democrats, I have been focused on how we safely and responsibly reopen Kansas and get our economy back up and running, rather than writing political messaging bills," Marshall said.