DALLAS – Kansas would limit the use of sales tax and revenue bonds for tourism-related projects under a $16.1 billion budget approved by the state Legislature for the coming fiscal year.
Under the bill, the state cannot issue the so-called STAR bonds to attract the American Royal Horse Show pavilion to Kansas from its current location on the Missouri side of Kansas City.
Legislators said Kansas was planning to apply sales tax revenues generated in a section of Kansas City, Kan., to back bonds for the American Royal development, costing the state $42 million a year.
Gov. Sam Brownback's proposed budget did not allocate the debt service, but some lawmakers said the sales tax revenue could be diverted from another project that had paid off its debts.
Wyandotte County issued $450 million in STAR bonds starting in 2001 for a successful entertainment and shopping district surrounding a NASCAR track called Kansas Speedway. Officials expect those bonds to be paid off by the end of this year.
Under the budget bill, Brownback cannot allocate sales tax revenue toward the American Royal project until reforms have been made in the STAR bond program.
STAR bonds have maturities of 20 years and are designed for projects that increase regional tourism in Kansas.
The budget, which awaits Brownback's approval after lawmakers signed off Wednesday, closes a $200 million deficit in the fiscal year beginning July 1. However, lawmakers may have to make further adjustments after the revenue forecast is updated in April. Even after a sales tax increase in 2015, state revenues have met expectations in only one out of the first six months in the current fiscal year.
The budget provides $15.6 billion in total spending for the current fiscal year and nearly $16.1 billion for next fiscal year beginning July 1. The bill provides more than $6 billion from the state's general fund each year.
Brownback has not said whether he would sign the bill and has the discretion to line-item veto any of the bill's spending.
The budget does not address a state Supreme Court ruling that current school funding is unconstitutional. Although the court has not specified how much more lawmakers should allocate, the additional cost has been estimated at about $100 million.
Legislators said they expect to deal with the issue ahead of a court order to close the schools June 30 unless the issue is resolved.
The bill allows Brownback to delay the state's contribution to Kansas Public Employees Retirement System this fiscal year, a move that could free up to $100 million to cushion the state's ending balance.
The budget bill also limits universities in Kansas to in-state conduit issuers for their bonds. Several lawmakers were angered when the University of Kansas used Wisconsin-based conduit issuer Public Finance Authority for a $327 million issue.
