Kansas Governor’s Budget Includes Pay Raises, Medicaid Expansion, Special Education, Tax Relief

TOPEKA — Kansas Gov. Laura Kelly’s budget director on Thursday outlined her spending blueprint, which includes salary raises for state employees, expansion of Medicaid eligibility, paying down debt, and investments in special education, water and emergency housing.

Her budget, which also includes a previously announced bipartisan plan to reduce property, income and sales taxes by $1 billion over three years, would leave the state with a $1.4 billion dollar surplus by July 2025 and an additional $1.7 billion in a rainy day fund. The GOP-controlled Legislature will make adjustments to the governor’s proposal before sending her a final budget.

The Democratic governor’s administration characterized her plan as an attempt to build on the momentum established during the first five years of her administration, when the state underwent a dramatic reversal from years of budgeting crisis.

“I’m a fiscal conservative, which is why, once again, I’m proposing a budget that’s balanced, pays off debt, and includes tax cuts for working families and retirees,” Kelly said. “This budget also delivers on my commitment to continue fully funding schools, investing in our workforce and child care system, and giving law enforcement the resources they need to keep Kansans safe.”

Budget director Adam Proffitt, who also serves as secretary of administration, presented the budget plan to a joint hearing of Senate and House appropriation committees. Republicans showed support for her proposed tax cuts but signaled fierce resistance to Medicaid expansion.

An estimated 109,000 adults and 39,000 children would sign up for health care insurance through the state-run Medicaid program if Kansas were to join the 40 states that have already expanded eligibility. Under current rules, a single mother working a minimum wage job earns too much to qualify for coverage.

Senate President Ty Masterson, an Andover Republican, questioned the fairness of asking the state’s medical professionals to serve more Medicaid recipients.

“You have a fixed market of doctors that will take Medicaid, and if you add tens of thousands of people to that, you by nature will displace” their current patients, Masterson said.

Masterson also questioned why the state would expand eligibility when current Medicaid services need support. The Legislature for years has neglected funding disability waivers, leading to long waiting lists.

Rep. John Alcala, a Topeka Democrat, said he is “for Medicaid expansion” because “it will help a lot of people in my district.”

“We could never get that issue debated on the Senate floor, but yet I hear my colleagues on the Senate side reaching into their back pockets, some of them even tugging on wedgies, to come up with excuses why Medicaid expansion isn’t gonna work,” Alcala said.

Proffitt, the budget director, said the governor’s budget priorities include Medicaid expansion, “sustainable and meaningful tax relief,” early childhood education, having a healthy ending balance, and minimal base spending increases.

The plan also calls for $1.3 billion in one-time expenses with the last of the federal pandemic relief aid. That includes $450 million to pay down pension obligation bonds, $377 million for improvements at the state prison in Hutchinson, $40 million for emergency housing to address a crisis with the state’s unhoused population, $20 million for operations associated with the 2026 World Cup in Kansas City, Missouri, and $10 million for water infrastructure grants in towns with populations of less than 1,000.

The bipartisan plan to cut taxes includes relief from property taxes, exemption of Social Security income, elimination of the sales tax for diapers and feminine hygiene products, a back-to-school sales tax holiday in the first weekend of August, and doubling the child care tax credit.

Separate from that package, the governor’s budget also calls for restoration of the Local Ad Valorem Tax Reduction Fund. The program, which has been defunct for 20 years, would transfer $54 million to counties to offset local mill levies.

Kelly’s budget calls for an annual increase of $74.9 million in special education funding for each of the next five years. The state hasn’t met its statutory obligation to pay for 92% of special education costs since the fiscal year 2011 budget, which was signed by former Democratic Gov. Mark Parkinson. Instead, public schools have to redirect funding earmarked for other needs. For the current school year, the state covered 69% of special education costs.

Under the governor’s plan, state employees would receive a 5% pay increase, which would pull $68.9 million from the state general fund. Salaried employees would see a 7.5% pay increase, with a cost of $2.6 million. She also called for raising the minimum wage for state employees to $15 per hour, which would affect 969 employees at a cost of $2 million to the state general fund.

The governor’s budget includes a $35 million earmark for the state water plan and $5 million for Kansas State University’s Water Resources Initiative.

This story first appeared on the Kansas Reflector, a nonprofit news operation covering Kansas state government and politics that is part of States Newsroom. Sherman Smith is editor of the Reflector.