Yesterday the Flint Hills Center for Public Policy released research that shows that the state of Kansas has large unencumbered balances, representing excess funds needlessly collected from Kansans in the form of taxes and fees.
The numbers are staggering, with over 1,600 state funds holding between $2 billion and $3 billion in excess balances, depending on the method used to determine reasonable balances.
The report, titled “Analysis of State Unencumbered Fund Balances in Kansas” was prepared by the accounting firm Anderson, Reichert & Anderson. The author, Steven J. Anderson, has extensive experience in government and its accounting. The report may be read by clicking on Analysis of State Unencumbered Fund Balances in Kansas.
Investigative journalist Paul Soutar’s reporting on this report may be read at Buried Treasure.
I spoke with Dave Trabert, president of the Flint Hills Center a few days ago about this research. He said that many state agencies have collected more fees than they have spent. These funds are considered “unencumbered.” That is, there is no claim on them. This doesn’t mean, however, that the state or agency can transfer or spend these funds in any way they want.
Trabert said that often money is held in funds that, by law, can’t be transferred into other funds and used, perhaps resulting in lower taxes for Kansans. But, he said “the same result can be accomplished by simply reducing the amount going into the fund and forcing the agency to spend down their surplus.”
The effect of this would be a reduction in taxes and fees that Kansans must pay. The amount of money involved is huge.
The Flint Hills Center used two methods to calculate how much money could have been returned to taxpayers since fiscal year 2003, a period of six years. One method estimated about $2 billion in excess funds that could have been returned. The other estimated about $3 billion. Both methods leave sufficient balances in these funds for the state to conduct its business.
In context, for a state that has a population of 2.8 million, these balances that could have been returned over this period amount to $1,071 per person, using the $3 billion figures. Or, for every household in Kansas, $2,890.
Where is this money, I asked Trabert. It’s in bank accounts, he said. Who is aware of this? Trabert said that some legislators have been stunned to learn of these balances.
There are people who know this money exists, Trabert said. But not everyone believes. In a KAKE television news story, Kansas senator Jean Schodorf, who is considering a run for the U.S. Congress, said she didn’t believe these numbers.
In the same report an official from Wichita State University gave the example of a student housing fund. Fees collected for that fund, she said, can be used only for student housing.
But if funds are accumulating in this fund and not being spent, this is strong evidence that too much money is being collected. The fees are too high.
What are the implications of this report, I asked Trabert. “As shocking as it is, it’s really good news. … We can get away from this either/or situation: Either we raise taxes, or we have to give up a lot of services. … We just need to figure out how to make better use of what we have. We can have lower taxes and good services.”
This analysis doesn’t include school districts, counties, or municipalities, except for a handful of cities that participate in a state-administered investment fund.
Kansas lawmakers and the governor, as well as the press, primarily focus on the state’s general fund. There’s a reason for that, as it is the single largest fund, and the fund over which the legislature and governor have the most immediate control. In contrast, the “All funds” budget — that’s where the funds that are the subject of this research are held — is often treated as something over which we have no control.
The general fund is about half the state’s total spending. This analysis by the Flint Hills Center shows that we need to pay more attention to the other half, and to the balances that are accumulating there.Learn how you can support the Voice for Liberty. Click here.