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Originally published April 30, 2013 at 8:15 p.m., updated May 1, 2013 at 5:45 a.m.
TOPEKA The leader of a child advocacy group and the ranking Democrat on the Senate Ways and Means Committee today criticized Gov. Sam Brownback and Kansas Attorney General Derek Schmidt for their handling of the money the state receives from its master settlement agreement with the nation’s tobacco companies.
“This is money that is supposed to go toward supporting early childhood development initiatives across the state,” said Shannon Cotsoradis, chief executive at Kansas Action for Children. “But that’s not what’s happening. And we should know or at least have a good idea about how much money is going to be available from one year to the next. But that’s not happening either.”
On Monday, the governor’s office issued a proposed budget amendment that if approved by the Legislature would send $9.5 million in unexpected settlement payments to the State General Fund, which pays for a variety of government services. It was the first notice that the state would receive that much more money than previously anticipated. The tobacco dollars typically have been used to underwrite programs that help at-risk children and their families.
State officials — including analysts from the Kansas Legislative Research Department, the Division of Budget, and the Attorney General’s Office — recently as a week ago, said they expected the agreement to generate $55.8 million for Kansas this fiscal year, which ends June 30. But then the administration made public on Monday that the state had received $68 million.
Brownback's budget amendment proposed that the windfall be used to replace the $4.6 million from the State General Fund that’s he’d earlier recommended be spent on early childhood development grants in fiscal 2014 and 2015. He also proposed capping the tobacco payments’ support for children’s programs at $55 million in fiscal 2014 and 2015.
"The transfer simply covers the funding for the grants, rather than using SGF (the general fund), as you know has been the practice in previous years," said Sherriene Jones-Sontag, the governor's chief spokesperson.
“What he’s saying is that if money comes in that we don’t know about, we should sweep it — put it in the State General Fund,” Cotsoradis said. “But those dollars are supposed to go to the KEY (Kansas Empowerment for Youth) Fund.”
Established in 1999, the KEY Fund was meant to be a repository for the state’s master settlement payments. Each year, most — but not all — of the fund has been transferred from the KEY Fund to the Children’s Initiative Fund where it’s used to underwrite grants for a variety of programs for at-risk children.
In nine of the past 13 years, lawmakers have moved almost $147 million out of the KEY Fund and into the State General Fund to shore up other state spending.
“In times of great economic crisis — like after 9/11 or after the Great Recession in 2008 — some of that money is going to be swept. It’s inevitable,” Cotsoradis said. “But that’s not what happening here. The governor is sweeping money that’s meant for children to pay for last year’s income tax break that we can’t afford. This is a mess of our own making. Kids shouldn’t have to pay for this.”
The Children’s Initiative Fund is administered by a nine-member board known as the Children’s Cabinet. It’s members, a group that includes Cotsoradis, are appointed by the governor, and Senate and House leadership.
Sen. Laura Kelly of Topeka, ranking Democrat on the Senate budget committee, said she also opposed shifting the dollars to the general fund.
She said the extra tobacco money should go to the KEY Fund so that “if the receipts do drop in the next year or two, there would be a cushion. If it were up to me, I would let the money sit there in the trust fund so that in future years — were there to be a reduction — we could withdraw the funds we need to hold the programs harmless.”
The Governor's Office did not respond to emailed or telephoned requests for comment on the matter.
Cotsoradis also accused the attorney general of purposely withholding details about Kansas' share from the arbitration, which involved 16 other states. She said some attorneys general in other states had made public information about their states' receipts weeks ago.
She called the arbitration results “the best-kept secret in the state” and said it was hard to believe that Schmidt was unaware earlier of the windfall or that he was unable to project how much the state likely would receive for fiscal years 2014 and 2015.
“He’s entered an agreement on behalf of the state,” she said. “How can he not know?”
Schmidt's office sent a copy of the agreement to KHI News Service, but provided no additional comment or response to the criticisms.
In a prepared statement earlier in the day, Schmidt said that instead of Kansas potentially “losing tens of millions of dollars” in a long-simmering dispute with the tobacco companies, it had received an additional $13 million in 2013. The arbitration agreement, Schmidt said, "should help stabilize tobacco payments for several years to come, which will allow the state more certainty in its budgeting and planning process.”
In future years, he said, the tobacco companies’ payments likely would decline, but "the risk of a precipitous drop from one year to the next is now substantially reduced.”
Kelly said she also was concerned about the lack of earlier information regarding the settlement money.
“I have long been concerned about the secrecy around the amount of money that we could expect from the tobacco settlement and, now, the arbitration as well,” she said. “I, too, have been trying to get that number and I keep being told it’s not available.
“I’m sure they didn’t want to put that number out there because if they had," she said, "we (lawmakers) would have been incorporating it into the budget in April when we were looking at how we were going to fund those early childhood programs.”
Cotsoradis said Schmidt’s office has refused to explain why the payments may go down or how much of a reduction the state should expect, which she said made it difficult for the advocates, legislators, the Children's Cabinet and others to plan funding for children's programs.
The arbitration agreement, first announced in December, settled tobacco company allegations that several states, including Kansas, had not done enough to “diligently enforce” restrictions on cigarette manufacturers that were not part of the 1998 master settlement agreement.
In recent weeks, national news outlets have reported that the arbitration agreement called for giving the 17 participating states access to slightly more than half of the disputed payments, and allowing the companies to take the rest as credits on future payments.
Since 1999, the tobacco companies’ payments to Kansas have totaled almost $800 million.
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