Has Kansas Maxed Out Its 'Bank Of KDOT' Credit Card?

Dec 16, 2015

While this major KDOT project in Johnson County is safe, millions of dollars in preservation work is not being done in Kansas.
Credit Matt Hodapp / KCUR 89.3

 Was a little-noticed provision slipped into this year's Kansas budget a backdoor way for the state to continue squeezing the Department of Transportation for more general fund revenue? Some lawmakers and transportation experts suggest that could be the case. 

The Topeka Capital-Journal first pointed the measure out in a story published Tuesday night. It comes on page 326 of the state's massive budget bill. The language is predictably legalistic but it is referring to a provision that prohibits KDOT's total bond debt amount (that is, how much it can borrow) to exceed 18 percent of the department's annual revenue. 

It says: "During the fiscal year ending June 30, 2016, and the fiscal year ending June 30, 2017, the provisions of this subsection which prescribe a limitation on the amount of the maximum annual debt service on all outstanding bonds issued pursuant to this section [sic] and amendments thereto, for the purpose of issuing any such series of additional bonds authorized by the secretary are hereby suspended." 

Translation: for the next two years, the state can borrow as much as it wants in order to fill up KDOT's coffers. 

"I have very grave concerns about this," Rep. Melissa Rooker (R-Fairway) said. "That 18 percent cap had to do with the state's cash flow. Removing that is a major policy decision."

Rooker sits on the House Committee on Transportation and Public Safety. She says this provision was never mentioned in the committee's discussions on the budget. 

"I don't know how it went on or where it went on," she said. "But it should have come up. It was buried. Through this process we did not get to see the full measure." 

But KDOT Secretary Mike King says he's sure staff did, in fact, tell lawmakers about the plan to life the cap. "I think we make it perfectly clear in our testimony that we were asking it to be lifted."

The Capital-Journal reports that earlier this month, with the bond debt cap eliminated, the state sold $400 million in bonds, effectively raising the debt limit to 19 percent, a borrowing record for the agency. 

That is worrisome to some, in light of recent trends. Michael Johnston, CEO of Economic Lifelines, the largest transportation coalition in Kansas, says the state has already raided nearly $1.4 billion from KDOT over the past six years to spend on other things. 

"We think that's not sound policy. We think economically it doesn't make any sense and it's not the way to go. Those dollars are there for transportation improvements, which improve the economy, create jobs and create new wealth," he said. 

King says, however, that all of the $400 million in new bond money will stay with KDOT. "We’re going to put this money to use on road projects and economic development projects around the state so, no, not worried at all about that.” He also says that the department's bond consultant believed rates were favorable and this was the time to enter the bond market.

The state's fiscal moves have depleted KDOT project's of their value. KCUR recently reported on the jeopardy that state's roads are in with tumbling revenues. 

Kansas is in the middle of a ten-year, $8 billion program, called T-Works. It is aimed at expanding and preserving the state's highways, which are considered among the best in the nation. But since T-Works was announced in 2010, some $2 billion have been swept into the state general fund.

"You cannot, as this administration has done, say that you can remove hundreds of millions of dollars from the Department of Transportation, but that it will have no consequence to the quality of roads or the commitments that were made tot he public," former KDOT secretary Deb Miller told KCUR for that story. 

That habit of raiding KDOT funds has led some in Topeka to start referring to the agency sardonically as the 'Bank of KDOT'. Now this latest move to raise the bond debt limit is being interpreted as a sign that it will continue to be used like the state's credit card, just now with a higher credit limit. 

Last week, Gov. Sam Brownback indicated that he anticipates no budget issues in the coming legislative session, despite months of shortfalls in projected tax revenues. 

"Those puzzling comments make sense now," Rooker said. "If you have that bonding authority, that's the answer for how you will skate through this session without major difficulty." 

Rooker says she hopes the issue of KDOT funding and bond debt limits can be brought up in the session, starting in January. But based on how this bond debt provision was handled, she says she's skeptical.