State Insurance Commissioner Ken Selzer doesn’t have to dig too deep into the past to make his case against balancing the state budget with fees paid to help run the agency.
Less than a year ago, the state agreed to repay $3 million out of the general fund to compensate for fees that were taken from state agencies in 2009 to help balance the budget at the start of the great recession.
Now, Selzer has gone to court to stop Republican Gov. Jeff Colyer’s administration from transferring $8 million in fees to the state general fund from the Insurance Department.
Selzer and Colyer are competing for the GOP nomination for governor, leading some to speculate that the insurance commissioner is trying to get his name in the news. Selzer said the issue is not political.
The dispute over so-called fee sweeps started well before this year’s governor’s race.
Facing a revenue shortfall in 2009, then-Gov. Kathleen Sebelius called for using $22 million in fees to help fill the budget hole, including $2.4 million from the workers’ compensation fund administered by the Insurance Department.
The Insurance Department subsequently levied more fees on insurers to make up for the money diverted to help balance the budget.
Likewise in the ongoing litigation, Selzer said fees will have to be increased if the $8 million is moved over to the state general fund.
After a protracted legal battle over the 2009 fee sweeps that went all the way to the Kansas Supreme Court, the state agreed to repay the fees to the agencies.
The high court found that the state didn’t have unlimited access to the fees, which are many times paid by businesses to cover the cost of state regulation.
“We reject the state’s assertion that all moneys in the state treasury are public moneys over which the state has unfettered, general appropriation powers,” the court found.
“Here, the fee funds were composed of payments for a particular and specific purpose and, accordingly, they were to be kept as separate funds and not as part of the general fund.”
In the order settling the case, District Court Judge Franklin Theis called the financial maneuver an “improper use of the Kansas Legislature’s authority to transfer monies held in state agency fee funds to the state general fund.”
The Legislature then passed a law in 2017 that Selzer said prohibited the transfer of the fees.
However, Colyer vetoed part of the state budget that blocked the transfer of $8 million in fees from the agency to general operations.
Colyer administration officials say the only law only required them to notify state licensees whenever fees are moved out of a regulatory fund.
They said the 2017 law that Selzer cites was enacted after the budget had already been passed.
The fees at issue generated $18 million in fiscal 2018. At one point in May, the fund in question held about $11 million.
Selzer contends that using the Insurance Department’s fees to balance the budget is equal to an unconstitutional tax.
He argues that the fees levied by the Insurance Department can only be used for running the agency.
