Clarifications to Kansas unencumbered fund balances report


Last week the Flint Hills Center for Public Policy released a groundbreaking research report detailing the several billion dollars hidden away in Kansas state government funds. My reporting on this, along with links to the study document, is at Kansas funds have large, unneeded balances.

There’s been a bit of pushback. Some officials have said they simply don’t believe the research. Others quibble over definitions of terms and have said — perhaps mistakenly — that there are more restrictions on specific fund balances than are actually in effect.

Dave Trabert, president of the Flint Hills Center, has released the following response and clarification regarding some of these issues.

It’s not all in special revenue funds. Only $241 million of the $1.955 billion in unencumbered cash is in fee funds (from licensing fees paid by barbers, chiropractors, CPAs, etc., student fees paid to universities, certification fees paid by farmers, oil & gas well owners, etc. etc.); somehow, people have been led to believe that all of the money has built up in fee funds. That clearly is not true. Some of the cash is in other types of funds but the source of a great deal of the money is from tax collections. (It’s difficult to say with certainty in the case of some funds based simply on the name of the fund, so the exact amount coming from taxes is not known … much more investigation is needed).

“Special” can be very misleading. To some, it means that the revenue source is something other than taxes; others use it to refer to money in a fund created to track a particular type of expenditures. In both cases, the “special” designation has been used to at least imply that the money can’t be used for anything else, which may be true in a few cases but most often is not. “Special” means different things to different people and is not a legal definition.

“Spoken for” is a meaningless phrase. This is another label that has no accounting or legal basis. The sheer fact that agencies have plans to use the leftover money has no legal bearing, and in fact the current and previous governors have swept carryover money out of funds for other purposes. The Government Accounting Standards Board says that unless a specific statute prevents money in a particular fund from being redeployed, it can be. Anyone who says this leftover cash can’t be used for any other purpose should be forced to cite the pertinent statute.

Even unencumbered cash in bond funds may legitimately be available for other uses — it is not uncommon for bond funds to take in more money than needed to meet obligations. Even at the local level where, for example, schools levy a specific tax to pay off construction bonds, there is a legal mechanism for returning excess collections to taxpayers. Whether that actually takes places is another matter, but mechanisms for returning excess money to taxpayers exist.

Unencumbered defined. The accounting definition of unencumbered funds is funds that are not subject to any mortgage, lien, charge and/or encumbrance (whether equitable or otherwise) or any other creditor claims whatsoever. This is the definition used in our analysis and we must presume that state agencies and their accountants properly differentiate between encumbered and unencumbered.

The fact that money is in a designated fund is, in itself, meaningless — there is a perhaps natural assumption that once money is put into a fund, it can’t be used for any other purpose. However, unless restricted by statute, the money is otherwise available to be used for other purposes.

Federal funds are listed separately. Some agencies have argued that their federal funds are restricted and not available for other purposes; they are right; that’s why we provided a separate list. Ironically, most agencies’ federal funds balances are negative, which means their total balances from state funds are even higher. For example, the Department of Health & Environment has a total unencumbered balance of $188 million, including federal funds with a negative balance of $13 million; their state unencumbered balance is therefore $201 million.

The existence of this leftover cash hasn’t been shared with most legislators and the public. Can anyone think of a good reason for this to be a closely held secret?

Trabert says he’s available anytime to answer questions on the study but he prefers that specific accounting questions be directed to Steve Anderson, the CPA who wrote the analysis or another CPA who works with government accounting. Steve can be reached at or 405-923-8875. Contact Trabert at or 316-634-0218.


One response to “Clarifications to Kansas unencumbered fund balances report”

  1. […] Clarifications to Kansas unencumbered fund balances report, Wichita Liberty, Aug 19, 2009. […]

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