The Kansas Insurance Department is asking the Legislature for permission to raise fees paid by insurance companies because the state has diverted millions of dollars from its regulatory fund for other purposes.
Zachary Anshutz, assistant commissioner of insurance, said the regulatory fund is likely to be down to $200,000 in December if revenues don’t improve.
The fund used to hold $24 million but the state diverted $15 million in June and another $5 million in July. Another $5 million is scheduled to be used in July and Gov. Sam Brownback has proposed diverting $3 million more in March 2015, The Topeka Capital-Journal reported
Since income tax reductions were enacted in 2012, the state has been diverting funds, called “fee sweeps,” from agencies such as the insurance department, the highway fund and a tobacco litigation settlement for programs that usually are paid for by the state general fund.
“The sweep of fee funds from the insurance department is just one more example of this governor’s attempt to fill the holes in the Kansas budget created by his reckless and irresponsible income tax cuts,” said Sen. Laura Kelly, D-Topeka.
Previous administrations also have used the fee sweeps to fill budget holes. Brownback’s predecessor, Democrat Mark Parkinson, was sued by former House Speaker Mike O’Neal in 2010 over diversions his administration used. The lawsuit, which claims some industries were essentially double-taxed, remains in litigation after the Kansas Court of Appeals reinstated it last September.
Brownback’s spokeswoman, Sara Belfry, said the insurance department has the necessary cash flow to operate.
“The budget office is working closely with them, and as the actual money comes in over the next few months, we will make adjustments if required,” Belfry said.
The department’s fees on insurance companies are capped at $25,000. A proposed bill would lift that ceiling and tie the assessment fee to the agency’s budget. It would specify that the total assessments could not exceed 125 percent of the total budget for the insurance company regulation program.
Insurance companies paid an estimated $440 million in premium taxes into the state treasury over the last three years.
Anshutz also said that because Kansas Insurance Commissioner Sandy Praeger isn’t running for re-election in November, the legislative change would give more flexibility to the department’s next administration to deal with depleted funds.