TOPEKA — People in one of Kansas’ southernmost counties noticed in 2014 their local hospital was struggling, so they voted to create a sales tax that would direct funds to keep their health care system afloat.
In the decade that followed, the Morton County hospital only received about half of the sales tax revenue it was owed, missing out on nearly $2 million.
The cities of Morton County received the money instead.
The Kansas Department of Revenue, for nine years, sent checks to Elkhart, population 1,726; Rolla, population 356; and Richfield, population 30, and the cities spent that money.
David Thompson, the county attorney, told a committee of legislators Tuesday in Topeka the clerical error that led to the misappropriated funds “was just an oversight — an accident.”
Rep. Ken Rahjes, a Republican from Agra, called the situation “head-scratching.”
Sen. Rick Kloos, a Berryton Republican, wondered how the cities didn’t realize they had extra money in their coffers for so many years.
“It just bewilders me how you can have that kind of money coming in that long of a period of time and somebody didn’t recognize,” Kloos said.
Thompson pitched the committee on forcing the state to pay the $1.9 million in lost revenue, without interest, to make the hospital whole.
But finger-pointing preempted solutions and the root of the problem.
“The county’s position is this is Department of Revenue’s mess,” said Thompson, who is also the Elkhart city attorney, “and we’ve already spent a lot of time and effort trying to clean this up.”
WHEN THE Morton County Commission put the voter-approved sales tax on ballots, it cited the law incorrectly. It used a statute’s subparagraph 1, a general tax provision, instead of subparagraph 5, which is dedicated to health care facilities. Under the first section, retail sales tax revenue should be distributed proportionally between a county and its cities. Under the fifth, revenue should be sent to a county, which then spends it on the health care facility.
The commissioners realized their error soon after ballots were cast. Before the retail sales tax became law in 2015, they passed a series of ordinances to try to fix it.
But the revenue department adhered to the initial iteration of the ballot measure, doling out about half of the countywide sales tax revenue to the county and the other half to its cities. The money went into the cities’ general funds. The mayor of Elkhart did not immediately respond to a request for comment.
Thompson acknowledged the county made a mistake. But it corrected that mistake, he said.
KANSAS ATTORNEY General Kris Kobach issued a nonbinding opinion in May that affirmed Morton County’s stance, concluding the will of the voters was to direct all sales tax revenues to the county hospital.
