Small Kansas county to sue state for $2M meant for local hospital

Morton County attorney David Thompson, left, and counsel for the Kansas Department of Revenue Ted Smith, right, tell legislators at a Dec. 2, 2025, meeting in Topeka, Kansas, that the state and county knew of a mistake in local sales tax revenue distribution, but it took ten years to correct it. (Kansas Reflector screen capture of Kansas Legislature YouTube channel)

TOPEKA — A southwestern Kansas county plans to sue the state for more than $2 million after nearly a decade of mistaken payments, mounting concern for democratic processes.

Voters in Morton County, which borders the Oklahoma panhandle and Colorado, approved a countywide sales tax in 2015 that directed funds to their local hospital. But an early administrative error that the county tried to fix resulted in the Kansas Department of Revenue sending checks to the county’s cities, which spent the money.

The hospital was short more than $1.8 million over those nine years, and the county took on new debt as it tried to cover the struggling hospital’s missing costs, according to the commissioners. In addition to the misappropriated payments, the county is suing the revenue department for an additional $295,000 to pay for the interest and legal fees from the new debt.

Morton County’s board of commissioners decided Monday it “will not compromise on recovering the full $2,152,421.36 and ensuring the financial future of our hospital,” the board said in a Tuesday announcement.

The county was emphatic.

“The liability rests with the state of Kansas,” said the board, which comprises commissioners Ed Anderson, Jim Tucker and chairman J.W. Finn.

The revenue department declined to comment because of the involvement of litigation, said Zach Denney, a department spokesperson.

At a Dec. 2 legislative hearing in Topeka, the department’s chief counsel, Ted Smith, said the department fixed the sales tax revenue’s appropriation earlier this year, following an opinion from the Kansas Attorney General’s Office that underlined the voters’ intent to give funds to the hospital. 

The hospital began receiving full checks after ten years of partial funds. 

The Morton County attorney, David Thompson, tried at the hearing to make a claim against the state to recover the funds through a legislative process. But lawmakers did not immediately accept. The committee arrived at two options. Legislators said they could forward the issue to a larger group of lawmakers, who would take it up in January, or the county could take legal action. 

The county had yet to file a lawsuit as of Thursday.

Costly shoulder shrugging

As passed, Morton County voters approved a general sales tax provision instead of one specifically for health care services because of a clerical error. The question on voters’ ballots cited the wrong subparagraph in state law. As it was voted on, Smith said, the department was bound by statute to formulaically distribute the sales tax revenue to Morton County and its three cities.

The county fixed the error within months, passing ordinances to divert the sales tax revenue to the county, which would then be passed along to the local hospital.

But the department continued to send checks as was dictated by the initial wording. The county gave the money it received to the hospital, but the cities, who have not been involved in the county’s efforts to reclaim the funds, spent their checks. 

The board of commissioners emphasized unity over conflict between the county and its cities — Elkhart, Rolla and Richfield — which the board said “were simply the unintended recipients of checks sent monthly by the state agency.”

“The county views our municipalities as essential partners, not as adversaries,” the board said.

The department had known about the mistake a decade ago. 

Thompson, the county attorney, said at the legislative hearing that it was staff at the state revenue department who advised the county on how to fix its initial error. But the department said it must abide by the statute to which an issue is tied, as a matter of policy.

“The result of this policy can be classified as nothing less than administrative voter nullification and is repugnant to our democratic processes,” the county commissioners said.

In hindsight, Smith said, the county should have taken the issue to court in 2015.

“If anything unfortunate happened back in 2015, (it) is when Morton County and the Department of Revenue (were) dealing with this issue after the vote,” Smith said. “I think both parties sort of just shrugged their shoulders.”