Gov. Kathleen Sebelius unveiled her reformed fiscal year 2009-2010 budget to the Kansas Legislature Tuesday. The package is aimed at tackling the state's deficit with a mixture of budget cuts, tax manipulation and reorganization of funds. 

But the use of out-dated numbers means the budget will result in a deficit, no matter how accurate the projections are.

Sebelius’ budget recommendations are based on the November Consensus Revenue Estimating Group’s initial deficit projection of $141 million for fiscal year 2009, and $1.021 billion for fiscal year 2010.

However, new revenue shortfalls have suggested a more accurate picture is a deficit of $185.5 million for fiscal year 2009 and $1.066 billion for fiscal year 2010, as reported yesterday in Kansas Liberty.

Since Sebelius’ plans do not include the most recent estimate, they do not address the additional shortfall of almost $50 million.

The current recommendations, however, do close the gap between receipts and expenditures, while leaving a balance of $58.3 million for 2009, and a $600,000 balance for 2010.

Duane Goossen, secretary of the Kansas Department of Administration and the state’s budget director, said the initial budget reform for fiscal year 2009, which was given to the Kansas Legislature for consideration in the form of a bill today, should be referred to “step one” of the budget cuts. 

Goossen said that since these initial budget changes do not take into consideration more recent deficit estimations, or the deficit estimation that will be determined the end of January, more budget changes would probably have to be made in a “step two” process.

According to Goossen, the January receipts will serve as a better indication of what direction the budget crisis will turn, and said that more than likely it would point to an even bigger deficit.

“Step one gets us to zero, assuming the estimates hold, and so far those estimates have not held,” Goossen said.

Goossen said a possible federal stimulus package introduced at the federal level as early as February or March could alter the need for round-two budget cuts but said it was too soon to tell whether or not federal help would be available, and if it would be enough to offset the deficit, hedging the second round of budget cuts.

Freezing the education budget at approximately $3.779 billion for fiscal years 2009 and 2010 by reorganizing funding is one of the plan’s key initiatives.

But while K-12 was spared cuts, higher education is scheduled to experience cuts of $24.6 million for operating costs in 2009, and a further cut of $56.3 million in operating costs for 2010.  The budget also recommends suspending $15 million in deferred maintenance payments for Kansas colleges for 2010.

The 2010 budget already factors in gaming revenue of $56.7 million, though so far the state has only generated $5.5 million in revenue from gaming – and that revenue plus an additional $1.5 million had already been allocated to KPERS COLA, causing a net loss from gaming of $1.5 million for fiscal year 2009.

Other means of money savings include freezing the Highway Fund Loan Repayment, which will save the state almost $62 million in the next two years, and decreasing planned funding for the Bioscience Authority by $32 million over the next two years. Dissolving Kansas Inc and KTEC will result in a loss of approximately 15 to 20 jobs. 

Not every number in the budget is preceded by a minus sign. Sebelius is recommending a 1 percent salary increase for all state workers in the fiscal year 2010 pay plan.  The increase in salary will cost the state $22.8 million "from all funding sources," according to the budget summary, "including $10.7 million from the State General Fund."

Although Sebelius did not introduce any new taxes in her budget, she does have plans to manipulate several current taxes for 2010.  Indefinitely suspending the phase-out of the corporation franchise tax and suspending the phase-out of the estate tax are set to generate $19 million in revenue for 2010.

There was no estimate given of the negative impact these taxes may produce. Kansas is already perceived as unfriendly to business in most surveys.

The budget will also raise revenue by funneling roughly $80 million in local government tax revenue, including $27 million in liquor taxes, to the state general fund.

Senate Majority Leader Derek Schmidt, a Republican from Independence, said he had mixed emotions about the budget plans.

“This is a strategy to have multiple rounds of budget cuts for the current year, which is a terrible disservice to all people who rely on services,” Schmidt told Kansas Liberty. “But at this point we can’t change what the numbers are, and all we can do is maximize the amount of certainty Kansans have and give them the ability to plan. The governor should have started aggressive cuts in spending back in July for an advanced notice.”

Schmidt pointed out that though the governor’s education plans appear to save K-12 education from cuts, it will actually result in less funding on a per-pupil basis.

“I don’t want to criticize decreasing school funding, but base aid per pupil goes down for 2009 and for 2010 it goes down substantially,” he said. “This is brilliant politics, but poor budget leadership.”

-Holly Smith

Resources:

• Read the budget online here: http://budget.ks.gov/gbr.htm

Also in Kansas Liberty:

• Budget director sounds the alarm.
  

•  General Fund Receipt and Expenditures Chart

•  Sebelius says state of state is strong, despite budget crisis

• Budget panned by critics

The Week in Review