Education key in budget battle

The cause of the impending budget battle in Topeka this legislative session is a matter of basic bookkeeping, according to Duane Goossen, who heads the process of crunching the numbers as the state’s budget director.

Simply put, state revenues are declining and expenses are increasing.

The rate of decline and increase, though, has left legislators the enormous task of digging the state out of a hole projected to be about $426 million deep for the upcoming fiscal year.

Fueling the decline in state revenue is a nationwide recession.

“The economy in Kansas is not as bad as it is in many states,” Goossen said. “We’re actually comparatively better off than most states. But economically, we are in a downturn, and that has reduced our revenue stream from what we had expected.”

At the other end of the money pot, increases in the cost of state-funded medical services, averaging 12 percent a year, have drained the state of any reserves.

“Essentially, it’s the Medicaid program,” Goossen said. “There are other costs as well which enter into that, but we have to pay for medical costs. We have no choice. They are entitled programs.”

Goossen said the cost of those services makes up about 35 percent of the state’s general-fund budget-the portion of the budget generated from taxes, and totalling more than $4.5 billion.

About 50 percent of the general fund-the largest portion-goes toward funding public education from kindergarten through grade 12. An additional 15 percent is directed toward higher education.

Goossen said that with medical expenses being all but untouchable, the state’s budget battle likely will center on K-12 education.

“Our budget hole is so big, we cannot cut general government far enough to fix it,” he said.

“We’ve been doing that the past two or three years,” he added. “We have been very conservative on general government spending so that we could have at least moderate increases in education and keep up with social services. It doesn’t work this year. The gap is too big.”

Goossen said Gov. Bill Graves has made some cuts in social services, but the state’s chief executive “has gone out of his way to protect those areas and keep the most essential programs in tact.”

Another area the governor has suggested cutting is transportation, Goossen said. Most highway projects in Kansas are funded through gasoline taxes, but some money has been coming from the general fund, too.

“What we’ve done is eliminate all the money coming from the general fund,” Goossen said. “We’ve eliminated it so that it is very clear that education and social services are not competing with highways for dollars.”

The alternative response to cutting expenses, of course, is to increase revenues. Some of the tax cuts enacted in the late 1990s, while the economy was strong, may have to be restored. Goossen said the governor will present a package that includes cutbacks and some restorations.

“It’s unclear what the legislature will do with that,” he said. “But their choice is going to be pretty difficult. Either they’re going to have to accept some very difficult cuts, or they’re going to have to find some ways to raise revenues. Certainly, adding revenue is a difficult thing to do in any case.”

Goossen strongly opposes a possible third option: solving the problem temporarily through risky accounting strategies.

“There are ways you can finagle this financially that maybe get you through for one year, but leave you in a very, very precarious financial position,” he said. “I hope we do not come out with that kind of a position. We should do the prudent thing-either make the cuts or raise revenues, or a combination of both.”

Goossen said state economists are expecting the present downturn to continue into summer, then begin to turn around after that-and ultimately reverse the state’s revenue decline. But those are only projections.

“The assumption we’re working under is that we’re not as bad off as the national economy is,” Goossen said. “So far, at least, we’ve escaped the worst of it. But we’re in this (budget) position now even after having escaped the worst of it.”

He said Kansas has good company in the battle to balance its budget.

“This is the worst budget year in 20 years for states as a whole,” Goossen said. “Some states have different kinds of reserves and operate a little differently. But the latest numbers we have tell us that 45 states are in deficits right now.”

And is Kansas among them?

“It depends how you define that,” Goossen said. “Our fiscal years run from July 1 through June 30. We’re operating now under a budget plan that we expect to be able to complete without having to make any drastic cuts.

“The year that’s the problem is the year that begins July 1. That’s the crucial one.”

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