State’s budget picture grows ever bleaker as legislators return to work

ORIGINALLY WRITTEN JIM O’MALLEY
While the state’s financial situation continued to worsen, the Legislature took some steps toward adopting a budget for the next fiscal year, which begins July 1. But the process is far from over.

Budget gap to $800 million?

State revenue was about $27 million below projections in March, and was below projections again in April, by about $50 million.

Secretary of Revenue Steve Richards said Wednesday, income tax payments are down about 10 percent from last year, and refunds are up about 16 percent. He said the decline was due largely to a decline in individuals’ investment income. Richards said he didn’t expect a reversal of the trend in May and June.

State Budget Director Duane Goossen said with the new monthly revenue numbers, the state’s budget gap was now about $775 million.

“It will probably be worse by the end of the fiscal year,” he said. “We could be looking at $800 million.”

Goossen said the gap was the difference between revenue from current revenue sources and a conservative budget that maintained current services.

At a press conference Wednesday, Gov. Bill Graves said the new revenue numbers meant that the state general fund would probably be in the red at the end of the fiscal year. State employee furloughs and layoffs were possibilities, he said.

The general fund had been in the red since December, and the state had been paying its bills by borrowing money from other state funds, he said.

“The state is living off its savings account,” Graves said.

Spending that money reduced the state’s investment income further, however.

Graves said the new numbers should make his March proposal of budget cuts and $360 million in new taxes look more reasonable to the Legislature. If the Legislature adopted his tax proposal and reduced the ending balance to 5 percent, Graves said, it could come close to an adequate budget for 2003 and with a little economic recovery, the state could get by in 2004.

But Graves said he thought reducing the ending balance would be unwise. Most states have both an ending balance and a separate rainy-day fund for fiscal emergencies, he said, but Kansas has only the ending-balance requirement.

The ending balance was a cash-management fund, not a rainy-day fund, Graves said.

The state general fund has gone into the red for part of 2000, 2001 and 2002, even though it started those years with balances of 12.9 percent, 8.7 percent, and 8.3 percent, Graves said.

Reducing the ending balance to help balance the budget this year could well make the budget situation worse for the next governor and the next Legislature, the governor said. There is no quick, easy fix, he said.

“This is a pill that none of us want to swallow,” Graves said. “It’s bigger and more bitter than we ever imagined. But why don’t we just figure out how to swallow it once and fix it correctly the one time we are called upon to fix it.”

Budget moves ahead-barely

Over the break between the end of the regular legislative session and the start of the wrap-up session last Wednesday, a conference committee worked out a compromise between the House and Senate budget bills. The House passed the compromise bill Thursday by a single vote. The Senate passed the bill by a single vote Friday.

House Appropriations Committee Chairman Kenny Wilk, R-Lansing, told members, “All around the state, people are saying the Legislature is going to implode. They’re not going to do their job.”

He urged them to vote for the bill to move the budget process forward. The initial vote was 53-70, but enough members changed their votes to pass the bill 63-61, to audible sighs of relief from supporters. Forty-six Republicans and 17 Democrats voted for the bill and 33 Republicans and 28 Democrats voted against it.

House Speaker Kent Glasscock, R-Manhattan, was relieved.

“Everybody thought it was going down except Kenny and I,” he said. “People did the right thing.”

The Senate passed the budget bill 21-19 Friday. Two Democrats, senators Christine Downey, D-Inman, and Greta Goodwin, D-Winfield, joined 19 Republicans in voting for the budget bill. The Senate’s other eight Democrats and 11 Republicans, most of them conservatives, voted against the bill.

Opponents said the bill offered only a short-term Band-Aid approach to the state’s fiscal problems and used too much one-time money from other state funds to fill the budget gap. They also said it was shortsighted not to increase funding for education and highways, and wanted to send the bill back to conference committee.

Sen. Les Donovan, R-Wichita, though, said it was a bad idea to send the budget back. In all his time in the Legislature, he had never seen a budget that was sent back to committee come back smaller.

But the budget was the easy part, Glasscock said. “There’s still the revenue to do.”

Sen. Ed Pugh, R-Wamego, who opposes tax increases, predicted a contentious debate.

“It’s going to be ugly,” he said.

Saturday the House debated a variety of tax increases but voted them all down.

John Edmonds, R-Great Bend, chairman of the House Taxation Committee, offered the tax increase amendments. He told the House that back in January he had been convinced the state could get through its fiscal crisis without new taxes. But growth of the budget gap from $426 million to more than $700 million had convinced him otherwise.

“We no longer have the option of leaving here without a tax increase,” he said.

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