By JOHN HANNA
TOPEKA, Kan. - Many legislators are gloomy about Kansas' financial future and believe they've adopted a $13.6 billion budget that the state can't afford for even one additional year.
Gov. Kathleen Sebelius said Thursday that she believes the state's economy remains sound and in better shape than the national economy. Any downturn, in her opinion, will be temporary, but a money crunch is probably coming next year.
Some legislators predicted that they'll be forced next year to consider breaking spending commitments they've made in recent years, cutting programs or even increasing taxes. And they were critical when a few colleagues suggested there's some hope that the state's budget picture will improve.
"How do I go home and tell folks how we're going to get out of this fix we're in?" said Sen. Tim Huelskamp, a Fowler Republican. "Obviously, in this budget, you can't spend hope."
The budget approved by legislators increases overall spending about 3 percent, or $391 million, during the state's 2009 fiscal year, which begins July 1.
The state would increase aid to public schools by 5.5 percent, in keeping with a plan approved in 2006 to meet Kansas Supreme Court mandates. The budget keeps up with the growth in social service entitlement programs, provides a 2 percent increase in payments to groups serving the disabled at home and creates a new early childhood education grant program.
Most state employees will receive a 2.5 percent pay increase. Many retired teachers and government workers will get an extra, one-time payment of $300.
But the state also will eat into cash reserves that built up during recent good financial times. Reserves were $935 million on June 30, 2007, and are projected to drop to $119 million by July 1, 2009, the start of the state's 2010 fiscal year.
For the current and next fiscal years, spending is expected to outstrip anticipated revenues by about 7 percent - $402 million in fiscal 2008 and $415 million in fiscal 2009. Much of it is linked to promises legislators have made in recent years, including the 2006 school finance plan.
The Legislative Research Department projected that if legislators attempted to continue spending at the same rate, a budget deficit of $190 million, or 2.9 percent, would result at the end of fiscal 2010. It would then more than double during fiscal 2011, even if revenues grew better than inflation.
"We certainly can't keep that spending up next year," said Sen. Jim Barone, a Frontenac Democrat.
But legislators have faced budget scenarios from their research staff in previous years that projected shortfalls. That was especially true in 2006, when they approved phasing in a $541 million increase in spending on schools over three years.
They've also continued to cut taxes, particularly for businesses, to continue stimulating the economy.
State officials and university economists last month issued a new, more pessimistic forecast for anticipated revenues through fiscal 2009. They cited mainly the effects of a federal economic stimulus package and cuts in interest rates that lowered the state's earnings.
"The good news for Kansas is that the downturn we're seeing is not because of job loss, and it's not because of a housing boom gone awry," Sebelius said. "We continue to grow this economy."
The projections from the Legislature's research staff also don't include revenues from state-owned casinos and slot machines at dog and horse tracks authorized last year. That law is being challenged in court, but the state expects to get its first $25 million fee next month from a prospective developer.
"We will have a dip," Sebelius acknowledged. "We're in kind of a short-term crunch that will be tough next year, but I think the long-term outlook continues to be positive."
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