Archive for Sunday, July 21, 2002

Budget to be next governor’s chief task

July 21, 2002

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The person elected governor Nov. 5 should probably rise early Nov. 6, knock back his or her Malt-O-Meal and multivitamins and get to work, even though the job won't officially begin until January.

Given that the budget shortfall awaiting the next Kansas chief executive will be the biggest in state history, "probably the new governor is going to need to show up in the Budget Office very shortly after the election," said Duane Goossen, state budget director.

The new governor's first major task will be recommending a budget to the Legislature. In most years, that thick, multivolume proposal accounting for about $9 billion in spending by more than 100 agencies and departments is due on lawmakers' desks when the Legislature convenes soon after the New Year's holiday. But green governors are allowed a couple of extra weeks to get the document ready.

Gov. Bill Graves has done eight state spending plans and "knows the budget as well as any governor," Goossen said. Still, each fall Graves spends about a week and a half doing nothing but reviewing executive budget summaries.

Getting ready to cut

"Part of the challenge for a new governor will be to clearly know what an agency does, what they're supposed to do, what it costs to do. Understanding the history of an agency is extremely important in setting their budget," Goossen said. "Cutting is actually more difficult and takes more knowledge than adding."

And the next governor might be doing nothing but cutting.

Goossen said best estimates are that the budget shortfall facing the next governor will be between $600 million and $700 million. Some candidates are saying they can make the budget balance without raising taxes or cutting education spending. But those who know the budget well say that would be extremely difficult, if not impossible.

Spending on K-12 education accounts for roughly half of all state general fund spending. Higher education takes another 15 percent. Social services spending for the infirm, elderly, foster children, the developmentally disabled and other welfare programs eat up about 20 percent of the budget. Prisons, state police and other public safety programs are about 5 percent.

It will be difficult for the next governor to cut welfare spending because of the state's aging population. The fastest-growing segment of the welfare budget increasing annually at about 12 percent is the state's share of Medicaid.

In Kansas, it isn't welfare mothers eating up the budget. It's welfare grandmothers. Even the most cold-blooded fiscal conservative would have trouble finding support for cutting spending on the 83-year-old woman with Alzheimer's who would be the most accurate stereotype of an expensive Kansas welfare case.

That leaves few places for a cut-seeking governor to go, if education spending isn't targeted.

"You could eliminate everything else in state government, I mean eliminate the department of administration, the judicial branch, the Governor's Office, the Legislature, the Board of Tax Appeals and not get to $600 million," Goossen said.

Where the gap started

The state's budget hole, Goossen said, exists for two reasons:

Five consecutive years of earlier tax cuts, especially a big round of them in 1998, means state government since has forgone "billions" in revenue it otherwise would have collected.

"That's why when the governor was promoting a tax plan this last legislative session, he said: 'Look at all the tax cuts we've offered. Now, we need a portion of that back,'" Goossen said.

Also, the stock market went south, hurting businesses and individual pocketbooks. That produced a dramatic turnaround at the state treasury. Even after multiple years of tax cuts, revenue collections continued to increase about 5 percent annually because of the robust economy.

Then the economy tanked; and instead of increasing, tax receipts dropped about 7 percent in one year.

"It's almost all corporate income tax and individual income tax" receipts that have dropped, Goossen said. "Corporations are not making money. You can peg some of that back to 9-11. But also people are especially not making money on capital gains and interest income. It's a nationwide deal. We're riding the same trend as the rest of the states."

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