Topeka ? The hole just keeps getting deeper.

State leaders already struggling with the worst balance sheet in decades were hit Friday with news from economic forecasters that the budget gap has widened to $680 million from $426 million.

The economists whose projections form the basis for the state budget also were gloomy about the overall Kansas economy, predicting it would stay in recession longer than the national slump, which is thought to be over or ending.

House Speaker Kent Glasscock, R-Manhattan, called the wave of bad news “staggering.”

Senate President Dave Kerr, R-Hutchinson, said it would require “all hands on deck.”

Earlier in the day, Kerr appointed a nine-member committee to consider budget cuts and tax increases.

Glasscock and Kerr said they had expected a downward revision of revenue projections, but not as big as the one they got. After a quick briefing by the budget experts, they seemed stunned.

In perspective

Gov. Bill Graves, who tends toward calm understatement, summed it up this way: “This is the most significant fiscal dilemma we have ever faced.”

To put it in perspective, closing the $680 million revenue gap would require an across-the-board cut in state spending of about 12.5 percent. Looked at another way, it would require shutting down nearly all the state universities for a year.

Graves and legislative leaders said the widening gap must be filled with a combination of new taxes and program cuts.

“I don’t think there is any doubt we are going to have to put together a budget that puts together pretty dramatic cuts in almost every aspect of government and calls on people to pay some additional tax and pay some additional fees,” Graves said. “Anybody who says that no tax increase is necessary  I would probably like to figure out a way to let them cast their vote for that package so that they can be clearly on record as supporting the kind of cuts it would take.”

Other options

At the start of the legislative session, Graves proposed a $228 million tax increase. He said that may not be enough now, and he may revise his tax package.

“You have to be willing to look at every option that has the potential of getting legislative support. I’ll look at any option,” he said.

Graves said expanded gaming may be part of the answer, but he added that proponents of increased gambling have not done a good job of moving their proposals through the Legislature.

Even conservative members of the Legislature said the need for increased taxes was becoming more apparent.

Sen. Stan Clark, R-Oakley, said it would be impossible to balance the budget with cuts alone.

“I think we’re looking at a substantial tax increase,” said Rep. Melvin Neufeld, a conservative Republican from Ingalls. “There will be a lot of gnashing of teeth, but soon we will find out where people are at” on taxes.

Graves said the budget he presented at the start of the session  which would have reduced funding to public schools, higher education, social services and highways  is even further out of balance now. The continuing fall in revenues has put it more than $250 million out of whack.

Bigger hole ahead

Graves and legislative leaders said the revenue gap would grow even more next week when there are revised estimates on caseload in health-care programs for the poor and elderly.

In addition, the state’s balance of funds will dip to about $44 million by the end of the year, triggering a law that would allow Graves to institute across-the-board cuts. Graves did not address that issue during a short news conference, but Kerr pointed out the option would be available to the governor.

The downward revision of revenue was caused by lower-than-expected corporate and personal income taxes.

Graves’ budget director Duane Goossen and Ben Barrett, director of the Legislative Research Department, said the loss of income taxes was related to a slowdown in the state’s economy, especially in communications and aircraft manufacturing.

Kansas has been hit hard during the current recession with massive layoffs announced at Sprint in Kansas City and Boeing in Wichita.

Barrett said the numbers suggest Kansas was recovering from the recession more slowly than the rest of the nation, including neighboring states.

The group’s previous forecast, issued in November, assumed a state and national recovery late in 2002. Though the national economy appears to be bouncing back more quickly than predicted, Kansas is lagging, Barrett said.

“This isn’t the last of the bad news,” Kerr said.