Topeka ? Gov. Kathleen Sebelius and Republican legislative leaders have agreed to delay the largest annual monthly payment to public schools to help bridge a state revenue shortfall budget experts said Tuesday had increased nearly 10 percent since last month.

Sebelius’ office and key lawmakers said they agreed to delay until July the June school payment as a way of taking $200 million off the expenditure side of the balance sheet in the fiscal year that ends June 30.

The maneuver helps balance the budget, but has repercussions down the road.

For one thing, school districts need their state money on time to pay bills, especially in June, because many school employees receive their July and August salaries in a lump sum payment.

But state lawmakers have introduced a bill to clear that hurdle. Under House Bill 2468, schools can write their checks in July and record them as having been written in June. Another bill, already signed into law by Sebelius, would exempt school districts, if they are short of revenue because of late state payments, from the law that requires them to keep their checkbooks balanced.

More bad news

The latest accounting gymnastics came as state budget leaders delivered more bad financial news Tuesday.

They revised their revenue projections for the rest of the current fiscal year and the next fiscal year, which starts July 1, and found that when it comes time to pay the bill, the state will fall about $255 million short on an already approved $10 billion budget.

The lowered projections are reflective of a state economy that is “sluggish at best,” said Alan Conroy, director of the Legislative Research Department. “The recovery has not arrived.”

State budget director Duane Goossen said the only good news on the state’s economic horizon was, “We think we have bottomed out now in capital gains losses.”

An unofficial March revenue forecast put the gap between spending obligations and incoming revenue at $230 million.

That gap was widened because:

• Based on tax returns counted so far, less money is expected to come in.
• Based on a readjustment of social service caseloads, expenses will increase by $10 million.

Increasing the shortfall to $255 million from $230 million may not seem like much in comparison to the total budget, but Goossen and Conroy pointed out the state would be facing a $700 million shortfall if it hadn’t already reneged on paying off a loan to the highway department, stopped sharing tax dollars with local governments, swept out all fund balances and increased taxes.

And coming up with $255 million only gets the state ledger out of red numbers. “You’re not supposed to end the fiscal year in negatives, so some type of action will have to get us to zero,” Conroy said.

Bipartisan plan developing

Lawmakers will reconvene April 30 to find ways to fill the budget hole. Legislative appropriation committees have scheduled meetings this week to get a jump on the problem.

¢ See more state budget stories¢ April revenue estimates (pdf)

So far, the Legislature has been unable to come up with a plan to pay for the budget.

Sebelius, a Democrat, proposed expanded gambling, selling bonds backed by future tobacco settlement receipts and accelerating tax payments. The Republican-controlled Legislature rejected the proposals.

Senate President Dave Kerr, R-Hutchinson, and House Speaker Doug Mays, R-Topeka, proposed delaying the June payment to public schools and delaying some tax refunds. Neither has been put to a vote yet, but Sebelius has criticized the proposal to delay tax refunds.

But the school payment delay has gained traction.

Mays said he spoke with Sebelius about it and said, “I wasn’t displeased. That is the heart of the real program. She is interested in a bipartisan plan.”

Nicole Corcoran-Basso, a spokeswoman for Sebelius, confirmed that the governor had agreed to the delayed school payment as an option to close the budget gap.

Randy Weseman, superintendent of the Lawrence school district, has become fatalistic about delayed payments from the state. He said the district’s budget had been designed to allow breathing room when the Legislature delays payments to schools.

No tax increase

Despite the worsening budget news, Mays was optimistic.

“I definitely see light at the end of the tunnel if we live within our means,” he said.

Mays noted that the revenue forecast predicted a 3.2 percent increase in revenue in the next fiscal year.

And he wasn’t dissuaded by the fact all of the twice-yearly estimates since 2000 have been too rosy. Tuesday’s estimate represented a $133 million downward departure since November, which is the largest downward revision since the revenue estimating group started making projections in 1975.

Mays also said state tax increases wouldn’t be part of any solution. “When you have the governor and virtually all of the leadership in both houses saying they are not going to raise taxes, it’s just not going to happen,” he said.

Recently, a bipartisan group of freshmen legislators has talked about the need for a tax increase, criticizing both Democratic and Republican budget-balancing plans as smoke and mirrors.

Mays said the freshmen were frustrated but that was natural. “The odds are longer than long that there is not going to be a tax increase this year,” he said.