Topeka ? It’s the economic time bomb ticking in Gov. Kathleen Sebelius’ proposed budget: a zero-percent ending balance.

State Rep. Melvin Neufeld, R-Ingalls, the chief budget writer in the House, explained it this way: If you have a house payment due on the first of the month, and there’s no money in your checking account on the last day of the month, “You have a problem.”

Under state law, the Legislature-approved budget must provide on the last day of the fiscal year — June 30 — an amount of money equal to at least 7.5 percent of state appropriations of general tax fund dollars. With a current general fund budget of about $4.1 billion, that ending balance requirement would be about $280 million.

Passed in 1990, the ending balance requirement has provided a cushion in the state bank account in case of an emergency, tax receipts falling below expectations or to handle cash flow problems.

When the economy was growing, state officials couldn’t spend tax funds or cut taxes fast enough, and in some years the ending balance ballooned past the 7.5 percent requirement. In fiscal year 1998, it was nearly 20 percent.

But facing shortfalls in tax receipts, lawmakers last year cheated the 7.5 percent requirement by passing legislation that ratcheted down the ending balance to 5 percent.

This year, Sebelius proposed a budget that essentially abolishes the requirement of any ending balance in the current fiscal year and the next one.

That means if tax receipts continue to fall below projections, which they have continually done for the past two years, there will be no reserve to cushion the blow, and cuts will have to be made immediately.

“The biggest problem with her budget is no ending balance, so there is no flexibility. That is obviously a major hill to climb,” Neufeld said.

But so far, lawmakers are willing to go along with her proposal.

State Sen. Stephen Morris, R-Hugoton, chairman of the Senate budget-writing committee, said there was little alternative.

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“The weakness in the budget is there is no money,” Morris said.

Like most states, Kansas is reeling from the economic recession, which has led to a decline in tax receipts and increased demand for services.

Morris said to replenish the ending balance, the Legislature would have to increase taxes or cut into public school funding — something few want to do.

House Speaker Doug Mays, R-Topeka, said the lack of an ending balance was not a major problem, saying the state fared well before 1990 when no ending balance was required.

“I don’t think we should be raising taxes so the state can have a surplus,” he said.

Revenue sources

If the budget starts dipping into negative balances, he said, Sebelius can start cutting, just as her predecessor Gov. Bill Graves had to do twice last year.

But Sebelius has said that although she proposed a zero-percent ending balance, she wants to find revenues to build back the balance. But she hasn’t identified any sources of revenue.

Some potential sources would be expanded gaming and forgoing some future tobacco settlement monies in order to get some upfront cash. But neither issue has gathered much steam in the Legislature. Expansion of gaming is embroiled in turf battles, and questions have arisen about the long-term effects of giving up tobacco monies.

Both Morris and Neufeld said so far Sebelius, who took office last month, has done the best she can do with the hand dealt her.

A month after taking office, Sebelius, a Democrat, is still enjoying a honeymoon period with the Republican-dominated Legislature.

“She was elected with a lot of Republican votes,” Neufeld said. “What are we going to do, tell our voters they were wrong?”