Topeka ? Gov. Kathleen Sebelius on Wednesday proposed protecting education from further budget cuts at the expense of cities, counties and highway projects.

Sebelius also recommended the state operate like a family living paycheck-to-paycheck, building up almost no cash reserves before the 2004 fiscal year ends on June 30 of that year.

The proposed budget she outlined for legislators did not include a statewide tax increase, but it would require some agencies to increase fees, including for driver’s licenses. Also, some cities and counties could increase local property taxes to prevent cuts in services they provide.

“Just a few years ago, before the turn of this new century, our economy was robust; our markets rose ever upward, and our state coffers were flush,” Sebelius said in prepared remarks from her State of the State address to a joint session of the Legislature, which is controlled by Republicans.

“But today, our economy has slowed, our markets have tumbled, and our coffers are empty.”

While Sebelius, a Democrat, endorsed many actions former Gov. Bill Graves, a Republican, took in his final months in office, she did ask lawmakers to undo about two-thirds of the cuts he ordered in social services.

In her speech, she outlined a $10.2 billion budget for fiscal 2004. During her campaign, Sebelius pledged not to cut education spending and said she wouldn’t seek tax increases.

“I am dedicated to reorganizing and streamlining state government,” Sebelius said in her prepared remarks. “We must ensure that services are delivered in the most efficient and cost-effective manner possible.”

Under her budget for fiscal 2004, public schools would continue to receive $3,863 per student in state aid, and higher education would lose only $5 million in general tax dollars, mostly in the central Board of Regents office.

¢ See the text of the governor’s speech.

But she would take $165 million from highway projects and eliminate $86 million in aid to local governments _ on top of the $95 million Graves withheld from highway projects and $48 million he kept from cities and counties.

Sebelius also made a campaign promise to build all projects promised under the state’s 10-year, $13.5 billion transportation program. Her proposals didn’t say how the Department of Transportation would deal with the loss of funds.

Her budget also would allow the Kansas Highway Patrol to hire 70 new troopers, give state employees a 1.5 percent pay raise, and prevent the closings of four minimum-security prison units and two inmate boot camps.

Under Sebelius’ proposals, total spending in fiscal 2004 would decrease about $31 million, or 0.4 percent.

But that figure didn’t convey the seriousness of the state’s budget problems, which some officials have said are the worst since the Great Depression. The gap between expected general tax revenues and spending commitments during the next 18 months is more than $1 billion.

Sebelius also proposed to help eliminate the gap by spending some $313 million _ all but $500,000 _ that otherwise would be set aside as emergency cash reserves.