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Archive for Monday, November 3, 2003

State budget sufficient to muddle through year

November 3, 2003

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— As the 2004 legislative session approaches, the state finds itself in a better financial position than it did a year ago.

Revenue collections met expectations for the three months starting July 1, when the current fiscal year began, indicating a stable flow might continue into next year. And Gov. Kathleen Sebelius does not expect to have to cut any spending from the current $10.2 billion budget to prevent a deficit next year.

A tax increase isn't required -- which may fit legislators' mood, given that all 40 Senate seats and 125 House seats will be on the ballot in November 2004.

Barring some unforeseen crisis, the state probably could get through the 2005 fiscal year, which begins next July 1, without having to resort to expanded gambling or new accounting tricks.

But some Kansans won't be content to see the state muddle through another year, especially if some of them put stock in promises made by legislators during the boom years of the 1990s. Replicating the current budget means breaking promises on highways and higher education, containing aid to public schools and stiffing local governments.

Budget goals

An official's or constituent's view of whether the state has enough money for fiscal 2005 is likely to depend on his or her goals for the budget.

"Whether you see a shortfall or whether you don't depends on what you plug in," said State Budget Director Duane Goossen.

Sebelius' staff is several months into work on a proposed 2005 budget to be submitted after the Legislature opens its 2004 session on Jan. 12.

The budget picture will be clarified with the release of new revenue forecasts -- the so-called consensus estimates -- scheduled to be issued late Monday afternoon by Budget Division staff, Department of Revenue officials, legislative researchers and university economists.

Covering the rest of fiscal 2004 and all of fiscal 2005, the estimates will be used by the governor and legislators alike in their planning.

The last forecast predicted general revenue of $4.4 billion in fiscal 2004. But it was issued in April, before Congress approved a package of aid to states that has sent Kansas $91.4 million in relief plus $63 million for medical services for the needy.

Since August, legislators have been working with two competing scenarios outlined by their research staff. Both scenarios put general revenues for fiscal 2005 at about $4.6 billion, which is roughly 3.5 percent growth.

"It doesn't appear to me that there's any momentum for a tax increase," said Senate Ways and Means Committee Chairman Steve Morris, R-Hugoton. "We're probably going to have to do a budget that's very similar to what we did last spring."

Hold spending

One scenario from legislative researchers -- the muddle-through scenario -- does anticipate some adjustments to the current budget, for additional contributions to state employees' pensions and health insurance and a program that provides death and disability benefits.

Also, the scenario assumes the cost of providing services to the needy will increase by $60 million and that the state replaces $94 million in federal funds that bolstered social services in previous years. Both seem reasonable assumptions, given federal law and legislators' unwillingness to make huge changes in social services.

Under that scenario, the state would leave a little less than $75 million in its treasury on June 30, 2005 -- a cushion for bad times.

But following that scenario would require the state to hold spending on public schools at its current $3,863 per pupil, not even the $3,870 included in the state's 2003 budget, much less what educators feel is adequate to provide each child with a suitable education.

In addition, spending on higher education would remain frozen after having been cut last year, when legislators promised more money would flow to universities, community colleges and technical colleges when the state reorganized the system in 1999.

Gone would be $130 million in aid to cities and counties promised, in theory, under Kansas law. More than double that amount would be kept from highway projects, despite plans made in 1999 under a 10-year transportation program.

The second scenario drafted by legislative researchers assumes their bosses try to keep some promises: providing extra money for higher education and highway projects, restoring aid to cities and counties and bringing aid to schools to $3,890 per pupil.

Also, that scenario assumes legislators would leave a healthy cushion against bad times -- a treasury balance of $338 million when fiscal 2004 ends.

The gap between revenues and the spending needed to reach those goals comes to about $600 million. Fulfilling higher ambitions and keeping past promises simply requires more money.

"It makes a huge difference, what kind of assumptions you make," Goossen said.

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