Topeka ? Toward the end of 2002, state government’s wallet was pretty thin.

Drought, recession and the aftershocks of 9-11 on the Kansas aircraft manufacturing industry dropped state tax receipts a record 7 percent.

Gov. Bill Graves pushed through a $250 million tax increase to balance the state budget, but revenues continued to tumble, so shortly after that he cut $120 million, including from schools and social services, before handing off state government to incoming Gov. Kathleen Sebelius.

“Gov. Sebelius took over in January 2003 right in the middle of the fiscal year when our balances were running below zero,” said Duane Goossen, who served as Graves’ budget director and has continued as Sebelius’ budget director and secretary of administration.

“At that point in time, there was nothing. We were down to zero and had all sorts of obligations and issues pending,” he said.

When Kansas lawmakers return Monday for the 2005 legislative session, the state will have recorded a balance of about $327 million in its reserves, which is 7.6 percent of expenditures.

The turnaround was caused by a growing economy, bookkeeping maneuvers, which some have called smoke and mirrors, a one-time federal assistance package linked to 9-11 and fiscal discipline, Goossen said.

With the brighter budget picture has come calls to increase spending to make up for the lean years.

But Goossen and other budget experts say Kansas must maintain tight controls on expenditures. Even with the increased revenue, state government has little left over after taking care of required expenses, he said.

“We’re making some progress, but we still have these cost drivers,” said Senate President-elect Steve Morris, R-Hugoton, who was chairman of the Senate budget committee.

Caseload increases in Medicaid have grown by about $400 million over the past five years; the state’s contribution to the state pension system and debt payments on pension bonds are accelerating, and in next year’s budget the state will start paying off research bonds at regents universities.

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Pension payments and Medicaid “are the two biggest obstacles we have in being able to have more flexibility in our budget,” Morris said.

In addition, the state base aid per pupil in public schools has remained at the same level for the past four years. On Monday, the Kansas Supreme Court ordered an unspecified increase in public school funding, which makes up about half of the state budget.

Tax receipts for the current fiscal year, which ends June 30, are expected to increase by 3.5 percent, and tax receipts for the next fiscal year are predicted to increase by 3 percent.

“We are experiencing moderate growth,” Goossen said, thanks largely to the recovering aircraft industry and a good year for agriculture.

“There are more jobs, more income and that contributes to our revenue growth,” Goossen said.

Many lawmakers say now is the time to codify in the Kansas Constitution a spending limitation fashioned after one in Colorado, called the Taxpayer’s Bill of Rights, or TABOR for short.

The proposal would limit revenue growth in state government to inflation plus population growth, and refund to taxpayers any state revenue collected above that amount. In addition, the state would need approval from voters before imposing a tax or fee increase.

Supporters say it will control government spending, but opponents say it is an unnecessary restriction that could prevent government from providing needed services or responding to emergencies. Sebelius opposes the measure.

“For two straight years we’ve balanced the budget without increasing taxes despite some of the steepest revenue declines in state history. The system of checks and balances already in our constitution is adequate protection for Kansas taxpayers,” Sebelius said.