Analysis: Legislature continues to repeat its mistakes

? In recent years, legislators haven’t had much of a long-term vision when it comes to the state budget.

In fact, the Republican-controlled Legislature seems a bit thick when it comes to fiscal policy, perhaps stubbornly resistant to learning from the state’s past financial problems.

GOP leaders – sometimes with the collusion of governors, sometimes not – bounce from tough fiscal year to tough fiscal year, patching together state budgets to avoid tax increases but creating problems for future Legislatures to solve.

This year, Republicans were determined to satisfy a Kansas Supreme Court mandate to improve education funding without raising taxes. They provided $127 million in additional aid to public schools for the fiscal year beginning July 1, relying on projected revenue growth and tapping cash reserves to pay for it.

But the result is a projected budget gap for fiscal 2007, something that could force legislators to consider reducing services, raising taxes or expanding gambling.

The development is predictable. Two decades of history have shown that if legislators insist on depleting the state’s cash reserves, they’ll eventually face a financial reckoning. Yet Republican leaders continue to allow the same mistakes, year after year, even though the GOP identifies itself as the party of fiscal responsibility.

“This is the frustrating part about the school finance debate,” acknowledged Senate Majority Leader Derek Schmidt, R-Independence. “There is no free lunch, and ultimately the state is going to have to pay the bills.”

But for much of this year’s session, Republican legislators, particularly in the House, talked as if the state could increase education funding without finding new revenues, at least for the near future. Their tone changed at the end of the session, when they were confronted with realities of the budget.

Yet they’ve not abandoned the idea that a growing economy will head off problems altogether.

“I happen to believe in the people of this state and the economy of this state,” said House Speaker Doug Mays, R-Topeka. “The solution to all of our financial problems in this state is not higher taxes. It’s economic growth.”

Schmidt said fellow senators recognized the potential problems created by the school finance plan.

“What is there to say?” he said. “We wound up having to compromise to get a bill passed.”

Still, Mays contends pessimism from Democratic Gov. Kathleen Sebelius and her staff about the budget is driven by Sebelius’ support for raising taxes to provide additional dollars to public schools.

While there’s truth in that, their arguments are grounded in the hard realities of the state’s fiscal cycles. Boom years eventually fade into lean years. Revenues grow more slowly, tripping up legislators who budget as if the good times never will end.

The state expects to end the current fiscal year on June 30 with about $290 million in cash reserves. Those reserves would dwindle to $171 million by the end of fiscal 2006, largely because of the extra aid promised to schools.

Then, in fiscal 2007, the budget would go into the tank. Even with 4 percent growth in general tax revenues, the state Budget Division projects that attempting to sustain a status quo budget would result in a deficit of $53 million at the end of the year.

Of course, the state can’t run budget deficits. It would have to adjust its spending or find new revenues. Cash reserves are a cushion that can be tapped only once, while expenditures for public schools continue into the future.

“You can’t spend one-time money for what we know is an ongoing expense without seriously jeopardizing everything else in the budget,” Sebelius said in an interview.

Adding to problems created by the education funding plan were decisions legislators made to patch together previous budgets.

For example, some decisions diverted money from highway projects, requiring legislators to pass a plan to prop up the state’s comprehensive transportation program. That plan sets aside $52 million in general tax revenues in fiscal 2007 and $167 million in fiscal year 2008 for road projects.

“Certainly, something will have to give,” said state Budget Director Duane Goossen.

The solution, of course, isn’t necessarily to raise taxes or expand gambling to provide fresh revenues.

“We need to be more aggressive in how we cut spending in the budget,” Mays said. “There are so many constituencies in this state that rely on state government for their funding and want more spending, not less. It’s a tough hill to climb.”

It’s a tough hill because the cost of providing the same social services keeps rising, with higher medical costs. And it’s a tough hill because the state spends 78 percent of its general tax revenues on public schools, higher education and social services for the needy and elderly.

But those are issues legislators are likely to ponder next year, as they deal with the problems their short-term thinking has caused.