Legislators don’t have millions of dollars to throw around in ’06
Despite rosy forecast, big bills are coming due
Topeka ? In a typical budget year, increasing revenues would be good news for people looking for a few more dollars to expand government programs or take care of long-neglected needs.
But state budget officials say despite a glowing economic forecast for the coming months, this year’s budget is going to be anything but typical.
For starters, many of the bills that legislators delayed are coming due during the next budget year beginning July 1 – the budget year lawmakers will be looking at when they return to the Statehouse in January.
How big are the bills? About $226.4 million, slightly more than the $221 million in additional revenue the state expects to collect through mid-2006.
Looking at the big picture isn’t much better. Kansas will collect $5.22 billion during the next budget year but spend $5.27 billion. That means lawmakers must dip into reserve funds to make ends meet.
Something’s got to give
The brutal fact is absent cuts in services or higher taxes, something has to give.
“There’s not a lot that we can back away from,” said House Appropriations Chairman Melvin Neufeld, R-Ingalls.
The latest revenue estimate on Nov. 3 does mean that legislators will have money in the bank, but there isn’t enough money for pay increases for state employees or boosting their health insurance plan.
“There is reason for hope and optimism in view of the challenges,” said Senate Ways and Means Committee Chairman Dwayne Umbarger.
State law requires legislators to hold 7.5 percent of each budget in reserve. However, legislators have relied on those reserves to pay for ongoing operations and additional school spending. Kansas should have 9 percent, or $467 million, in the bank as of June 30, 2006, falling to 7.8 percent or $410 million a year later.
But that level falls significantly in 2008, eroding by $170 million.
“We’ve been using the rainy day fund 365 days a year, even though it’s not raining,” said Umbarger, R-Thayer.
A legislative committee wrapped up work this week on Medicaid, recommending creating an inspector general to be watchdog over the $2.2 billion state program. It didn’t make any changes in the program’s eligibility, leaving that task to a newly created authority to decide what, if any, cuts can be made.
Medicaid spending is one of the fastest growing budget items as demand for services and health care costs escalate. Children make up nearly 60 percent of recipients but services for the disabled account for 45 percent of spending.
“Our hope is not to necessarily find savings, but to stop the hemorrhaging and keep the growth to a manageable level,” Neufeld said.
House Minority Leader Dennis McKinney said Kansas already has one of the most restrictive Medicaid programs and making drastic cuts aren’t likely in the near term.
“Many of the benefits are at the level they were several years ago. We’re not throwing money at welfare,” said McKinney, D-Greensburg.
Highways and universities
Legislators have few options to curb spending, given so many obligations.
A big obligation is the state’s highway program, now entering the seventh of 10 years of planned improvements. In past years, legislators siphoned off road dollars to bolster other programs, so much so that they had to pass legislation in 2004 to keep the program solvent.
Issuing bonds to pay for programs, such as state pensions or refurbishing university campuses would appear a good idea. But Neufeld said some legislators are losing their appetite to increase the state’s debt, currently at nearly $4 billion. Principle and interest payments are running about $300 million annually.
The Kansas Board of Regents have proposed bonding and increases in sales and property taxes to address a $584 million maintenance backlog. But Neufeld said chances of such a proposal passing are slim.
Umbarger and Neufeld say any additional increase in school funding ordered by the Kansas Supreme Court could shatter hopes of making the budget work next session. There simply isn’t any extra money for schools above what has already been promised. Kansas spends more than $3 billion on K-12 education, more than half the budget.
Legislators complied with earlier court rulings and put an additional $290 million into education in 2005 without raising taxes. The state can still afford those increases, as well as $55 million in additional aid earmarked for the upcoming budget.
If the justices make order more funding, legislators could face a tough election-year decision of cutting other programs, raising taxes or both.
“We need solid new revenue,” Umbarger said. “When you look at the big picture, we aren’t getting the kind of money we need.”
Gambling is always an option, but legislators haven’t felt desperate enough in recent years to allow slot machines or casinos on every street corner. When the special session on school finance ended in July, many felt that gambling stood a good chance in 2006.
Neufeld said the issue would be back, but don’t count on any bill passing.
“The proponents are the ones who always kill it. They get greedy and want a different deal,” Neufeld said.
Economic growth in Kansas has been weaker than surrounding states, though Neufeld said recent orders for new Boeing jets are helping to stabilize the aviation industry.
Economists believe that overall growth will continue in the next 18 months and that revenue collections will continue to rise but not as fast.
“You can’t grow yourself out of something when you are spending more than you are taking in,” Neufeld said.