Topeka ? State coffers bulged with unanticipated revenues last month, building legislators’ expectations Monday that they’ll be able to meet court mandates on education funding without raising taxes.

But even as legislators pondered increasing aid to public schools, they worked on cutting taxes. The House Taxation Committee endorsed a modified version of Gov. Kathleen Sebelius’ plan to phase out property taxes on business machinery and equipment, sending the measure to the entire House for debate later this week.

The state collected about $518 million in revenues in January, when it projected collections at $473 million, a difference of $45 million, almost 10 percent.

Since the current fiscal year began July 1, the state has collected almost $3 billion, about $69 million, or 2.4 percent, more than anticipated.

“Facing the challenges that we’ve got, this is very good news,” said Senate Ways and Means Committee Chairman Dwayne Umbarger, R-Thayer.

‘Economy is growing’

The state also is seeing strong growth in its revenues over fiscal year 2005, which ended June 30, with collections for the current fiscal year running about 10 percent ahead of last year’s collections.

Individual income taxes this fiscal year are running 11 percent ahead of collections last year. Corporate income taxes are generating nearly 66 percent more.

“This is further re-enforcement that the economy is growing,” said Sebelius spokeswoman Nicole Corcoran. “Kansas businesses and workers are earning more, and we see that in these numbers.”

Money for schools

Legislators face pressure to increase spending on public schools because the Kansas Supreme Court concluded last year that they had failed to adequately fund schools or distribute money fairly. Lawmakers increased aid to Kansas’ 300 school districts by $290 million, but the court suggested it was ready to impose further, much larger increases.

A legislative audit last month said the state needs to increase education funding by at least $400 million.

The more the economy grows, the better it is for schools and other government services, said Mark Desetti, lobbyist for the Kansas National-Education Assn., the state’s largest teachers’ union.

“Obviously, there’s no great appetite for tax increases,” he said.

But House Speaker Doug Mays said legislators need to consider tax cuts as well, to stimulate economic activity.

“Those should result in additional job growth, which in turn will result in additional revenues,” said Mays, R-Topeka. “I think we have to take a long-term approach to this, to the problem of our job environment.”

‘No. 1 priority’

Sebelius’ proposal would eliminate property taxes on new business machinery and equipment, and it enjoys bipartisan support. But some lawmakers are concerned that local governments will lose revenues and raise taxes on other property.

The House committee’s bill would require the state to make up the difference for two years between what a city or county collects on business machinery and equipment and what it would have without any exemption. After two years, the aid would be phased out. There’s no solid estimate on the cost to the state.

GOP House members also have endorsed proposals to reduce estate taxes; eliminate the franchise tax, which firms pay to do business in Kansas; and exempt clothes and school supplies from the sales tax for three days before the school year starts.

But House Minority Leader Dennis McKinney said legislators should be cautious about cutting taxes.

“The No. 1 priority still in front of us is to solve the school finance challenge without raising taxes,” said McKinney, D-Greensburg.