TOPEKA — Gov. Kathleen Sebelius proposed a budget today with something for all of state government's biggest clients, but it won't work if legislators shoehorn in a big school funding plan without additional revenues.

The $11.7 billion spending plan for the fiscal year beginning July 1 includes additional dollars for higher education, health care initiatives and public safety.

Sebelius also proposed giving most state workers a 2.5 percent pay raise and setting aside dollars to improve public safety. Her budget would allow the state to maintain adequate cash reserves.

She even included nearly $76 million in new dollars for public schools, to fulfill mandates approved by legislators last year in responding to Kansas Supreme Court orders to improve education funding.

But Sebelius didn't attempt to factor in an even larger increase in aid to public schools for fiscal year 2007 in advance of a legislative audit saying the state needs to increase education funding at least $400 million a year. Auditors released their report Monday.

The lack of such a school finance plan cast doubt on the Democratic governor's proposals. House Appropriations Committee Chairman Melvin Neufeld even suggested Sebelius was trying to push lawmakers into raising taxes to benefit schools - something majority Republicans generally oppose.

"It's pretty clear the Legislature probably won't leave without actually putting new money in education above what the current law is," said Neufeld, R-Ingalls.

Sebelius aides said the timing of the audit prevented the governor from addressing it. They also said she would follow the same approach she took last year - not proposing her own school finance plan but waiting for ideas to emerge from the Legislature.

"We're dealing with the facts we had at hand," Sebelius spokeswoman Nicole Corcoran said during a budget briefing for reporters.

Under Sebelius' budget, overall state spending would decline about 1.1 percent in fiscal 2007, or about $131 million. That's largely because of the timing of highway projects, which causes the Department of Transportation's budget to fluctuate year-to-year.

General tax revenues provide about 45 percent of the dollars for state government. Spending from those sources would total $5.3 billion in fiscal 2007, an increase of $143 million, or 2.8 percent.

"This budget covers the ongoing activities and key things of state government," State Budget Director Duane Goossen said.

While the state would end fiscal 2007 with $396 million in cash reserves - meeting a target set by Kansas law - spending commitments made in previous years would force the state to cannibalize $178 million in reserves to meet the budget in fiscal 2008.

Absent new revenues from higher taxes, expanded gambling or some other source, grafting a school finance plan onto Sebelius' proposed budget would create future budget problems, even if lawmakers phased in a spending increase.

"We've got to find new revenue," said Senate Ways and Means Chairman Dwayne Umbarger, R-Thayer, adding that he prefers gambling because, "I don't see a tax increase happening this year."

Republicans were frustrated that Sebelius doesn't intend to submit a school finance plan, just as they were last year.

"She's supposed to be the leader of the state of Kansas, and obviously, she doesn't want the job well enough to actually lead," said Rep. Brenda Landwehr, R-Wichita, an Appropriations Committee member.

But aides said Sebelius will work with legislative leaders on a plan with bipartisan support.

"This is still pretty early in the conversation," Corcoran said.

Sebelius also could face criticism from conservatives who don't want large spending increases and worry that pressure is building for a tax increase. The Washington-based Tax Foundation released a report last week saying Kansas' taxes already are high enough to discourage economic development.

Chris Atkins, a foundation attorney, said that instead of building cash reserves, the state ought to appeal its corporate franchise tax, which firms pay for the privilege of doing business in Kansas, to save companies $46 million a year. Of eight other states in the region, only Missouri, Nebraska and Oklahoma have a similar tax.

"The long-term goal has to be to make Kansas competitive, the most competitive state in the region, in terms of its tax climate," Atkins said.

The governor proposed $36 million in new spending on higher education, including $20 million more for university operations.

But her budget doesn't address the regents' proposal to raise sales and property taxes to raise $70 million in fiscal 2007 for repairing campus buildings. Her staff said she hadn't discussed the proposal with the state Board of Regents.

Among her social services initiatives is a $13.7 million increase in spending on in-home services for the disabled by $13.7 million.

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