Topeka ? In a stunning announcement, state budget experts said Tuesday that when lawmakers return to session in January they could be staring into a $1 billion budget hole.

“The economy overall has taken a significant turn for the worse,” said Alan Conroy, director of the Kansas Legislative Research Department.

Gov. Kathleen Sebelius’ budget director Duane Goossen said when the legislative session starts, Sebelius will submit a revised budget for the current fiscal year, which is projected to be short by $137 million.

Then state officials have to start working on a budget for the next fiscal year that starts July 1, 2009. Under current circumstances, that budget could be $959 million below spending commitments, according to the new projection provided by the Consensus Revenue Estimating Group.

The group of state officials and budget experts provide estimates for lawmakers to use when they deliberate on spending plans.

Asked if the budget problem could be solved through cuts only, Goossen said, “It would have to go very deep.”

Conroy and Goossen, both state government veterans, said the financial picture was worse than in 2001 and 2002 when then-Gov. Bill Graves had to cut budgets and push through a tax increase.

“It’s going to be really, really, really challenging,” said Goossen, who also served as Graves’ budget director.

Conroy said the main culprit is that the worsening national economy will drag down income taxes. Revenue receipts are expected to remain flat from the current fiscal year to the next, he said.

Earlier in the day, Sebelius said Kansas is faring better than many areas of the country because farm commodity prices are up, oil and gas revenue is flowing and the airplane manufacturing industry remains strong.

But, she said, losses in the stock market and falling consumer confidence soon will affect the state.

“As the national economy worsens, the Kansas economy will follow,” she said.

In June, Sebelius asked state agencies to cut spending by 2 percent for the current fiscal year and 5 percent for the next fiscal year. “Agencies are already on notice that we don’t have any new money to spend,” she said

But Goossen said more than that will have to be cut in the near-term to meet the revised revenue estimate.