In the face of dropping tax revenues, Gov. Kathleen Sebelius on Wednesday directed state agencies to cut $60 million and warned that deeper reductions could be on the way.

“Agencies have already begun hiring freezes, they’ve stopped capital purchases, they’ve been making other changes, but those efforts need to be increased and extended,” Sebelius said.

She said the 3-percent cut, which would include higher education, represented a first step and that bigger cuts “are almost certain to be necessary” in the next fiscal year.

Sebelius said she wanted to hold harmless public school finance, social services and debt service. She also said a tax increase to help bridge the budget gap was probably out of the question because it would fall hard on Kansas families.

“I don’t think tax increases at this time and this juncture either would be politically viable or have a positive impact on our overall situation with folks struggling to make ends meet,” she said.

The action comes a day after state budget experts said that when lawmakers start the 2009 legislative session in January, there will be a $137 million shortfall. If nothing is done, that could balloon to nearly $1 billion for the fiscal year that starts July 1, 2009.

The state budget is suffering from downward projections in income taxes caused by the national economic downturn.

Sebelius had earlier requested a 1 percent to 2 percent budget cut, but said more cuts are necessary because of the new revenue estimates.

Reginald Robinson, president and chief executive officer of the Kansas Board of Regents, said the regents will probably ask the higher education institutions to follow Sebelius’ lead.

Robinson said higher education officials aren’t happy about proposing budget cuts, but added there wasn’t much of an option.

“Revenues are tight. You can’t plan to spend money that may not materialize,” Robinson said.