State employees may not get paid this week after Republican legislative leaders blocked an inter-governmental loan on Monday, Gov. Kathleen Sebelius said.

“Through their refusal to act today, the Republican legislative leadership is jeopardizing our citizens’ pocketbooks for no other reason than to play political games — games in which the only ones set to lose are Kansas families, workers and schools,” Sebelius said.

Asked at a news conference if the state’s 42,000 state employees, including those at Kansas University, would be paid Friday, Sebelius’ budget director Duane Goossen said, “I don’t know.”

In addition to state employee paychecks, payments to schools, Medicaid and income tax refunds are also in question.

The state’s general fund had $10.4 million in it Monday morning, Goossen said. The state’s payroll is $24 million, and state officials start processing those checks Wednesday for payment Friday. Last Friday, the state stopped paying income tax refunds because of the lack of cash.

The fireworks erupted after Sebelius requested a $225 million certificate of indebtedness to handle payments during the current low cash-flow period. Certificates of indebtedness, which have become almost routine during the past 10 years, allow the state to move funds around for cash-flow purposes.

Issuing the certificates requires agreement from legislative leaders, and the state has already issued $550 million worth during the current fiscal year.

But this time, House Speaker Mike O’Neal, R-Hutchinson, and Senate President Steve Morris, R-Hugoton, refused.

They demanded that Sebelius, a Democrat, cut the budget first to close an increasing revenue gap.

And they said that under state law, the certificates can only be issued if it can be certified there will be enough funds at the end of the fiscal year to cover them. According to a memo from the Kansas Department of Legislative Research, it doesn’t appear that would be the case, the Republicans said.

“This is important work, and we do intend to comply with the law,” O’Neal said.

O’Neal and Morris said Sebelius could satisfy their concerns by signing the budget recission bill approved last week by the Legislature, making executive authority cuts or both. The budget recission bill was expected to reach the governor’s desk by late Tuesday.

But Sebelius’ budget director Goossen said the Republican leaders were wrong if they believe there is a legal impediment to approving the certificates. “That is simply not correct,” he said.

Under the law, the secretary of administration must certify that the state will take the actions necessary to cover the certificates. Goossen is also secretary of administration, and he said he will guarantee that the state will do what is necessary budgetarily to pay off the certificates.

Since the session started in January, Republicans have been at odds with Sebelius over how to bridge a $200 million shortfall in the current fiscal year that could grow to nearly $1 billion in the next fiscal year, which starts July 1.

But Goossen said the cash-flow problem is separate from the state’s budget problems. Prior to the tax filing deadline, the state is often short on cash and must issue certificates of indebtedness, he said. When tax payments start flowing in, the state’s cash-flow situation improves.

Democrats said the Republicans, who hold significant majorities in the Legislature, were trying to pressure Sebelius into making budget cuts she doesn’t want to make by threatening to shut down government.

“This is a helluva way to run a railroad,” Senate Democratic Leader Anthony Hensley of Topeka said. “It is blackmail at its worst, maybe coercion at its best,” he said.

House Democratic Leader Paul Davis of Lawrence said, “This is not a time for partisan politics. We’re talking about essential payments so that services provided by the state can continue.”

Lisa Ochs, president of the Kansas Organization of State Employees, criticized Republican legislative leaders, adding, “Paychecks shouldn’t be held hostage for political maneuvering.”

In response to Hensley’s charge of blackmail, Speaker O’Neal, said, “Nothing could be further from the truth.”

The dispute came right before a meeting of the State Finance Council, which is led by Sebelius and includes legislative leaders.

But before the meeting, O’Neal and Morris went to Sebelius’ office to tell her they would not agree to the certificates of indebtedness.

Asked how the governor reacted to their message, O’Neal said, “It was not very cordial.”