Senate budget negotiators Jim Denning, R-Overland Park, Ty Masterson, R-Andover, and Laura Kelly, D-Topeka, agreed with their House counterparts Monday to drop language from a budget bill that would have shut down KU's Central District development project.

Topeka ? House and Senate negotiators struck a deal Monday on a budget bill for next year that does not include language that would have effectively shut down Kansas University’s Central District development project.

Instead, they agreed to language originally proposed by the House that would restrict how much money KU can spend next year from “special revenue” funds such as tuition, campus fees, student housing and parking fees.

Both provisions were inserted into the respective bills to reflect lawmakers’ anger at KU for forming a separate nonprofit corporation that issued $327 million in bonds for the project before the full Legislature was able to review and approve the project.

Lawmakers have been critical of the bond issue, arguing that if the project defaults, the state of Kansas will be asked to bail it out.

But Senate budget committee chairman Ty Masterson, R-Andover, said the Senate’s language, which was added onto the bill by Sen. Tom Arpke, R-Salina, almost certainly would have forced a default on those bonds, because it would have prohibited KU from using state funds or special revenue funds to make any payments toward the project for the next two years.

The House’s language, while still punitive toward KU, would only cap how much KU can spend out of special revenue funds at the amount the university originally estimated when it submitted its budget proposal last fall.

The budget conference committee began meeting Monday afternoon and reached agreement on a final package after only four meetings.

The bill incudes adjustments to both the current and next fiscal year budgets. It will now be sent to the full House, which will vote on the plan first, probably later this week.

One issue the bill does not address is increased funding for public schools. The Kansas Supreme Court last week struck down the new block grant funding system that lawmakers enacted last year, saying it does not treat districts equitably.

But House budget chairman Ron Ryckman Jr., R-Olathe, said lawmakers will revisit that issue later in the session.

“There’s no reason to hold the rest of the state budgets hostage on one issue,” he said.

Deputy Education Commissioner Dale Dennis estimated it would cost the state about $70 million in the current fiscal year, and about $39 million in the fiscal year that begins July 1, to comply with the court’s ruling.

The two chambers also agreed to temporarily pause any attempt to establish a new Sales Tax Revenue, or STAR bond district in Wyandotte County, which the American Royal horse and livestock show is said to eyeing as a possible new location to replace its current site in the West Bottoms area of Kansas City, Mo.

Those districts allow the new sales taxes generated in the district to be used to pay for the cost of infrastructure in the district.

Sen. Jim Denning, R-Overland Park, originally proposed halting any new STAR bond districts from forming through the end of the next fiscal year. He argued that the program has grown too large and is now being abused by retail developers.

But in the conference committee, he offered a compromise to only stall the one in Wyandotte County while allowing another proposed district in Salina to proceed.

Meanwhile, he said, the House is working on a bill to reform the state’s STAR bond program, and Denning said if that bill is passed, the stay on the Wyandotte County project would be lifted.

The two chambers also agreed on language that would allow Gov. Sam Brownback to delay an estimated $100 million payment into the Kansas Public Employees Retirement System fund at the end of this fiscal year, if doing so is necessary to prevent the state from ending the year with a negative balance. But that payment would have to be repaid in full by Sept. 30, plus 8 percent annual interest, and the KPERS fund would be off limits for any more delayed payments for the next year.

If payments into the fund are delayed, KPERS officials insist it would have no impact on benefits being paid out of the fund to retired KPERS members.

Other provisions of the bill include:

• $2.4 million to provide a 2.5 percent pay raise to all adult and juvenile corrections officers next year.

• $2 million to the budget of Osawatomie State Hospital next year to address staffing and recertification with the Centers for Medicare and Medicaid Services to help it requalify for Medicare reimbursements.

• $50,000 to hire an outside lawyer to advise the Legislature during the school finance litigation.

• $100,000 for the Kansas Geological Survey to continue monitoring seismic activity in south-central Kansas for the next year.

• Language preventing the administration from privatizing or outsourcing the functions of the Osawatomie and Larned state psychiatric hospitals without legislative approval.