Posted on Sat, Apr. 18, 2009

Flagging tax receipts will punch a $328 million deficit in next year's state budget, Kansas economic experts predicted Friday.

"The overall economic outlook clearly reflects, unfortunately, that perfect storm of almost every economic indicator going the wrong way," said Alan Conroy, director of Kansas Legislative Research. He said Friday's projections show the biggest drop since the state began forecasting revenue in 1975.

He also noted that the forecasters expect Kansas to see a decline in gross state product and personal income for the first time since World War II ended.

The state will take in $401 million less than expected in the next fiscal year, which starts July 1, according to estimates by the panel of state budget experts and university economists. Once existing budget changes and reserves are taken into account, Kansas will be left $328 million in the red.

"We are probably going to have to make wholesale reductions to every part of the state budget," said House Appropriations Committee Chairman Kevin Yoder, R-Overland Park.

Earlier this week, Gov. Kathleen Sebelius signed into law the Legislature's $13 billion budget proposal, which spends $500 million less than this year's budget. Lawmakers already have reduced spending on public education and universities, prisons and other agencies and programs that relies on state money.

Now, lawmakers must cut more -- or find new revenue by raising taxes or delaying the phase-out of business taxes scheduled for elimination. This time there's no more federal stimulus money to help.

Already the political lines are drawn. Democrats largely oppose additional cuts to education; many Republicans argue they must be considered to avoid devastating cuts to other programs.

"I don't see how we can make ends meet without including education," said Senate Ways and Means Committee Chairman Jay Emler, R-Lindsborg.

The money will have to come from somewhere. State employee furloughs are an option. So are new parole policies that could let low-level offenders out of prison early.

The debate starts April 29, when lawmakers return for what's usually a brief ending to their annual session.

One thing Yoder isn't considering? Tax increases.

"Not in this economy," he said.

Sebelius and other leading Democrats favor delaying the phase-out of certain business taxes and keeping local governments' shares of a state liquor tax. All told, Sebelius' proposals could generate $180 million.

She and House Minority Leader Paul Davis, D-Lawrence, said Friday that additional cuts to K-12 schools or social programs should be a last resort.

"It is time for everyone to share in the sacrifice brought on by this financial crisis, not just our most vulnerable citizens," Davis said.

Also at stake is in-state tuition at state universities and colleges. The Board of Regents has vowed to freeze in-state tuition next year -- but only if the Legislature avoids additional cuts to higher education. Lawmakers trimmed $34 million from public higher education earlier in the session.

Like their counterparts at other state organizations, the Regents acknowledged a frustration with the waiting game.

"Everything's in flux," said Regents Chairwoman Donna Shank. "Nothing will be settled until the Legislature finishes its work."

To reach David Klepper, call 785-354-1388.

Contributing: Associated Press