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Posted on Sun, Apr. 26, 2009

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Nothing off-limits in Kansas budget process

BY JEANNINE KORANDA

Eagle Topeka bureau

TOPEKA - Facing shrinking revenue, lawmakers will consider options previously seen as last resorts as they return for a third round of budget cuts Wednesday.

Deeper cuts to public schools, less money for local government, delays in business tax decreases and unpaid days off for state workers are all part of the discussion. Lawmakers continue to shy away from talk of general tax increases.

"The easy cuts have been made, the medium cuts have been made and now we are getting to the real meat of the budget and trying to balance it," said Sen. Jean Schodorf, R-Wichita, who serves on the Senate Ways and Means Committee.

Legislators cut about $300 million from the 2009 budget and $500 million from the $13 billion 2010 budget during the regular session. But state revenues continue to fall short of projections, prompting economists to forecast a $328 million deficit by July 2011.

"The picture got a lot darker than any of us imagined it ever would," said Rep. Jason Watkins, R-Wichita, vice-chair of the House Appropriations Committee. "The reason we are now looking at some things we didn't previously is because we have to."

Last week, Senate and House budgeting committees met to bang out initial budget proposals. Both will change before passage, but the measures give a preview of what to expect.

Education

Both the Senate and House proposals include deeper cuts in funding to public schools, which sustained a cut of less than 1 percent in the original 2010 budget.

The House is looking at a 3.3 percent cut. Base aid per pupil would drop about $117, to $4,250. The Senate committee suggested a 2.5 percent cut. Base aid per pupil would drop about $70 per pupil, to $4,297.

Both chambers recommended cutting what the state pays into school districts' capital outlay funds, for an additional $25.6 million decrease.

About 50 percent of the state's money goes to public schools, Watkins said. Education has been relatively untouched, compared with departments such as agriculture and natural resources, which saw their funds slashed 27 percent in the last round, he added.

But school districts say that even the earlier cut of less than 1 percent has prompted them to look at shortening the school year, eliminating teaching positions and cutting programs.

The Wichita school district faces a cut of $4.8 million in base aid under the Senate proposal and $8.7 million under the House proposal, said interim Superintendent Martin Libhart.

The cut in capital outlay aid would equal $4.5 million for the district.

A cut in base aid might mean curtailing big-ticket items like all-day kindergarten, Libhart said, though he noted the district has not proposed that.

The district also could have a harder time adding teachers to fill new classrooms as it builds new schools with bond issue money, he said.

"We're more concerned about keeping the positions we currently have," he said.

Business taxes

Lawmakers have discussed suspending the phase-out of the business franchise tax, the corporate income tax and the estate tax.

That move could net the state about $20 million, but it isn't popular in the business community.

"We understand that we're in a recession and that money is tight, but it would be a huge mistake for legislators to try to bridge the state's budget gap by forcing small family businesses to keep paying these onerous taxes," said Dan Murray, state director for the National Federation of Independent Business.

Another proposal would decouple the state's depreciation bonus. The federal government has accelerated depreciation to encourage businesses to buy equipment. The state currently uses the federal depreciation formula for state taxes.

By not going to an accelerated depreciation schedule, the state could save about $40 million.

Lawmakers are also considering using money accrued by various regulatory boards, such as the state Board of Healing Arts, Board of Pharmacy and Board of Cosmetology. Gov. Kathleen Sebelius, a Democrat, previously suggested tapping into the money but Republicans held back, contending that would be an additional tax on regulated professionals.

Sweeping up those fees could raise about $35 million.

Senate Minority Leader Anthony Hensley, D-Topeka, noted that between 1995 and 2005, the state approved $6.7 billion in various business tax cuts and reduced unemployment taxes by $6.1 billion.

"I believe the Legislature's record on tax cuts is pretty clear," he said. "We have cut a lot of taxes over the years, and I think right now we need to ask the business community to help be part of the budget solution by delaying the taxes plus the decoupling."

State worker furloughs

When the House budget committee returns on Wednesday, it plans to discuss a bill that would have state employees take one unpaid day off a month for a year, Watkins said.

The move could save the state $70 million, he said.

The Senate does not have a similar proposal, but Schodorf said state employees she has talked to have said they would prefer unpaid time off over eliminating jobs.

Hensley called the suggestion a "terrible idea" and said it should be an option of last resort.

Local government

County and city governments are unlikely to see a second $25 million payment from the state. The money is intended to offset local funds lost when the lawmakers eliminated the business and machinery tax a few years ago.

Not included in cuts so far is the $27 million local governments receive from the state in liquor tax money. It mainly pays for parks and recreation programs and drug and alcohol prevention programs.

Reach Jeannine Koranda at 785-296-3006 or jkoranda@wichitaeagle.com.