Politics & Government

Feb. revenue shortfall is $71 million

TOPEKA — Kansas Gov. Mark Parkinson backed away Friday from his opposition to additional cuts in the state's current budget after a report showed tax collections this month were $71 million short of expectations.

Parkinson said he will outline a plan next week to address the revenue shortfall. He described further spending cuts as "a last option" but said they must be considered.

The Democratic governor had said previously that he opposed further cuts because he believed they would cripple public schools, social services and other government programs. He proposed raising sales and tobacco taxes to forestall future reductions.

"The situation that we face right now, I think you have to look at all possible options," he said. "It would be disingenuous to say that this number wasn't disappointing and doesn't cause us to re-evaluate the budget situation in its entirety."

His comments came only hours after House Speaker Mike O'Neal, R-Hutchinson, called for additional cuts to keep the current budget balanced.

Other legislative leaders weren't ready to join O'Neal in pushing for new spending cuts. They said they need to know how much of the shortfall is tied to the state's soft economy and how much to Kansas paying income tax refunds earlier than expected.

Friday's report complicated an already difficult debate over the budget and tax policy. It came hours after House members gave first-round approval to a bill aimed at creating jobs by expanding a business tax break.

Parkinson and the Republican-controlled Legislature must keep the current budget in balance and eliminate a budget shortfall for fiscal 2011, which begins July 1. The 2011 gap is projected at $416 million, but that figure will rise next week after legislative researchers consider Friday's report.

"This obviously is a game-changer," O'Neal said. "These numbers are grim enough that we will have to make adjustments."

The state expected to collect $266 million in taxes in February and took in $195 million, 27 percent less than expected.

It was the third consecutive month collections fell short of expectations. The gap for the 2010 fiscal year through February is now $105 million, with total tax collections of $3.1 billion falling 3.3 percent short of expectations.

Officials said Kansans appear to be filing for income tax refunds more quickly this year than last. That could mean fewer refunds than expected in March and April — causing a rebound in tax collections.

Senate President Steve Morris, R-Hugoton, rejected the call for new budget cuts.

"We don't know what the March numbers are," he said. "We don't know what the April numbers will tell us."

The state had five rounds of cuts and other adjustments last year to keep the 2010 budget balanced. If revenue meets expectations for the entire fiscal year, the state would break even.

After the February figures were released, Parkinson issued a statement saying the state will overcome its financial problems by "not panicking." He told AP that the news is "very bad."

"One of the mistakes that people can make when facing a difficult budget situation is to act too quickly and not thoroughly examine all their options," he said.

Raising taxes has proven unpopular so far, and many Republican legislators haven't given up on using tax breaks or incentives to stimulate the economy.

On Friday, the House voted 84-27 to give first-round approval to a bill expanding a tax break for businesses that move workers to Kansas from other states. Members plan to vote again Monday to determine whether the measure goes to the Senate.

Under the bill, more companies would be eligible, as would nonprofit groups and even some federal government agencies. Also, the wages they'd have to pay would be lower than they have to pay now to qualify.