By Jim O’Malley

KPA Legislative News Service

TOPEKA - Legislators are considering several ways to close the $426 million budget shortfall the state faces in 2002 and 2003.

The governor’s proposal -

Gov. Bill Graves presented his worst-case scenario budget two weeks ago. The governor’s annual budget recommendation was required by law to be based on existing sources of revenue without any new taxes. It would cut spending from the State General Fund by 5.1 percent in fiscal year 2003, which begins July 1. Elementary and secondary education would be cut by $82.6 million, a drop of 3.6 percent from fiscal year 2002.

To avoid some of these cuts, in last week’s State of the State address, the governor proposed increases in sales, cigarette and motor fuels taxes.

The Kerr-Morris proposal -

Senate President Dave Kerr, R-Hutchinson, and Sen. Steve Morris, R-Hugoton, have introduced a budget plan that would make smaller spending cuts beginning in the current fiscal year, which ends June 30.

Morris said the plan includes the following major points.

* Finding $104 million by amending the state’s spending lid law, which now requires a projected ending balance in the General Fund of at least 7.5 percent of expenditures. Their plan would reduce the balance to 5 percent.

* Rescission cuts in state agency budgets for the current fiscal year, which ends June 30. The plan calls for 2 percent cuts in everything but education and courts.

*Education, which accounts for about half of the state’s budget, would be cut less. General Fund aid to local school districts would be cut by $23.7 million, or 1.2 percent, which would come to $39 per pupil. Higher education would also be cut 1.2 percent, or $8.5 million.

* Delaying some highway and higher education spending for a year at a saving of $92 million.

Morris said lowering the ending balance was not imprudent, as the governor suggested in the State of the State message. The balance was intended as a cushion against hard times, he said.

Sen. Dwayne Umbarger, R-Thayer, agreed. "It’s a rainy day fund," he said. "And if it’s not a rainy day now, what is a rainy day?"

Kerr said the rescission proposal got a positive response in last week’s Republican caucus, but that he wouldn’t make any predictions. The rescission bill could be out of committee and on the Senate floor in two weeks.

Cigarette and alcohol tax increase -

Morris said some Republican legislators expressed concerns about the cuts in education and would consider some tax increases to avoid them. "My gut instinct is we’re going to have some combination of alcohol and tobacco tax increases, and most of the talk I hear is that those kinds of increases would be dedicated to education," he said.

Kerr said that the Legislature might be interested in some of the governor’s tax proposals, such as a cigarette tax increase, but not at the levels he asked. An alcohol tax hike was also a possibility. "I don’t think there is much interest in a general tax increase," Kerr said.

But Umbarger, said that in a poll of his constituents last year about 85 percent of those who responded said they preferred increasing the sales tax first, then taxes on cigarettes and liquor to address the state’s budget problems. So that will be his position.

Umbarger said the very real possibility of education cuts was behind this result. "I know my people in southeast Kansas are very supportive of their school systems," he said. "If we don’t address this budget shortfall, we’re facing some real belt-tightening that I don’t think people understand."

He said he generally supported the governor’s proposals, except for a fuel tax increase.

Democrats criticized the governor’s proposed tax increases for having a disproportionate impact on the poor. In his response to the State of the State message, Senate Minority Leader Anthony Hensley, D-Topeka, said, "By raising the most regressive of taxes, the governor increases the tax burden on those who can least afford it and who will suffer the most by the rescission — lower and middle income Kansans."

Some Republicans offer the same criticism of the governor’s proposed tax hikes. Conservative Sen. Tim Huelskamp, R-Fowler, called the cigarette tax very regressive.

Gambling -

Gambling is another alternative some legislators are considering.

Sen. Chris Steineger, D-Kansas City, supports slot machines at the state’s three pari-mutuel racetracks. He said he didn’t support a tax hike and didn’t think most legislators would, either. But he also didn’t support cuts in elementary and secondary education. As a result, he said, revenue alternatives like expanded gaming were needed.

He said Kansans were already gambling at the Indian casinos in Kansas and Oklahoma, and at the riverboat casinos in Missouri. They were spending millions there, but the state received no revenue from it. "Missouri and the Indians donét share any of the money," he said.

Kansans were already gambling, Steineger said, so the state already experienced all the negative effects of gambling, such as addiction, but without receiving any money.

He said close to a majority in both houses supported expanded gambling and that he expected a bill to be introduced by the end of the month.

Steineger estimated that slot machines would generate $50 million to $100 million a year in state revenue.

State budget director Duane Goossen said it was hard to estimate how much revenue slot machines at the race tracks would generate. His very rough estimate was $50 million to $70 million a year. "That alone will not solve our budget problems," he said. It would help but wouldn’t raise much revenue until the 2004 fiscal year.

In his State of the State message, the governor said he wouldn’t oppose a limited expansion of gambling.

Sen. John Vratil, R-Leawood, who supports the gambling proposal, said it had a better chance of passing this year than in previous years.

Morris, who has opposed expanded gambling, said he didn’t think there were enough votes to pass a gaming bill. "But if a few people changed their minds, it could happen," he said. "If it’s going to happen, this is the year it could happen."

SIDEBAR BOX

Why are budget cuts needed for 2003 when the state’s total budget is actually projected to grow by 2.2 percent?

The answer is that the State General Fund is projected to shrink, and that’s the part of the budget the Legislature can tinker with.

About half of the state’s revenues go to the General Fund. The rest, which include federal grants, state agency fees and lottery ticket sales, are earmarked for specific purposes and are treated separately in the budget.

Most of the discussion over budget cuts is about the General Fund, because it is the largest source of uncommitted money the Legislature may spend for any purpose.

Source: The Governor’s Budget Report for Fiscal Year 2003