Kansas House of Representatives - District 28

Governors Budget

Dear Constituent:

With the elections behind us, we got back to work on January 13, 2003. The first order of business was to begin the budget preparation process.

We waited for the Governor to announce her proposed budget. Some felt that her budget would contain tax increases and other items to use against her in the future. Most of us knew she had good advise on the fiscal condition of the State, and that she would be hard pressed to raise taxes, but how would she balance a budget, hold education harmless and not raise taxes in these tough times?

I was please to hear her announce that she proposed no tax increase. She does this primarily by providing no ending balance, ie. The "rainy day " fund (a reducation in the budget of approximately $300,000,000.00) and by deferring the transportation capital budget. She cuts revenues to cities and counties thereby requiring them to either raise taxes at the local level or cut services. The Governor's budget did, however, keep the BSAPP at the post-allotment level of $3,863 (we provided for $3890 last year but Governor Graves cut that by $17.00).

For your review, find below a summary of the Governors Budget:

Over the last year, Kansas, like many other states, experienced a dramatic loss of revenue. In FY 2002, State General Fund collections were 6.9 percent below the previous fiscal year. At the same time, State General Fund costs for Medicaid programs rose rapidly. The combination of dramatic revenue drops and rapidly rising entitlement expenditures quickly depleted the reserves in the State General Fund and now leads to a very difficult budget situation for FY 2003 and FY 2004.

Key Components of the Budget
No Tax Increases. The funding for this budget is based on the Consensus Revenue Estimate of November 5, 2002. No additional tax sources have been incorporated.

State General Fund Balance at Zero Percent. The budget recommendations leave a balance at the end of FY 2004 of zero percent. Under the current extraordinary circumstances, building a realistic budget that contains a 7.5 percent ending balance but a no tax increases proposal is impossible.

Education Protected. Funding is added in FY 2003 and FY 2004 to cover local option budgets and base aid requirements. In FY 2004, the base budget per pupil remains at $3,863, adequate funding is provided to cover the local option budget formula fully, and special education receives the same State General Fund support. Higher education funding for university operating grants, community college aid, Washburn aid, and technical college funding support remainsconstant between the two fiscal years.

SRS/Aging Caseloads Fully Funded. In FY 2003, supplemental funding is added to address increased caseload costs in these two agencies. FY 2004 costs are fully funded using November consensus caseload projections.

FY 2003 One-time Funding Replaced. The legislatively approved FY 2003 budget funded $93.5 million of entitlement expenditures with money from the Intergovernmental Transfer. The transfer money is not available in FY 2004, requiring those same entitlement costs to be funded from the State General Fund.

State Employee Salary Increase. The Governor recommended a 1.5 percent salary increase for state employees at the beginning of FY 2004 at a cost of $26.9 million from all funding sources, of which $13.5 million is from the State General Fund.

Prisons Kept Open. To meet the current year allotment reductions fully, the Department of Corrections would have had to close prisons. However, enough money is added in FY 2003 and in FY 2004 to avoid closure of the following facilities:
Stockton Unit
Osawatomie Unit
Toronto Unit
El Dorado North
Labette Conservation Camps
Adult Residential Centers in Johnson and
Sedgwick Counties

Human Service Restorations. The FY 2004 budget adds funding to restore a portion of the cuts required by the current year allotment reductions. Some of
these services are:
Senior Care Act
HCBS Waiting Lists
HealthWave
Delaying the Start Date for GA/MediKan Time
Limit
Emergency Shelter Case Management
Child Care Eligibility at 185% FPL
CMHC Aid
CDDO Aid

Shifts to Fees. Where possible, current State General Fund costs are shifted to fee-based funding. This occurs most significantly in the Department of Revenue, State Treasurer, Secretary of State, Health and Environment, the Board of Tax Appeals, and the Judicial Council.

Biennial & Fee Agency Budgets Reduced 5.9 Percent. Budgets for fee-based agencies that were not subject to the current year allotment reductions are lowered by 5.9 percent in FY 2004. The money saved from these reductions is transferred to the State General Fund. This treats these state agencies like other state agencies in regard to budget reductions.

70 New Troopers. The budget restores enough money to the Highway Patrol to hire 70 troopers in positions that are now being held vacant or that are subject to FY 2003 allotment reductions. For half of FY 2003 and all of FY 2004, the Highway Patrol's State General Fund financing is removed and substituted with State Highway Fund dollars.

SGF Transfers Eliminated. For FY 2004, there are no State General Fund revenue transfers to the Highway Fund, the Local Ad Valorem Tax Reduction Fund, the County and City Revenue Sharing Fund, and the Special City and County Highway Fund. However, full payment to cities and counties from the Special City and County Highway Fund will still occur.

Continued Death & Disability Moratorium. The approved FY 2003 budget contains a two-quarter moratorium on payments into the fund. The Governor's recommendations add the last quarter of FY 2003 to the moratorium and all four quarters of FY 2004. The savings from this moratorium provide the 1.5 percent salary increase for state employees.

Judiciary/Legislature. Beginning in FY 2004, the Executive Branch will not presume to review or adjust the budgets of the Judiciary and Legislature, but will simply include as a "placeholder" the exact budget passed by the Legislature in the previous year.

State General Fund

FY 2003. At the beginning of FY 2003, State General Fund balances totaled $12.1 million. The 2002 Legislature passed a budget based on $4,515.5 million of revenue and $4,444.5 million of expenditures. Revenue collections were less than projected and, in August 2002, Governor Graves ordered $39.9 million of allotment reductions. In November 2002, the Consensus Revenue Estimate lowered FY 2003 revenue projections to $4,152.0 million. Governor
Graves then ordered a second round of allotment reductions, cutting $78.1 million from agency budgets, stopping $48.0 million in revenue transfers, recommending transfer of $35.1 million of the balances of several agency funds, and recommending that a $94.6 million loan from KDOT not be repaid. More "balance" transfers and a tax amnesty program are recommended to improve
current year revenues further. Supplemental funding is added for School Finance and SRS/Aging caseloads, although some SRS claims will be pended until FY 2004. The revised budget totals $4,358.3 million and is 2.4 percent less than actual expenditures in FY 2002. The recommended budget leaves a FY 2003 ending balance of $0.4 million, which then forms the beginning point for FY 2004.

FY 2004. The Consensus Revenue Estimate for FY 2004 totals $4,525.7 million. Total available revenue is enhanced by eliminating all revenue transfers except the School Capital Improvements Transfer, a partial transfer for the Water Plan Fund, and the Regents Faculty of Distinction Program. Operating reductions are recommended for fee agencies and KDOT and the savings transferred to the State General Fund. Budgeted revenue totals $4,493.9 million.

I hope the above is informative. For a complete copy of the Governor's budget, seek http://da.state.ks.us/budget/gbr.htm.

As I have done in the past, I hope to get you a report weekly. Please e-mail me or call if you have questions.

ALSO, if you have others who you believe would find these legislative reports of use, Please e-mail me their e-mail addresses and I will add them to my address book.

Respectfully,

Rep, Doug Patterson

Paid for by the Committee to Elect Doug Patterson, Dave Imhoff, Treasurer