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Matt Grange, Treasurer
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LEGISLATIVE UPDATE #47 -- November 20, 2008
Sometime around 55 BC Cicero said, “The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance.”

A constitutent sent the above to me and it has a rather familiar ring to it, wouldn’t you say? Boy, does it look like our economy is in a mess and even though we find ourselves in a hole we keep digging?

I wanted to share with you the latest information and the beginning of efforts to address the unprecedented budget difficulties facing our state. The most recent budget projections now place the shortfall or deficit in the current fiscal year (FY 2009) at a negative $141.2 million and for the budget year (FY 2010) the shortfall is now over $1.0 billion. These extraordinary shortfalls will challenge each and every legislator to make very difficult budget decisions during the 2009 legislature.

It appears the Governor is not going to use her statutory authority to reduce the current year budget to get the State General Fund (SGF) ending balance to zero. She has already suggested that certain agencies (excluding, K-12 Education and Human Services entitlement programs) reduce their budgets by 3.0 percent or approximately $64 million. The Regents share of this reduction will be approximately $24 million.

As we look at possible options to deal with the budget shortfall, several are under consideration:

  • Across-the-Board-Reductions- To give you a sense of the magnitude of the shortfalls in the current year and the budget year, across-the-board budget cuts from all agencies (including K-12 and the Human Services caseloads) would require a 2.2 percent reduction in the current year and over a 11 percent reduction in the upcoming budget year. This approach would treat all programs equally. Remember K-12 expenditures account for over 50 percent of the SGF expenditures. In fact 85 percent of the total SGF budget can be accounted for in three areas: K-12 education; Regents; and social service programs (SRS, Aging and Health Policy Authority). If these large areas of the budget were “protected” against the reduction, then the balance of state government would need substantial budget reductions in the current year.
  • Suspend Transfers - Currently there are a number of transfers out of the SGF to various other programs. $60 million to the Biosciences Authority, $30.9 million to KDOT to repay a prior loan to SGF, $45.3 million for property tax reimbursement to local taxing subdivisions, and $10.1 million to the Special County and City Highway Fund.
  • Delay Tax Reductions- There are currently several tax reductions that could be delayed in their full implementation. For example, the estate tax is being phased out by the end of FY 2012. The corporate franchise tax is also being phased out. These all could be placed on hold for a year or two to help address the budgetary shortfall.
  • Government Restructuring and Efficiencies- Legislative Post Audit conducts audits of all agencies and there could be some efficiency identified by combining some agencies, such as the financial and agricultural related agencies, and by determining if state universities can provide post0secondary education in a more efficient manner.

    Chairperson Schwartz has called a meeting of the House Appropriation Committee for Dec 1st to hear preliminary plans that major state agencies are taking to reduce their current budget and explain their preliminary plans to reduce their FY 2010 by 5 percent.

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