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Kansas 2014 budget in flux until tax plan settled

John Milburn, Associated Press

TOPEKA, Kan. (AP) -- Kansas legislators left for their monthlong break without finalizing the state's $14 billion budget, with many spending cuts favored by Republicans still pending and more possible changes to the tax code.

Lawmakers spent more than a week negotiating the budget before adjourning late Friday. Although they settled several issues, including changes in abortion and gun regulations, disputes over higher education and income taxes remain unresolved.

The Kansas Senate is recommending a 4 percent cut in funding for the state's public universities and community colleges. The House favors a 2 percent cut while capping salaries at state agencies to generate about $36 million to make up the difference.

On Monday, House Appropriations Committee Chairman Marc Rhoades said state agencies have been spending less than what they were authorized on salaries in recent years, choosing to use the savings for other operations and projects. He acknowledged that would amount to a cut to state agencies, which the Senate has been hesitant to embrace, but he said he was hopeful for a compromise.

"I think we're really close on that," the Newton Republican said. "Once you take care of those pieces, we have about 98 percent of (the budget) done."

Lawmakers also are fighting over how to further cut Kansas income taxes, though a revenue report due out before they return to work on May 8 is expected to help settle the debate. The report, compiled by nonpartisan researchers and economists, will look at current economic conditions and calculate how much Kansas can anticipate collecting in taxes through June 30, 2014.

Republican Gov. Sam Brownback wants to keep the state's 6.3 percent sales tax, which was approved as a temporary hike in 2010 to help stabilize the budget, while tweaking other income tax provisions.

Brownback said Monday that he was working with legislators to reach a compromise on taxes, adding that it was important to settle the issue before finishing the budget. He said he wanted a package that would maintain core government spending and has healthy reserves but moves toward eliminating income taxes.

The Senate plan largely mirrors the governor's proposal, but the House has voted to let the sales tax increase expire, allowing it to fall to 5.7 percent on July 1. The House plan also would make other tax adjustments with an eye toward future cuts in income tax rates if overall tax collections grow.

But both chambers, controlled by Republicans, want to eventually eliminate income taxes in Kansas.

However, Democrats said Monday that Republicans are making tax and spending decisions based on the drop in revenue caused by the large income tax cuts that were made last year.

"Every time they are looking under a rock for dollars, it's all about paying for the tax cuts," said House Minority Leader Paul Davis, a Lawrence Democrat.

Rhoades said the proposed cuts to the next budget are a combination of trying to keep government spending in check and to pay for the tax cuts.

"It's both, but it's because we got a tax plan in 2012 that the House didn't want," Rhoades said, referring to the aggressive tax-cutting plan approved last year.

The Senate approved the plan assuming it would be amended in the House, but the House approved it after the Senate refused to accept any House changes. Brownback signed it knowing it could complicate future budgets without tweaking the law in the future.

"Regardless of what the tax plan was last year, my intention is to look for ways to make government trimmer, more efficient and smaller. That desire won't change," he said.

Senate Minority Leader Anthony Hensley, a Topeka Democrat, added that the budget problems were "self-inflicted" by the tax cuts. Hensley said he and Davis were focused on educating the public about the impact of the cuts and what they will mean in the coming years.

Some estimates, he said, project that the state could be as much as $1 billion short of revenue absent additional revenue sources or spending cuts by fiscal year 2018.