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TOPEKA — Most legislators agree that to balance the budget, they’ll have to come up with about $450 million, either in spending cuts, new revenues or a combination of the two.

It won’t be easy. But it could be a cakewalk compared to putting together the budget for the following fiscal year – the one that starts July 1, 2011,

“That’s when the (federal) stimulus money – the money that’s been helping us out in fiscal years 2010 and 2011 – goes away,” said State Budget Director Duane Goossen.

It’s likely, Goossen said, that the state will have to come up with at least another $450 million to offset the loss in American Recovery and Reinvestment Act funding.

"Backfill the hole"

“That’s money that’s part of the base,” he said, “which means that when it’s gone, you have to either backfill the hole with State General Fund dollars or you cut programs.”

More than half of the $450 million in federal aid is shoring up the state’s Medicaid budget. And most of the remainder is supporting for K-12 and higher education programs.

Education and Medicaid together account for the lion’s share of state spending.

“Right now, the federal government pays about 70 percent of our Medicaid bill. We pay about 30 percent,” Goossen said. “At some point - whether it’s on Jan. 1 (2011) or on June 30 (2011) – we revert back to the federal government paying 60 percent and the state paying 40 percent.

“The difference between the state having to pay 30 percent and having to pay 40 percent is $250 million, roughly,” he said.

Congress has yet to decide whether to stop paying the higher Medicaid match rate on Jan. 1, as initially planned, or on June 30, as many states have proposed.

Goossen said his projection of the additional $450 million the state might need for fiscal 2012 only includes replacing stimulus funding. It doesn’t count things such as potential increases in social services caseloads or increased contributions to the state employees’ retirement fund.

“It’s safe to assume the final figure will be for more than $450 million,” he said.

If Goossen’s calculations are correct that means legislators a year from now -despite whatever spending cuts or tax increases come this year – will be faced with yet another $450 million-plus deficit.

Slow bounce back

Historically, governors and legislators have depended on growth in the state economy to fend off tax increases or cuts in services. But few state officials are predicting much growth in the coming year.

“I don’t know that we can expect to see any dramatic growth in time for the 2012 budget,” said Revenue Secretary Joan Wagnon. “This (recession) isn’t something we’re just going to bounce back from.”

Wagnon and Goossen each said they’re waiting on the April 16 consensus revenue estimate, which will define how much the state has to spend in fiscal 2011.

“Everything is going to depend on that,” Wagnon said.

“I’ve been telling my social service friends, ‘Don’t be putting on your rose-colored glasses,’” she said, “because when you look at all the stimulus money that’s in the budget and how we’re still dealing with a sluggish economy – that does not make for smooth sailing once we get past 2011.”

So far, most of this year’s legislative debate has focused on balancing the budget for fiscal 2011, which begins July 1. There’s been little talk of the looming fiscal 2012 deficit.

A replacement puzzle

“I don’t know how we’re going to replace all this (stimulus) money. I really don’t,” said Sen. Jay Emler, R-Lindsborg, chairman of the Senate Ways and Means Committee.

“The issue is we used the stimulus money to cover operating expenses …,” Emler said. “The reason it went for operations was because some people were hoping beyond hope that the economy would turn around and the replacement money, through growth, would be sort of neutrally generated. Unfortunately, that’s not been the case.”

Emler said he’s mentioned the potential problems for fiscal 2012 on several occasions, “but most (legislators) are just trying to get through 2010 so they can go home and get started on their campaigns.”

All 125 seats in the Kansas House are up for re-election this fall and a number of senators and state representatives are seeking election to Congress or statewide office.