FHSU Budget Bulletin

Aug. 26, 2009

We start the 2009-2010 academic year in a spirit of optimism, but that optimism must be tempered by the realization that our budget remains fragile at best. This latest Budget Bulletin continues our commitment to keep everyone informed about the financial situation.
Over the summer Gov. Mark Parkinson enacted an additional 2-percent cut in funding in response to yet another projection of declining revenues. That cut reduced the state's financial support of universities in the Kansas Board of Regents system to about $753 million, which was a step back to the 2006 funding level.

This pattern of declining revenues began last fall. FHSU and the other state universities first had to reduce their budgets during the 2009 fiscal year, which ended on June 30, and then had to make further cuts in base budgets for the new fiscal year that began July 1. A cut of 10 percent and another 2 percent in unfunded mandates (university expenditures required but not funded by the state) originally caused a 12-percent reduction in FHSU's FY2010 budget. The latest 2-percent cut brings the total impact to 14 percent.

The Kansas Legislative Research budget profile provides a preview of the coming year, including the 2010 legislative session that begins in January. That profile includes the measures -- shifting of funds, withholding of some appropriations and delays in payments -- that have been implemented by the state in response to the revenue shortfall, but it does not include $70 million in revenue generation initiatives that require legislative approval.

The profile addresses possible items that may impact the state's Fiscal Year 2011 budget, which begins next July. It assumes a 1-percent increase in revenues during the next fiscal year, based on the assumption that Kansas will begin to emerge from the recession. While a reversal from declining revenue to increasing revenue would be positive, the 1 percent falls far short of the 4-percent increase that has traditionally been expected annually.

Of course, while we remain hopeful, there is no certainty of even the 1-percent increase. Kansas has a history of being slow to enter a recession and then being slow to come out of that recession.

With unemployment benefits about to expire for thousands of Kansans, social service agencies are anticipating the need for additional state funding. As individuals move off the unemployment rolls, they will qualify for entitlements from the Department of Social and Rehabilitation Services, which means the state has no choice but to provide the funding. The unemployment situation may actually benefit FHSU because of our new Stressed Kansans Scholarship Program, in which we will pay full tuition and fees for six credit hours in on-campus courses for workers who have lost their jobs and want to return to school.

According to Hawver's Capital Report, analysts have plugged in about $60 million for the new social services demands in FY2011, but reliable estimates will not be available until the consensus revenue estimate is released in November. The state also faces a need for an additional $42 million in FY2011 for increased KPERS payments to move the pension system back toward being balanced. Hawver also notes that the governor has said he wants another $8 million for judicial salaries to avoid staff layoffs in the Judicial Department.

Tax increases may also be in the picture. An increase of 1 cent in the state sales tax, for example, would raise an additional $300 million.
Legislators will be facing tough decisions for FY2011, and as we've seen recently, even the current fiscal year budget could be affected if revenues continue to fall.