In the 2nd Congressional District O'Neal supports incumbent Congresswoman Lynn Jenkins. "She is challenged by State Sen. Dennis Pyle, who has strong conservative credentials, but this is not an open seat and Lynn has served the 2nd well and deserves to be re-elected", noted O'Neal.

 In the 3rd Congressional District O'Neal supports State Rep. Kevin Yoder. Yoder earned O'Neal's support early as Yoder was O'Neal's choice to Chair the powerful House Appropriations Committee. "Kevin has done an extraordinary job under very difficult fiscal circumstances, never caving in to the 'tax and spend' mentality that is pervasive with so many elected officials both here and in Washington. He sought solutions that provided for essential services without forcing an additional tax burden on struggling Kansans. He'll take the same solid intellect to Washington and help change the culture there," said O'Neal.

In the 4th Congressional District O'Neal supports Mike Pompeo to replace Cong. Todd Tiahrt, who is a candidate for U.S. Senate. "Todd Tiahrt has served the 4th District well and, in my opinion, Mike Pompeo is the best embodiment of Todd's principals and the principals held by a clear majority of 4th District constituents. I admire his service to his country, his business sense and commitment to limited government and sound fiscal policy," said O'Neal.

In the race for U.S. Senate between Cong. Jerry Moran and Cong. Todd Tiahrt, O'Neal is not making a formal endorsement. "This one is too tough. I admire both candidates. Both have done superb jobs for the 1st and 4th Districts respectively. Both bring substantial positives to the race and I truly wish they were not running against each other. I have admired Jerry's dedication to getting home and traveling his district listening to and serving his 1st District constituents. I have admired Todd's principled dedication to limited taxes and limited government. Whoever wins needs to embrace the strong positives of the other. I've been disappointed in the negative tone of the campaigns recently between these two House colleagues but understand that to some extent this is the nature of politics. Still, I encourage both to focus on and accentuate the positives in the closing days of the Primary campaign. Kansas will be well served by whoever wins this Primary," said O'Neal.

In the Secretary of State race, O'Neal favors the candidacy of Kris Kobach. "What gives Kris the edge here is his legal knowledge and advocacy for the integrity of elections and the election process. This is not simply a 'care-taker' position in state government, but one where vigilance is required both on the election side and business side", O'Neal observed.

In the race for Kansas Commissioner of Insurance, O'Neal supports incumbent Commissioner Sandy Praeger. "I have appreciated the way Sandy has run the Kansas Insurance Department. She has been open and accessible and the Department has been "user friendly" at a time when many other agencies have been decidedly unhelpful and unfriendly. She has assumed a leadership role at the national level on insurance matters and deserves to be re-elected," O'Neal stated.

In the Governor and Attorney General races, U.S. Sen. Sam Brownback and State Sen. Derek Schmidt each have Primary challengers who have filed but who are not expected to offer more than token opposition. "I whole-heartedly endorse both Sam Brownback for Governor and Derek Schmidt for Attorney General and am excited about the prospect of returning both offices to solid, effective Republican leadership," said O'Neal.

 "Kansans are fortunate indeed to have quality candidates like these for our statewide offices this election year," O'Neal observed.

Again, The News has referenced the taxpayer lawsuit I have filed against the State. Where the News errs is in the suggestion that I have some obligation to support all actions of state government. I do not. I do not represent the State of Kansas as a governmental entity. I represent the citizens of the State of Kansas and the 104^th District. I represent flesh and blood families, business owners and taxpayers. When state government oversteps its authority, I have a duty to speak out and take action. Here, the State has for two years in a row resorted to raiding money from taxpayer-funded trust funds to divert to others areas of spending, something I have challenged as unconstitutional. Both the Kansas Supreme Court and former Attorney General Stovall agree that such sweeps of funds violate taxpayer rights. It would be a violation of my oath to uphold the Kansas Constitution for me to defend the State's actions in taking these funds.

In each of the past two years, while having the honor of serving as Speaker of the House, I have been the subject of two groundless but highly publicized partisan attacks. That they were both found to be without merit hasn't stopped political opponents and the media from bringing them up at every opportunity. That this seems to come with the territory with public service is as disappointing as it is unbecoming. Nevertheless, my duty and responsibility remains with my constituents and colleagues who elected me. If the News measures leadership by whether a Speaker sides with a majority that wants to continue to tax and spend during a recession that has been brutal to Kansas families and businesses, then I must respectfully disagree. I subscribe to the principled leadership style of Ronald Reagan. There is no shame in fighting for what you believe is right for your state. There is no shame in being in the minority on measures that you believe in your heart are bad for Kansas families and businesses. What is popular is not always right and what is right is not always popular. I remain of the conviction that you can't spend your way out of a recession, nor tax your way out of one. The decision by the Governor and 2010 Legislature to increase government spending thanks to a nearly 19% increase in our regressive sales tax was, in my opinion, wrong and will harm our economic recovery and competiveness coming out of the recession.

In the same issue of the News where the "Teflon" editorial appeared was the story "Dow drops sharply amid bleak jobs report for May". The government reported that of the 431,000 jobs created last month, all but 20,000 were temporary government census workers. Here in Kansas we're projected to lose even more private sector jobs with the sales tax increase coming on line, but state government jobs will continue to grow. In August and November voters will have an opportunity to decide which direction they want their state and country to go and what leadership style they will embrace. I trust the voters."

"I respectfully disagree with Governor Parkinson's statements today blaming Kansas' business friendly tax policies for the state's deficit.  Kansas has a spending problem, not a revenue problem.  Contrary to the Governor's assertions, the state budget crisis is not the taxpayer's fault.  It is the government that cannot rein in its spending.  We should not punish Kansas families and businesses, whose hardships already far outweigh those of the government, by forcing them to contribute even more to fuel the state's addiction to spending.  This recession has made clear that states fare better and recover faster with a business friendly tax climate, while states with big government and high taxes struggle to keep pace and suffer for longer periods of time.  Kansas would have been hit much harder in this recession if it were not for its proactive policies that have fostered a productive private sector.

Before enacting massive tax increases that will damage our economy and put more working Kansans out of a job, state government should take a lesson from Kansas families and learn to live within its means.  Rather than pursuing the same old policy of taxes, taxes and more taxes as the solution to every problem,  the Governor and Senate leadership  should look for real solutions to our budget crisis by following the House Appropriations committee's lead in pursuing fundamental budgeting reforms and maximizing existing revenue sources.  And instead of pursuing tax increases that will only lead to higher unemployment and prolong the recession, I would urge the Governor and Senate Leadership to do the hard but necessary work of trimming the fat out of the state's budget.

With that said, House Leadership is committed to having a free and open debate on tax policy in Kansas, and House members that believe we should raise taxes on Kansas families will have a chance to express that desire on the record.  The debate on taxes is a crucial step in determining exactly where House members stand.  While I question the appetite of even members of the Governor's own party for a massive tax increase, the debate and vote will enable the House Appropriations committee to finish their work on a responsible budget."

Delivered 1/7/10

In a move intended to enhance the flow of traffic and reduce incidents of road rage, the legislature has enacted a law restricting the use of the left-most lane on multi-lane highways.   The new law, which took effect July 1, restricts drivers on multi-lane highways to use of the left-most lane only when overtaking or passing another vehicle or preparing to make a proper left turn.  The provisions do not apply to that portion of multi-lane highways or streets within city limits.  Law enforcement officials will issue warning citations during the first year the law is in effect, from July 1, 2010 until June 30, 2011.  Thereafter, violators will be charged a $60 fine.

Since the 2009 Regular session of the Kansas legislature adjourned April 3, we were handed more disappointing state economic news when the Consensus Revenue Estimating Group met April 17 to project revenues for the next year. Their verdict was the Kansas economy continues to suffer from the effects of the national recession and revenues will continue to fall off. The recession is expected to be "U-shaped" instead of "V-shaped", meaning that the low point of the recession will last longer than most recessions, given the national economic situation.

Accordingly, although we had passed a FY 2010 budget that balanced and provided ending balances of around $170M, at the time, the April 17 revenue report estimated that we would instead have a $328M deficit at the end of FY 2010 based on new revenue projections. As I'vereported before, Kansas is a cash-basis state and we must pass a balanced budget.

We reconvened in Topeka April 29 for the traditional wrap-up session and have been working to once again close the gap between expenditures and revenues. The House Appropriations Committee was successful in passing out a balanced budget last week, one that eliminated the deficit and provided $48M in ending balances. Unfortunately, our budget bill failed to advance to final action Friday night. The bill included $215 in true net reductions in state spending and utilized around $161M in revenue adjustments, including delays in transfers and across-the-board reductions in salaries and wages at every level of government, including elected officials, judges and agency heads. Agency cuts were another 5%, except for Education, which was cut only 3.75%. Public safety was protected in the final budget proposal.

During floor debate the salary adjustments were amended out, reducing the savings by over $50M. Legislators were concerned that even though the cuts were applied equally across-the-board, the low end hourly workers would still be hit too hard. The top-to-bottom salary reductions, however, were put in the bill instead of forcing furloughs or, worse, state employee layoffs. Many felt that the private sector was experiencing far worse consequences in the form of huge loss of revenue, deep salary cuts at all levels and mass layoffs. State employees would, at least, still have their jobs and their benefits. The issue, needless to say, gets political, with state workers threatening legislators over the proposed salary cuts.

The rejection of the House budget bill probably extends by at least a couple of days the final adjournment of the Legislature, which we hoped would be Friday or Saturday. Now there is a real chance the session will extend through Mothers' Day. While it is not uncommon to have disagreement  over the final budget bill, Friday's action was frustrating because those who voted "No", did not offer up an alternative plan, nor could they articulate specific reasons for their opposition or provisions that they would need to see in or out of the bill to earn their support. Too many legislators appear to still be in denial about the current state of the economy. Some did say that they thought it was time for Kansas businesses to put some "skin" in the game. This suggestion is shocking in the sense that Kansas businesses have had considerable skin in the game for months before the Legislature went in to session in January. They had been suffering and will continue to suffer from the effects of the recession in the form of reduced revenues, loss of production and, in many cases, bankruptcy. Over 97,000 private sector Kansans are unemployed, the most since 1983. State government, on the other hand, has fared much better.

Still, the new Governor and what appears to be a majority of elected officials want to penalize businesses for government overspending by freezing or eliminating promised phase-outs of much needed tax relief in the areas of corporate income tax & franchise taxes. Many want to eliminate the state portion of the economic stimulus act's one true actual benefit, targeted tax relief. They call for us to decouple from the federal tax code and not pass along the state portion of economic stimulus to Kansas businesses. Incoming Governor Parkinson asked the Legislature to embrace all the spending required by the stimulus Act and then, incredibly, demanded that we decouple from the true tax benefits of the Act.

The Senate will now take a stab at their budget bill and we hope they can pass something that we can then take to Conference Committee. Otherwise, we could be in for a long wrap-up session, with both chambers having to go back to the drawing board on their respective budget bills.

        The Legislature successfully reached first adjournment Friday evening after passage last week of dozens of pieces of legislation. We will return to Topeka for the traditional "wrap-up" session Wednesday, April 29. Included in legislation sent to the Governor was this year's budget bill, which contains no tax increases and which cuts state spending in an effort to match expenditures with revenues.

          Against that backdrop, more layoffs having been announced in the Wichita aircraft industry, the Governor still plans to veto the comprehensive energy bill we approved Friday. The legislation is important to the development of alternative energy, including wind energy and would pave the way for the proposed $3.8B electric energy generating plant near Holcomb. The huge economic development project has support from legislators representing all 105 Kansas Counties and is supported by business and manufacturing organizations in the state as well as organized labor. The House is still less than a handful of votes short of a veto-proof majority and if we can't override the governor's veto we'll lose a crucial piece of our own  economic stimulus package.

          A state-wide smoking ban and a primary seatbelt law appear dead for the session. A state-wide smoking ban of sorts passed out of the Senate but supporters were unable to muster sufficient votes in the House last week. A majority of House members either oppose such a ban altogether, given the right of local communities to design their own bans, or found the proposed state-wide smoking ban to be flawed and unworkable. Supporters in the Senate claimed that a smoking ban would have no negative financial impact on business, then proceeded to grant an exception for casinos, racetracks and nursing facilities. Some clubs were subject to the ban and some weren't. Most of us believe that decisions like these are best left to local communities to decide based on their own unique circumstances.

          The primary seatbelt law has been proposed for a number of years for reasons of safety and because a primary seatbelt law in Kansas would allow the state to draw down at least $11m in federal highway safety funds. The measure cleared the Senate this year but came up a few votes short in the House. Opponents balked at yet another opportunity for law enforcement to make a traffic stop and noted that Kansas seatbelt compliance has continued to increase, to 77% currently, without such a law. Interestingly, the Legislature did pass this year a requirement that drivers remain in the right lane of traffic, except for passing, on highways of two or more lanes in each direction of travel. We get no federal funds for that.

           Legislative action last week was brisk as the House & Senate worked toward another legislative deadline. Wednesday marked the deadline for non-exempt bills in either house. Conference committees met Thursday and Friday to reach agreement on bills passed in different forms by the House & Senate and this week conference committee action will continue and we'll be adopting final conference committee reports before reaching first adjournment Friday or Saturday.

Of significant importance is that both the House & Senate passed their budget bills for the upcoming fiscal year and Thursday evening were able to reach agreement on a compromise on the FY 2010 budget that we will take action on this week. Their work was made more difficult this year due to the fact we have a budget deficit to address and on top of that have to deal with federal stimulus money with all the strings that are attached. In an economic environment where we should be cutting government expenditures at the state level, Congress is sending us borrowed funds and forcing us to spend the funds in certain ways and prohibiting us from taking budget measures at the state level that we would ordinarily take given the budget deficits we face.

The conference committee took the time to study the federal stimulus law and found that some of the Governor's budget recommendations were contrary to the law, notably in the area of higher ed funding. Her proposed higher ed cuts had to be scaled back to comply with the law on how higher ed stimulus funds must be spent. The Senate did agree with the House position on a .7% cut to K-12 education. Other state agencies and programs took considerably higher cuts. I was pleased that the Senate agreed with the House to restore additional funds to those eligible for the physically disabled waiver funding and also agreed with the House position on funding the second phase of market level state employee pay plan. Also, the House & Senate agreed to spend the $1.2M necessary to draw down additional federal funds for the State Children's Health Insurance Program (SCHIP) but wisely decided to use tobacco settlement funds in an existing fund instead of State General Fund money.

In other legislative action taken last week, the House passed legislation requiring the Governor to submit her annual state budget sooner. This year, she waited until the second day of the session to release her budget, leaving the Legislature very little time to address a current year budget deficit of over $200M. We also passed legislation making payment of state payroll a priority expenditure to prevent a Governor from withholding paychecks to create a political firestorm in times where there is a cash crunch. Similar legislation is pending to require the Department of Revenue to promptly pay tax refunds or incur interest liability.

Various economic development measures passed last week, including one that has particular significance to Hutchinson, Salina and Wichita, where we're trying to recruit new industries and the jobs that come with them. And in that regard, agreement has been reached in conference committee on the Comprehensive Energy legislation that includes incentives for development of green energy technology, renewable energy sources, regulatory certainty and provisions to enhance the opportunity for construction of the $3.8B electric generating plant expansion in Holcomb. We'll adopt the conference committee report this week.

On the subject of Holcomb, results of a new scientific survey were released late last week showing strong statewide support for the new plant. Kansans ranked their top statewide issues with the economy coming in at 30%, jobs and industry at 18%, the budget at 10% and health care at 5%, reflecting the current concern that we need to do what we can to fire up the Kansas economy. Significantly, 51% of Kansans were found to favor the building of the new Holcomb plant with only 26% opposing it. 23% were undecided. The main reasons for Kansans supporting the project included new job creation, the importance to the economy of Western Kansas and the ability to be a net exporter of energy. Finally, clearly 56% of  Kansans favor an override of a probable veto by the Governor with only 25% supporting a veto. A veto override vote may well take place after Governor Sebelius has been confirmed as the Secretary of Health & Human Services in Washington, D.C. and has resigned as Governor.

The state's budget continues to dominate legislative news this week.  We are scheduled to debate the FY2010 budget on Monday morning in Topeka, after passage of the proposed budget by the House Appropriations Committee this past week.  The Senate passed their bill out of Committee also and will be debating the budget bill on Tuesday.

The recommended budget utilizes all available federal economic stimulus funds for Medicaid, public education and public safety as proposed by the Governor.  Even with stimulus funds coming in, the state faces a huge deficit requiring significant cuts in spending.  The budget brings spending down $194M from last year's total expenditures.  Spending reductions include a reduction in general government spending of nearly 10%, a 4.2% reduction in spending on services for individuals in need, a reduction of 9.4% in public safety spending, a reduction of 22.7% in agriculture and natural resources spending, a 3.6% reduction in Higher Education and a mere .6% reduction in K-12 public education funding.

Even though K-12 funding was by far the least affected, any cut in funds at all prompts howls of protests from the well-organized tax-funded education lobby and their e-mail network.  However, K-12 funding makes up over 50% of the total state expenditures and so the lesser the cuts are to K-12 the greater the cuts need to be in other essential areas, such as public safety and services to those needing assistance.  The proposed cuts to K-12 are a mere $33 from the base budget per pupil, from $4,400 to $4,367 per pupil.  But the total state spending for schools is around the equivalent of $12,188 per student.  A $33 reduction amounts to a mere .3%.

What's more is that most school districts, including all Reno County Schools, will have more funds available in FY 2010 than they did in 2009.  Additional federal revenue, under the stimulus package, flows to the State Department of Education and then is passed directly to the public school districts.  Indeed, schools have cumulatively nearly $100M sitting in their contingency funds, far more than the state itself has in total cash reserves.  An example of one of the consequences of following the governor's plan to hold K-12 budgets harmless is the fact that the Department of Corrections will be closing day reporting centers for convicted felons in Shawnee and Sedgwick Counties, the correctional facilities at Osawatomie, Toronto, Stockton, and Labette and the Atchinson Juvenile Correctional Facility.

The budget continues to dominate the 2009 legislative session. As I reported last week, the Governor has amended her FY 2010 budget in an effort to reflect her proposed use of anticipated federal stimulus money. Unfortunately, staff has identified a couple of significant problems with the Governor's adjustments. She uses an unrealistically optimistic assumption of revenue growth in her projections and we've determined that her proposed use of stimulus funds may actually violate the specific requirements of the newly passed federal law. She essentially uses stimulus funds to replace State General Fund dollars in several budgets and then uses the savings in SGF to add to our ending balances or rainy day fund.           

However, use of stimulus funds, particularly related to health services, to directly or indirectly increase rainy day fund accounts is strictly prohibited. The reason for this is that the federal law is premised on the requirement that federal funds actually be spent by the states to hopefully stimulate the stagnant economy. Simply substituting federal dollars for state dollars without a net injection of expenditures into the economy is not allowed. Several agencies have brought this problem to our attention and we are in the process of trying to get the best and most accurate interpretation of the law before passage of our 2010 budget, which is scheduled to be worked this week. We don't want to be in a situation where we approve Gov. Sebelius' budget proposals and then have to repay the funds several years after she's gone when we get a federal audit. We had to repay millions of dollars in federal funds a couple of years ago due to Executive Branch errors in computing eligibility for the funds.

As for realistic revenue projections, staff has provided us with no less than 6 different budget scenarios based on various revenue and budget assumptions. Probably the most realistic one removes the Governor's proposals to repeal prior legislatively approved tax relief and removes her inflated estimate of gaming funds from casinos, assumes the Consensus Revenue Estimating Group will revise downward next year's projections by another $100M and projects a modest 1% growth rate in FY 2011 and 2% in FY 2012. Plugging in anticipated stimulus funds in FY 2009, 2010 and 2011, the profile shows us with an ending balance in June of only 1.8%. The statutory ending balance law is 7 1/2% but has not been followed for the past several years.

However, for FY 2010, the profile shows us once again in deficit, this time by over $50M and in deficit by a whopping $523M in FY 2011, illustrating that the stimulus money will solve little if any of the state's budget woes. This is because, instead of creating the incentive to cut expenditures and save during the economic downturn, states are forced to maintain current spending levels and, in fact, spend more. It is doubtful, in my opinion, that there will be a real economic stimulus that creates permanent jobs and permanent revenue growth. Instead, we'll be forced even next year and particularly the two years after that to look for dramatic cuts in expenditures, something we were prepared to do this year to get us back on track. Without cutting expenditures, the most realistic state budget profile has us spending nearly $30M more than we'll take in in FY 2010, nearly $200M more than we take in in FY 2011 and over $500M more than we take in in FY 2012.

There was some positive news last week. I joined the 3 other Republican and Democrat legislative leaders and the Governor on a 2-day visit to Washington D.C. with the Kansas Bio-Science Authority Board, bio-industry and university leaders, and representatives of the Kansas University Cancer Center to follow-up on the selection of Kansas and Kansas State University as the site of the future National Bio Agro-Defense Facility and pursuit of National Cancer Institute designation for the KU Cancer Center. The trip was a success. Funding has been secured to start construction of the NBAF in Manhattan and we are on track for NCI designation for KU Cancer Center which will put us on par with such institutions as Mayo and M.D. Anderson.

The role of Kansas in hosting world class animal and human drug and disease research and bio-energy development should make us the Silicon Valley of research and product development, attracting along with it a wide variety of support industries all across the state. Along with our aviation, manufacturing and agriculture sectors, we should be poised to emerge from the recession in a very strong competitive position.

Last week legislative news was dominated by the announcement that Governor Sebelius has been nominated as Secretary of Health & Human Services. This was welcome news in Topeka as speculation about a cabinet-level appointment had been a major distraction the first two months of the session. The hope is that the confirmation process will play out quickly. Lt. Gov. Parkinson appears to be preparing to take over the duties of Governor and we are wanting to meet with him soon to discuss how we address the ever-increasing budget shortfall the state is experiencing.

In the wake of passage of the Federal Stimulus bill, we have been briefed on how it will affect Kansas. Governor Sebelius met with the Senate President & me a week ago Friday to go over her plans to adjust her 2009-2010 budget recommendations and we found out last week that even her new proposals do not balance. Our Legislative Research staff projects that even if we follow all the current Governors cuts and revenue adjustments, we could be short as much as $80M in the current year and $100M next fiscal year. Of course, Kansas can not be in the red at the end of any particular fiscal year, so more cuts will be needed even with stimulus money coming in already.

The problem with the stimulus money is that there are so many strings attached that we literally have to spend money to get the money. Also, in order to draw down federal funds, we have to maintain certain budgets at current levels, taking them off the table when looking for areas to cut to get our budget into balance. Some states, hopefully not Kansas, will actually have to consider tax increases in order to maintain the spending effort required by the stimulus bill. Taxes can hardly be said to be economic stimulators. Kansas may be able to replace enough state dollars with stimulus dollars this year to delay the inevitable cuts that will be necessary when the stimulus money runs out but we will have accomplished little or nothing and the country will only be that much further in debt.

An opportunity we had this year to make fundamental changes in the way we approach government spending may well be lost. Spending will continue at a rate that exceeds true revenues. I say true revenues since you really can not call the stimulus money revenue in the sense that it was earned and produced in the marketplace. That money was printed in Washington and backed by IOUs from our children and grandchildren. Unfortunately, in Topeka there appears to be a majority of people who want to simply push the problem ahead into future years without addressing the core problem of government overspending. Some are elected and some are taxpayer funded lobbyists. This is frustrating to say the least. Still, I am committed to trying to get us to tackle the budget beast and look for ways to make government efficient and limited.

We still have several bills in play that would help. One would return us to zero-based line-item budgeting, with budgets that follow generally accepted accounting principles. We would break current budgets down to zero and rebuild them based on the proven need for each line item of spending, rather than the bulk funding that is now employed that is virtually impossible to audit. We are also working on budget stabilization fund legislation that would divert disposable income to pay down existing debt and add to our ending balances rather than spent on newly created programs that bulk up annual budgets. Government expands to consume whatever funds are available and we have got to reign in government spending that significantly outstrips revenues. More than that, we need to shrink government by providing incentives to consolidate services and reduce duplication of effort and governance.

When we could afford it, we let government grow. We have layer upon layer of administration at all levels. The largest growth sector in our current economy is government. This is not good. Legislation to break down the barriers to creating local government efficiencies is being considered again this year. Hopefully that legislation will advance.

Work continues this week on the budget. Today and tomorrow I will be in Washington with members of the Kansas Bioscience Authority and state and federal leaders. Having succeeded in getting Kansas selected to be the site of the new National Bio-Agri Terrorism Defense Facility, we are working hard to obtain National Cancer Institute designation for the Kansas University Cancer Center. Both of these projects represent a real bright spot for Kansas in an otherwise sobering economic landscape.

            Highlighting last week's legislative work in Topeka was debate and passage in the House of our comprehensive energy legislation. The bill, which contains many of the components of the Governor's plan, gained broad strong bi-partisan support on final action and moves on to the Senate for consideration. Unfortunately, the Governor has promised to veto the bill even before seeing it, much to the frustration of even her own party. Republicans and Democrats alike have been awaiting word of whether Sebelius will be heading for Washington soon to serve in Obama's cabinet. Her views on our energy bill are seen as having more to do with increasing her marketability with the D.C. crowd than with good sound energy policy for Kansas. The AP reported Saturday that Obama will make official her nomination as Secretary of Health & Human Services sometime today.

            Every credible scientist and energy expert in the country has agreed that coal is a necessary piece of any comprehensive energy plan. Even Obama has conceded this point. There are no less than 28 coal-based energy generating unit projects pending or coming on-line in the country, including 3 in the President's home state. There are 5 in three of our neighboring states, including Missouri, Colorado and Nebraska. Coal provides a source of reliable low cost energy to supply base-load needs.

            The House energy bill is comprehensive in that it embraces and provides incentives for the development of alternative energy from renewable resources like wind and solar. It contains RPS or renewable portfolio standards and net metering and sets up a mechanism of regulatory certainty that ensures that projects that meet state and federal clean air act requirements will not be stymied by politics.

The proposed Holcomb plant expansion is a critical part of our plan to address future energy needs and provide economic development in the western part of the state. The plant project will also provide critical transmission line construction to help get Kansas wind energy to the grid. The $3.8B project will create 2,500 Kansas jobs, including engineering jobs as far away as Kansas City, and provide affordable energy to 500,000 Kansans. Over 300 permanent jobs will be created adding over $16M in payroll to a sagging state economy. Revenue from exported power is expected to exceed $750M. It is estimated that electric rates could climb 35% in some areas of the state if the project is not allowed to move forward.

            Work continues this week on the FY 2010 budget. The severe budget deficit continues to be a moving target. February tax-only revenues were down another $12M, which was less than expected but still headed the wrong way. With 4 months still left in the current fiscal year we hope our rescission bill that recently passed will be enough to allow us to finish the fiscal year ending June 30 in the black, as required by law. Corporate income tax receipts continue to be below estimates. The state paid more in refunds to corporations than it received in corporate tax revenues in February. Individual income tax withholding was up slightly over estimates and, surprisingly, sales tax receipts were up slightly instead of down, as we had predicted. Overall we are down $78M from the November consensus revenue estimates, with 4 months to go in the fiscal year.

            What this means for the FY 2010 budget is that we still have considerable cutting to do. The state is continuing to spend more on programs than it is collecting in revenues and we need to get a grip on that. Complicating matters is the fact that Congress has passed and the President has signed the so-called Stimulus package and Kansas is slated to receive a considerable amount of funding from the package. Unfortunately, at a time when we need to be making budget decisions, we still do not know the full details of the package or what Kansas would have to commit to do in order to draw down its share of federal funds.

We reached the midpoint of the session last Friday, the deadline for considering all non-exempt bills in either chamber. We reconvene the House Tuesday to start considering exempt House bills and Senate bills that have come over. The week was highlighted by the signing by the Governor of our 2009 rescission bill, which provides for what we hope are sufficient cuts in the current fiscal year to end the year in the black, as required by law. With almost 5 months left in the fiscal year and with revenues continuing to fall, we tried to pass sufficient cuts to leave some cushion going into FY 2010, where we may need to trim as much as 10-12% from total state expenditures.

While the House & Senate had productive weeks, the Governor and her Secretary of Administration didn't. The Governor's office created a wholly unnecessary payroll and tax refund crisis last week with a belated attempt to issue debt instruments that weren't legal. The Secretary certified on the Thursday before that state funds were insufficient to pay debts and so the Governor ordered a mere $3.5M in allotments, or cuts, in state spending to cover a single expenditure. On Monday, the Secretary and Governor sought to issue certificates of indebtedness in the amount of $225M, in addition to certificates already totaling $550M, for a whopping $775M in the current year. Unfortunately, since it had already been determined there were insufficient funds to pay expenditures for the year, more certificates of indebtedness were not legal. After Legislative staff and Legislative leadership pointed this out to the Governor on Monday, she tried to cover by running to the press and claiming that the Legislature was holding up state employee paychecks and tax refunds by balking at her request to issue more debt. She also fired up her state e-mail account to have state employees on state time send 1000's of hateful e-mails to legislators. All the Governor had to do was add to the $3.5M allotment from the week before to cover the amounts needed for the week. She has allotment power and had that power even before the session started in January when she knew we faced a deficit. No legislative approval is required.

House & Senate leadership quickly responded to her failure to act by expediting delivery of the rescission bill to the Governor so she could sign it and put us in a legal position to issue certificates. Why the Governor or her office failed to follow the law or make provision for the week’s payroll and tax refund liability remains the subject of much speculation. She did sign the bill, with some notable line-item vetoes, and payroll was met. Payroll was never in jeopardy but fumbling by the Governor’s office needlessly worried 1000's of state workers.

Also last week, we discovered the Governor had authorized the sale of $14M in refinance bonds, including $10M in KPERS bonds. This was part of her plan to defer paying principal totaling $53M over the next two years by selling 3 bond issues. Incredibly, the bonds would be paid over 25 years at an interest cost of $68M! Our staff caught wind of the sale and upon discovering that part of the sale involved KPERS bond refinancing, alerted leadership to the fact that the law prohibits refinancing KPERS bonds without KPERS Committee and State Finance Council approval. Since the closing on the bonds was scheduled for next week, we were able to stop them and the Governor had to veto her own proposal in the rescission bill to refinance debt in the current year.

One of the Governor's notable vetoes in the rescission bill was a veto of a demand transfer from the State General Fund to the Health Care Stabilization Fund. We have learned that this is apparently contrary to law as well since the transfer is not an item of appropriation subject to line-item veto. As to these legal miscues, it's true that neither the Governor nor her Secretary of Administration are attorneys. However, she has legal counsel on staff who should be giving her sound legal advice before she acts.

Finally, another veto involved striking additional funding for the Wichita Center for Graduate Medical Education, a vital program to train doctors primarily for the medically underserved rural areas. This has left many observers scratching their heads as Governor Sebelius is said to be a prime candidate for appointment as President Obama's Secretary of Health & Human Services. The veto would presumably give rise to some sharp questioning during the confirmation process. If the Governor fails in her bid to be selected, her actions of this past week will certainly be seen as having played a role.

Thursday, the House is scheduled to debate its comprehensive energy bill, where passage is assured thanks to broad bi-partisan support. Unfortunately, the Governor has threatened a veto even before seeing the comprehensive legislation. Prospects for a veto override are promising.