DALLAS - Kansas Gov. Kathleen Sebelius signed a budget-balancing bill Tuesday, avoiding a shutdown of state government over a dispute with Republican leaders in the Legislature.

The measure cuts some $300 million from the fiscal 2009 budget. The approval by the governor satisfied legislative leaders, who then removed their objections to Sebelius' plan to shift $225 million from state agency funds to the general fund to pay the state's bills until income tax returns come in during April.

The State Finance Council met Wednesday afternoon to approve the $225 million in certificates of indebtedness requested by the governor. Approval allows the government to issue $24 million in payroll checks to 42,000 state employees on Friday, along with $20 million in Medicaid payments to doctors and hospitals.

State budget director Duane Goossen told the council that bond rating agencies had expressed concern over the budget impasse. The state is rated Aa1 by Moody's Investors Service and AA-plus by Standard & Poor's.

The council was to have met Feb. 16, but Sebelius cancelled the meeting after Republican members said they would not approve the certificates until she signed the budget-balancing bill. The council consists of the Democratic governor and eight legislative leaders, six of whom are Republicans.

House Speaker Mike O'Neal and Senate President Steve Morris, both Republicans, said Monday the finance council could not legally approve the certificates of indebtedness because it could not be determined how much money the state would have at the end of the fiscal year until the budget bill was signed.

After signing the bill, Sebelius told Goossen to begin the process of certifying the state payroll and resume the distribution of $12 million of income tax refunds that had been halted during the standoff.

Sebelius said the inter-government transfer was routine and legal, and not related to the shortfall in revenues that prompted the budget cuts.

"Our legislative leadership decided to play games and really hijacked the finances of the state," she said. "I'm sorry we had to have high drama. Rather than coming and saying, 'How do we resolve this?' they sort of played high-stakes partisan politics with people's paychecks."

The governor said lawmakers should focus now on developing a balanced budget for fiscal 2010.

"We are in very difficult economic times in this state. Unfortunately, this session has been marred with partisan divide instead of collaboration and cooperation," she said at a news conference. "There have already been too many personal attacks. Hopefully, that stops today."

The bill, the House substitute for SB 23, originally contained $325.6 million of cuts. However, Sebelius used her line-item veto authority to restore several reductions, including $7 million of a $32 million cut in state aid to local school districts and $4.5 million for special education.

"This is a responsible way to limit the reductions to schools, to pay our bills, and to move this process forward," she said. "I'm just sorry we had to have this high drama and worry a lot of Kansans."

She also vetoed a $2.9 million appropriation to the Wichita Center for Graduate Medical Education.

Most state agencies will see a 4.25% cut in their budget for the remainder of the fiscal year, which ends June 30.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.