Kansas governor eyes tobacco bonds for budget fix

(Reuters) - Kansas Governor Sam Brownback offered options on Wednesday for dealing with sinking revenue for the state's current and next budgets, including the sale of tobacco bonds.

With the fiscal 2016 revenue estimated to drop by nearly $94 million and fiscal 2017 revenue expected to be $134.7 million less than previously projected, the Republican governor said Kansas could raise about $158 million through its first sale of bonds backed by its share of a 1998 multi-state settlement with U.S. tobacco companies.

Several states and local governments have sold tobacco bonds with some using the proceeds as a one-time boost for their sagging budgets.

Brownback said he would also divert $185 million in sales tax revenue slated for the highway fund to the fiscal 2016 and 2017 general fund and continue a 3 percent university funding cut into fiscal 2017.

A second budget-balancing option outlined by the governor would delay a fiscal 2016 fourth quarter pension payment until fiscal 2018 instead of selling tobacco bonds. A third option calls for a 3 percent to 5 percent spending cut for most state agencies in the coming fiscal year.

“I am prepared to take executive action to help reduce expenditures, however, the legislature has a constitutional obligation to balance the budget and we are hopeful they will work with us on one of the three options..," Brownback said in a statement.

He added that he does not support a tax hike to patch up the budget.

The Kansas budget is feeling the effects from action taken by Brownback and the Republican-controlled legislature to cut corporate and other income taxes to help the state compete with bordering Missouri and other states for business development and jobs.

Kansas' fiscal year begins July 1.

(Reporting By Karen Pierog; Editing by Andrew Hay)