Gov. Sam Brownback completed work on a budget bill Saturday outlining expenditure of $13.8 billion by Kansas government in the coming fiscal year and inviting controversy by making dramatic cuts in public school funding and eliminating aid to the politically popular Kansas Arts Commission.

The first-term Topeka Republican earned praise from a state employee labor union for rejecting a 2.5 percent surcharge on health insurance premiums.

Brownback expressed appreciation to lawmakers for adopting a budget that erased a projected $500 million shortfall without imposing a substantial tax increase during a period of economic turmoil. He signed the bill late Friday, but submitted the required documentation Saturday to the secretary of state's office.

"The entire House and Senate took on the challenge and produced a budget that funds state priorities while maintaining a responsible $50 million real ending balance," he said.

The budget deletes more than $100 million from state government support of public school districts.

"Gov. Brownback has made brutal and unnecessary cuts to our public schools and stripped vital social services for our most vulnerable citizens," said House Minority Leader Paul Davis, D-Lawrence. "I’m not sure where this Brownback road map is taking us, but it doesn’t appear to be forward."

The governor used line-item veto authority to eliminate state funding of the Kansas Arts Commission, effectively undermining the agency's ability to operate. He prefers financing of the arts be performed by a privately financed foundation.

The action by Brownback ran counter to votes by the House and Senate to retain state support of KAC and to preserve the organizational structure of a 45-year-old agency sending arts grants to every corner of the state.

Henry Schwaller, chairman of the Kansas Arts Commission, said the governor's removal of $689,000 in state financing would prevent Kansas from qualifying for grants from the National Endowment for the Arts.

Kansas will be the only state to miss out on this federal aid, he said.

"With a stroke of his pen, the governor cost the state of Kansas $1.2 million," Schwaller said. "On July 1, nearly 200 local arts organizations and artists will lose critical support for local arts programs, operational funding and professional development."

However, the governor said the state must prioritize spending and concentrate on providing core services. The arts will thrive in Kansas through private contributions, he said.

"I intend to personally involve myself in efforts to make this happen," Brownback said.

Brownback also vetoed an across-the-board reduction enacted by the Legislature for all state agencies, but vowed to make an equivalent $5.9 million through imposition of targeted cuts. The objective, he said, was to thoughtfully impose reductions "without harming key services."

The new budget reflects a preference by Brownback to veto a 2.5 percent health insurance surcharge the Legislature adopted for state workers. The governor said concerns had been raised about the legality of this provision of the budget.

Jane Carter, executive director of the 10,000-member Kansas Organization of State Employees, said she appreciated the governor's veto of the health insurance "tax."

"The action of certain members of the Legislature was nothing more than a tax on hard-working state employees and their families," Carter said. "Hopefully, the governor's action today signals to the Legislature that such an arbitrary attack on state employees will not be tolerated in future sessions."

To compensate for his veto of the $790,000 annual surcharge on health insurance premiums, the governor ordered that a health screening program that provides $50 "gift cards" for participants would be phased out. The screening program costs the state $600,000 annually.

Brownback said in his budget message to legislators that he anticipated working in the future on avenues for streamlining government spending and focusing on rebuilding the Kansas economy.

The bill finances state government starting July 1, making cuts in public schools, social services and general government administration.

The budget assumes Kansas will spend about $880 million less than it did in the current year and erase a one-time revenue shortfall of nearly $500 million due to spending down of one-time federal stimulus dollars used to support education and social services. The projected ending balance in July 2012 is greater than $50 million.

Unlike the 2010 session, when legislators and Democratic Gov. Mark Parkinson raised the state sales tax rate to balance the budget, the Republican-led Legislature turned to a sharp knife to keep government in business.

None of the 33 Democrats in the House or eight Democrats in the Senate voted for this budget. They argued cuts in K-12 education would lead to larger class sizes and teacher layoffs, as well as eliminate services for thousands of developmentally disabled residents.

Some conservative Republicans also rejected the budget measure because it didn't cut deeply enough into expenditures.

The Legislature convenes Wednesday for what is expected to be a merely ceremonial closure of the 2011 session. The day is placed on the calendar to provide the House and Senate an opportunity to attempt overrides of vetoes by a governor.