TOPEKA, Kan. (AP) — Kansas will set aside $500 million to deal with future financial problems, give state employees a pay raise and increase spending across state government under budget legislation Gov. Laura Kelly signed into law Wednesday.

The measure contains the bulk of the state’s $22 billion-plus budget for the 12 months beginning July 1, aside from money for the state’s public K-12 schools. Kelly signed the measure ahead of a meeting Wednesday of state officials and university economists to draft a new forecast for state tax collections through June 2023.

The new forecast was expected to me more optimistic than the previous forecast, issued in November and used in budgeting decisions until now. Tax collections for the past nine months have been almost 5% more than anticipated, creating a surplus of more than $300 million.

The new forecast is likely to intensify the debate between the Democratic governor and the Republican-controlled Legislature over eliminating the state’s 6.5% sales tax on groceries, among the highest in the nation. Kelly argues that the state’s finances are strong enough that it can eliminate the tax this year, while Republicans have proposed eliminating it over three years while pursuing other tax cuts as well. Lawmakers expect to settle the issue when they return April 25 from their annual spring break.

Kelly said Kansas can “confidently make critical investments in our state,” saying the 2022-23 budget “allows us to continue to improve core services while investing in our future and setting the stage for additional economic growth.”

The Legislature opened its annual session in January with its researchers forecasting that the state would end June 2023 with nearly $3.8 billion in cash reserves. The state’s tax collections expectations for 20 months in a row through March.

Kelly proposed setting aside $600 million for future emergencies, while GOP lawmakers pursued a proposal to use $1 billion in surplus funds to bolster the state pension fund for teachers and government workers.

Lawmakers are still working on a pensions bill that would put more than $1.1 billion in surplus funds into the pension system.

The measure Kelly signed provides a 5% pay increase for state workers, their first bump since 2018. It would allow the state to increase its payments to providers of in-home services to elderly and disabled Kansas residents and provide $95 million for higher education programs meant to train students for the workforce.