DENVER -- Facing an expected $1 billion shortfall in next year's budget, Gov. Bill Ritter is proposing that education spending be cut by $260 million and that the state bring in another $132 million by charging sales tax on candy and soda as well as online sales.

Under a plan submitted to state lawmakers Friday, some business-specific tax breaks would also be eliminated or suspended, including a sales tax exemption on agricultural compounds and bull semen, which would be worth $1.5 million a year. Ritter also proposed limiting conservation easement credits for three years, raising $13 million annually.

State workers would also take home less money in a move intended to avoid more furloughs. State workers pick up the state's share of their pension contribution -- 2.5 percent of their salary -- for a year to save $20.1 million.

State colleges and universities would receive $56 million less next year but would be given the power to increase tuition by up to 9 percent.

Ritter said the budget was fair and spread the pain among a variety of groups.

"We are asking everyone to share in this sacrifice," he said.

His proposal is for the budget year that begins in July 2010 and it still has a long way to go. Next week, Ritter plans to make his case to members of the Joint Budget Committee. Those state lawmakers actually write the budget that will submitted and debated in the full Legislature next year and they can adopt or disregard parts of Ritter's proposal.

Rep. Kent Lambert, a Republican committee member, said voters should be asked to weigh in on any tax changes because the Taxpayer's Bill of Rights requires all new taxes be put to a vote.

The Democrats who control the Legislature, meanwhile, have maintained they have the right to change existing tax policy, just not impose brand new taxes, under a recent state Supreme Court ruling.

Despite the recession, funding for kindergarten through 12th grade schools has been largely protected because the voter-approved Amendment 23 requires funding to increase at a minimal amount each year.

Funding is determined by a complex formula that takes into account base funding plus a variety of factors meant to account for the differences between school districts, such as the cost of living and school size. Ritter is proposing a change in the way those factors are calculated but not the base and argues that it doesn't violate Amendment 23.

The proposed $260 million cut would mean that schools would get 4.6 percent less than they're getting this year. On top of that, they would lose a $94 million net increase they would have expected from both local and state sources had the calculation not been changed.

Ritter's plan would not cut funding for full-day kindergarten or preschool.

Jane Urschel, associate executive director of the Colorado Association of School Boards, said she think the change probably violates the constitution but she also doesn't think the state has much of a choice but to cut funding. She fears the cuts could get even deeper if the shortfall continues to grow.

"I think this is just the beginning of what cuts to K-12 will look like," she said.

Her group has told districts to brace for cuts as high as 8 percent and some districts have been wondering whether they should shorten the school year in order to avoid laying off teachers.

Ritter's plan would also take $158.1 million out of the state's reserve fund and continue some cuts and moves made to balance this year's budget. They include continuing a suspension of a property tax break for senior citizens and not opening a new state prison for another year.

Despite that, Ritter is still recommending spending about $1 million to pay for about 10 workers to continue to test and maintain the prison's expensive equipment while it's under warranty.