Kentucky budget outlook far worse than most expect, Gov. Steve Beshear says

Gov. Steve Beshear warned Tuesday that the states budget outlook is even worse than

expected with projected revenues falling at least $1.4 billion short of meeting obligations during the 2010-12 period.Citing a challenge much greater than many have anticipated, the governor said at a news conference that he will have to consider cuts even to his top priority school funding and laying off state workers.

He said the state must find a way to raise revenue, though he ruled out proposing any broad-based tax increase.

He made clear hes still interested in raising revenue through a bill to legalize video lottery terminals at race tracks, with revenue going both to the state and to help the horse industry.

Were still working on it, he said when asked if he has the votes in the General Assembly to pass a slots bill. If folks really want to help the horse industry and to give us money to solve this budget problem, then they ought to vote for the VLT legislation.

Senate President David Williams, R-Burkesville, said at a news conference later in the day that Beshear was exaggerating the problem to gain support for the gambling bill.

Hes been a one-issue governor up until this juncture, he said. Thats all hes had on his mind: establish one crisis after another that was unmanageable if you didnt have gambling revenue.

Two weeks ago the Legislative Research Commissions Office of Budget Review released more conservative figures for the estimated budget needs over the next two fiscal years, starting July 1, 2010.

When those numbers are compared to the official revenue estimates for the next biennium, the state falls about $888 million short.

Williams said his budget staff came up with similar numbers.

We are going to have to work together on this particular situation, he said. I just dont accept the (governors) figures.

Assumptions questioned

Rep. Rick Rand, the Bedford Democrat who is chairman of the House budget committee, said the administrations estimates include more detailed assumptions than the LRCs.They are saying theres more needed for debt service than we thought might be needed, and theyre assuming much more will be needed for Medicaid, he said.Beshear said the same at his news conference, noting that the more conservative estimates fail to take into account an array of rising costs such as debt service and Medicaid obligations obligations we cannot avoid.

Adding payments on bonds already authorized and projected Medicaid needs to current spending levels, Beshear estimated the size of the budget shortfall at $556.2 million in 2010-11 and $890.2 million in 2011-12.

That puts the total shortage at $1.446 billion over two years.

Williams, however, said the administration could avoid the added debt service by not issuing bonds on projects that the legislature has authorized.

The governor is going to have to look at those sorts of things he said.

Beshear said his own estimate is conservative because it does not include any increase in state retirement system contributions or funding to help the Teachers Retirement System pay for health insurance.

Nor, he said, does it cover increased health insurance costs for state workers and teachers, money to open new courthouses scheduled to be completed in the next two years, or increases in the prison population.

Beyond that, it does not provide money to increase education funding or pay for raises for teachers and state workers, Beshear said.

The governor warned that cuts to balance the budget could be far more painful than those that he and the legislature have made five times since the beginning of 2008. The cuts so far, he said, have preserved basic school funding, vital health programs and public safety.

But preserving those priority areas has meant that just 15 percent of the budget has endured nearly all of the spending cuts made this year. Beshear stressed how hard it will be to cut those lower-priority agencies again.

Many of these agencies are to the point where any additional significant cuts will cause the elimination of vital services and personnel, he said.

Kentucky budget outlook far worse than most expect, Gov. Steve Beshear says

By: Rick Lewis

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