Governor on revenue

Budget op-ed
June 11, 2009
Gov. Steve Beshear
Kentucky is not alone in its financial misery.

From the East Coast to the West Coast, states are facing enormous revenue shortfalls ranging from hundreds of millions to billions of dollars, and many have been forced to slash key programs and raise taxes.

In Kentucky, where our projected shortfall for the coming year has been officially set at $996 million, or 10.7 percent of our General Fund budget, I’m recommending we do neither.

Raising taxes in this economic climate would increase the hardship on our families and businesses.

And hacking away at key priorities like education, health care and public safety would do serious harm, I believe, in both the short and long term.

In fact, it’s only by preserving investments in areas like education that we will be able to climb out of and stay out of this economic recession.

That’s the message I’m conveying to the General Assembly in the days leading up to the June 15 special session, which I called to balance the General Fund budget before the start of the fiscal year on July 1.

The budget plan I have unveiled would balance the budget primarily by thoughtful and appropriate use of federal stimulus dollars and by cutting $200 million in spending beyond the $600 million we’ve cut since I took office – a process that will require the same sort of sacrifices our families are making.

We’d also restructure our debt, enhance our tax collections efforts by filling empty positions in the Revenue Department and suspend some paid holidays for state workers to avoid mass layoffs, a proposal that would also apply to me. I’ve also agreed – as have members of my senior staff – to keep in a place a 10 percent salary cut we voluntarily took last year.

The budget plan I’m recommending to the General Assembly includes no proposals to increase taxes. It sets aside hundreds of millions in stimulus dollars to plug anticipated holes in the 2011 budget. And it reduces spending in a thoughtful way that preserves basic education funding, fully funds Medicaid and maintains key areas of public safety like prisons, prosecutors and state police.

Kentucky will never move forward if we take significant steps backward in these areas today.

In this way, my plan carries out the two goals I’ve had ever since I became governor and began to realize the impact of this global economic crisis on the Commonwealth:

First, helping people in our state survive.

Second, finding ways to make strategic investments that will position our state to move forward.

I have put three other issues on the agenda for the session:

A focused reform of our economic incentives packages to enhance our ability to attract and retain many thousands of jobs and renowned events like a NASCAR Sprint Cup race.

An effort to create a mechanism to fund mega-projects between Kentucky and Indiana such as the Louisville bridges.

And saving Kentucky’s struggling equine industry by authorizing Video Lottery Terminals at licensed horse racetracks, an initiative that would help improve race purses and breeder incentives while also bringing in significant money for the general fund.

Gaming proceeds would create a recurring source of revenue that would support our priority investments once the federal stimulus funds are depleted.

While balancing the budget in a way that causes the least harm to our families and our future is my No. 1 goal, I believe these are three issues that require quick action to either take advantage of economic and tourist opportunities or protect Kentucky institutions.

Meanwhile, we continue to take steps to deal with depressed revenues in the Road Fund, which is expected to fall $239 million short in the 2010 Fiscal Year, or 17 percent.

Dealing with that shortfall, as with the General Fund, will require bold but steady action.

And we must be thoughtful.

The economy will recover, but it is expected to recover slowly.

In solving the problem for the coming year, we must be mindful of the years that follow. Economists predict we will not return to 2008 revenue levels for three more years.

And we have less cushion. This is the third straight year of a significant budget shortfall.

In previous years, we have relied on our rainy day fund and other transfers to help balance our budget. But those funds are depleted.

In fact, because of depressed tax receipts and those depleted funds, we begin Fiscal Year 2010 with $636 million less in General Fund resources than we are spending this fiscal year.

These are the numbers that require us to be strategic and responsible.

These are the numbers I have shared with the General Assembly during conversations over the last few weeks. I look forward to the dialogue that follows.

By working together, we will get through this difficult time.