Gov. Steve Beshear proposed deep cuts Tuesday to Kentucky government – stretching from universities to state parks – in presenting an $18.5 billion two-year spending plan that reflects sluggish revenues mixed with growing demands from Medicaid.
Kentucky’s public universities would face 12 percent cuts in the next budget that begins July 1, on top of an across-the-board 3 percent reduction Beshear already imposed this year. A cross-section of state agencies would also be targeted for sharp cuts, and the governor proposed no pay raise for public school teachers, though local school districts could boost teacher salaries.
“I envisioned this first budget address to be a night where I unveiled a plan brimming with bold and creative new programs,” Beshear said to a joint session of the General Assembly. “However, that evening will have to wait. Because tonight, we deal with cold, harsh reality.”
Beshear’s budget plan for Kentucky would include a marginal overall increase from the current two-year spending plan, which is $18.1 billion. But, with economic forecasters calling for drastically shrinking state revenues, cuts to certain areas such as education were needed to pay for unavoidable hikes in “have-to” areas such as health care coverage for the more than 700,000 low-income and disabled Kentuckians.
Beshear pointed to other states – Florida, Maine, Virginia and Rhode Island – as examples that Kentucky was not alone in its budgetary dilemma.
For the Bluegrass State, Beshear proposed no cuts in the basic formula for state aid to public elementary and high schools – a big chunk of the overall state budget – and the per-pupil spending would remain intact. The Department of Education itself, however, would face a slight decrease in funding for other agency spending.
“We had to make difficult choices, and we made those choices,” Beshear said.
The governor, however, said he was not proposing any changes to need-based financial aid for college students, and acknowledged some universities may consider tuition hikes to offset their funding woes. But, he urged university leaders to find ways of slimming down their own budgets.
“I regret what we’re having to propose,” Beshear said.
Other areas that would be cut in Beshear’s proposal include faith-based initiatives, the Kentucky State Police and public defenders.
Nevertheless, Beshear said his plan was “not a budget of retreat” and felt the state could stay on a pace of progress despite tough financial times. The governor noted that Kentucky’s reliance on one-time revenue sources would be cut in half over the next two years.
“This budget will put Kentucky back on firm financial footing,” Beshear said.
Beshear said he was proposing no tax increases, although various Democrats in the legislature have said they’d rather pass a cigarette tax hike than allow education funding to suffer.
“Taxes continue to be the last option for me in terms of resolving this situation,” Beshear said.
Reiterating a campaign theme, Beshear called on legislators to let voters ratify or reject a constitutional amendment that would legalize casino gambling. Kentucky already allows gambling at race tracks, bingo halls and via a state lottery. By allowing casino gambling, Beshear believes state government could reap an extra $500 million in revenue and stop Kentuckians from wagering their money in bordering states.
“Do we want Kentucky money continuing to benefit the people of other states, or do we want to bring it home to improve the quality of life of our own people?” Beshear said.
Senate President David Williams, however, said he felt the revenue that would be generated from casino gambling would not be worth the social costs and amount of money problem gamblers might lose.
“I hope we have a free and open discussion in both the Senate and the House and the governor doesn’t try to shove this down everyone’s throat,” Williams said.
Few agencies were in line for spending increases under Beshear’s budget, his first since winning election in November. Medicare, the state-federal health insurance program, would consume the largest share of additional spending.
Beshear proposed an extra $147.9 million for Medicaid in the first year of the biennium, and $242.5 million in the second year. The governor said that none of the state’s current 722,000 Medicaid recipients would be cut from the rolls.
But the governor said changes are needed to make the system more cost efficient.
Beshear proposed $53 million in extra spending for the prison system over the next two years, a big ticket item reflecting a projected 6 percent growth in the state’s prison population over that period. Currently, the state’s prison population totals more than 22,000 inmates, and Beshear estimated there would be an influx of about 6 percent over the next two years.
State employees would get 2 percent pay raises in each of the next two years, an amount totaling $60 million over the biennium.
The state’s constitutional offices wouldn’t be spared from cuts. Beshear proposed reductions of 12 percent in the governor’s office, secretary of state and treasurer’s offices. The attorney general’s office was targeted for a 9.8 percent reduction, and the agriculture commissioner’s office would be trimmed by 8 percent. The state auditor’s office would also have less funding to operate.
Other cabinets would also face cuts, but Beshear said his administration was asking the legislature for “flexibility” so agency heads could effectively manage their areas amid tight budget times.
Bob Vance, Environmental and Public Protection Cabinet secretary, said areas such as mine safety should be “taken care of” even though his agency would face cuts of about 18 percent. The agency would find ways to compensate, and would look to cut personnel last.
“I think we’re going to be in fair shape,” Vance said.
Beshear proposed using $189.8 million of the state’s budget reserve trust fund to help finance state operations in 2010. That would leave about $25 million in the “rainy day” fund to deal with any emergencies, such as forest fires or other natural disasters.
Rep. Harry Moberly, D-Richmond, the chairman of the House Appropriations and Revenue Committee, said Beshear’s budget would be a starting point for lawmakers.
“This is the worst situation that we’ve faced,” Moberly said. “I think the governor has done as good a job as he could have done with the available revenue and the time that he’s had to spend on this.”
Still, Beshear’s budget wasn’t all gloom.
He proposed the legislature reinstate more than $165 million in various projects the legislature approved two years ago but were vetoed by former Gov. Ernie Fletcher.
Such projects include $6 million for a polar bear exhibit at the Louisville Zoo, $17.5 million for renovations to Kentucky River locks and dams and $13.5 million for a livestock disease diagnostic center at the University of Kentucky. Beshear also proposed reinstating a $14 million technology center at the community college in Owensboro, $5.3 million for a dairy research farm at Eastern Kentucky University and $9 million for a renovation at Western Kentucky University.
The plan also calls for new projects, such as $9 million for runway improvements at Blue Grass Airport in Lexington and $39 million for an expansion of the Little Sandy Correctional Complex in Elliott County. It calls for $100 million in various road and infrastructure projects around Fort Knox, which is preparing to accommodate an influx of soldiers and civilian personnel due to base realignment. The plan proposes $10.3 million for roads around the Kentucky Horse Park leading up to the 2010 World Equestrian Games in Lexington.
Public universities would also be given authority to sell hundreds of millions of dollars worth of bonds to finance various campus improvement projects. It would be up to each individual university’s discretion on wh
ether to proceed with such plans, Beshear said.
“We are in tough times, and just like Kentucky families who find themselves in a similar situation, we must tighten our belts and balance our checkbook,” Beshear said. “But, my friends, if we work together we are going to come out of this in much better shape than we were before.”