Ky. budget chairman: State will likely have to deal with revenue shortage without higher taxes

Ky. budget chairman rules out tax hike next year

FRANKFORT, Ky. — Tax increases won’t be an option for shoring up Kentucky’s shrinking budget, a leading lawmaker said Monday.

House Appropriations and Revenue Committee Chairman Rick Rand said all 100 House seats and 19 of 38 Senate seats will be up for election next year, making tax increases of any kind unlikely.

“Those are the political realities,” said Rand, a Democratic from Bedford. “At a time when businesses and families are hurting, it’s awfully difficult to raise taxes on them.”

State Budget Director Mary Lassiter warned Friday that most state agencies could face additional 6 percent budget cuts this year to help offset an additional expected $161 million revenue shortfall. That’s on top of $800 million already slashed from the state budget because of revenue declines attributed to the ailing economy.

Lassiter sent letters to the heads of most government agencies Friday alerting them that additional budget cuts were coming.

Gov. Steve Beshear’s administration intends to try to shield some state programs from cuts, including Medicaid, public schools, universities, community colleges and the teacher retirement system.

Advocates began arriving at the Capitol on Monday in hopes of heading off cuts to a variety of other government programs and services. The state’s criminal prosecutors spoke to a legislative budget subcommittee about their already strained finances. AARP members rallied in the House chamber to urge protection of government initiatives that assist the elderly.

A parade of government leaders, including Attorney General Jack Conway, briefed lawmakers Monday on the impact of additional budget cuts.

Conway warned of potential layoffs in his office, which already has seen personnel levels fall from 250 to just more than 200. He said a 6 percent cut in funding also could eliminate grants to local prosecutors to help pay the wages of advocates who work with crime victims.

A panel of state economists predicted last month that the recession would likely cause additional financial woes for state government, though federal stimulus money has helped stave off some budget cuts.

General fund receipts dropped 4 percent in October, prompting Lassiter to warn that the administration was “very concerned” the state wouldn’t bring in enough money to pay for what’s been budgeted in the current fiscal year.

October revenues totaled about $652 million, down from October 2008 by some $27 million.

Corporate income tax revenues dropped nearly 82 percent last month, while individual income tax collections dipped almost 10 percent. Sales and use tax receipts were down about 4 percent.

Rand said a proposal to legalize slots at Kentucky’s horse tracks, then taxing the gambling revenues would provide some financial relief — about $200 million a year. He said he expects that proposal to come before lawmakers again next year.

A similar proposal failed earlier this year.

Rand said he foresees the economy turning around in time to resolve the financial crisis in the next budget cycle. Federal stimulus funding, he said, will help ease the pain.

“We’re going to have to grow our way out of this,” Rand said. “I just don’t think we can tax our way out.”