Kentucky Gov. Beshear sees tough budget decisions ahead with state’s financial woes

Ky. governor doesn’t rule out layoffs in agencies

FRANKFORT, Ky. — Government layoffs are a possibility as Kentucky tries to work through a lingering budget crisis caused by the faltering economy, Gov. Steve Beshear said Monday.

The Democratic governor told reporters that developing a balanced budget is the biggest issue he and lawmakers will face in an upcoming legislative session set to begin Jan. 5.

“Certainly, you don’t ever want to have to lay off folks,” Beshear said. “We will have to figure out ways to get through this next two years, and there won’t be any easy choices. They’ll all be tough choices.”

Beshear painted a bleak financial picture for a state that already has cut some $800 million out of its current budget. He ruled out any broad-based tax increases in the upcoming legislative session. And he promoted an expansion of gambling as one means of generating additional revenues.

Revenue shortfalls have already forced cuts in some government services to balance the current budget. Last month, Beshear called on agency heads to slash an additional 6 percent from their budgets to wipe out the latest projected shortfall of an additional $161 million, pushing the overall cuts in the current budget to nearly $1 billion.

“Now is not the time, in the middle of a recession where our families are hurting and our businesses are hurting, to increase the burden on those families and those businesses,” Beshear said. “I think if we did that right now, it could well push us further into recession instead of helping us come out of it.”

Beshear said his agenda will be very limited in the upcoming legislative session with his primary focus being on the budget.

“It’s going to be the most difficult budget to put together that I think this state has seen in modern times,” he said.

Beshear said his staff has begun preparing revenue estimates that he will use to make his case for legalizing slots at Kentucky race tracks. Previous estimates have generally ranged from $200 million to $350 million. But Beshear said Ohio’s recent decision to legalize casino gambling could cut into Kentucky’s potential revenues.

The gambling issue was central in Beshear’s 2007 gubernatorial campaign, during which proposed a constitutional amendment that would allow casinos to open in the state. Since then, Beshear has opted to endorse a proposal that would instead allow race tracks to install so-called video-lottery terminals that patrons could play slots and other games of chance.

The horse industry, a major driver of Kentucky’s economy, would get a large share of that money to preserve some 100,000 jobs by Beshear’s estimate. Beshear said the horse industry is hurting in Kentucky because most of the competing states already have approved some form of gambling expansion that has allowed them to increase purses and bolster breeder incentives.

Beshear said poultry, not thoroughbreds, is now the No. 1 agricultural product in Kentucky. “That is proof positive of where the horse industry is headed in this state if we don’t do something,” he said.

The slots proposal passed the House earlier this year but died in the Senate, failing to garner enough votes to move out of the Appropriations and Revenue Committee.

Beshear was sharply critical of Senate Republicans who thwarted the proposal and who are now calling for a constitutional amendment in hopes of winning back the support of horse owners and racing industry leaders.

“It’s too late to be fooling with a constitutional amendment,” Beshear said. “We need to get on with passing legislation that will put VLTs at the race tracks in a limited situation. If Senate Republicans really want to help the horse industry, they’ll step up in January and say it’s time to pass this legislation.”

Beshear has been working to cut into the GOP’s control of the state Senate. He has appointed two Republican state senators to high-paying government jobs, one at the Public Service Commission and another on the state judiciary. The appointments created openings and triggered special elections.

The first of the elections was won by a Democrat. The second will be decided Tuesday. If the Democrat wins, the Republican majority would be cut to 19-18 and slightly improve the odds for passing the slot proposal.

“We’re certainly working hard,” Beshear said. “We hope we win, but you know that’s a district that’s been represented by a Republican for 20 years, so it’s going to be a difficult election.”