Kentucky governor warns budget shortfall could surpass $1.5 billion over next 2 years

Ky. budget shortfall could exceed $1.5 billion

FRANKFORT, Ky. — Kentucky could be facing a budget shortfall of more than $1.5 billion over the next two years because of the economic recession, Gov. Steve Beshear said Tuesday.

“We face a challenge much greater than many had anticipated,” Beshear said at a Capitol news conference. “Obviously, this is going to require, more than ever before, a cooperative, bipartisan working relationship between the legislature and the governor’s office if we are going to continue to move this state forward.”

The Democratic governor didn’t rule out the possibility of furloughs or layoffs among the state’s nearly 34,000 employees.

Senate President David Williams said he believes personnel cuts will be necessary to deal with the shortfall, though he differed with the governor on the amount of the budget gap. Williams said he considers the shortfall, which he estimated at $900 million, “manageable” and vowed to work with the governor to resolve it.

“We will consider any measure the governor brings forth in good faith,” Williams said.

Beshear said he would do “all that is humanly possible” to spare education from sharp cuts at a time when rising Medicaid costs and debt payments for construction projects are eating away at state revenues.

Surrounded by spending charts, Beshear said he is open to all suggestions for generating more revenue except one. He said he is opposed to any type of broad tax increases.

“I think it would be counterproductive right now to have a broad-based tax increase,” he said. “I think it would tend to push us farther into this recession than to help us come out of this recession.”

Williams, the Burkesville Republican who heads the Republican majority in the Senate, agreed that tax increases are not an option.

Some legislative leaders have touted a variety of ways to generate more revenue, including a proposal to open the state to more gambling by legalizing slots at horse tracks. Revenue generated by taxing slots has been estimated at $200 million to $350 million a year — not nearly enough to resolve the budget crisis.

While Beshear said Tuesday that slots remains one option that could be considered, Williams said he doesn’t think lawmakers would approve the proposal.

Beshear said he also remains hopeful that Congress might provide some additional economic stimulus funding so that it won’t be necessary to make massive cuts to government services.

The shortfalls have fueled discussions among legislative leaders about tax reforms. The governor said he would oppose any such reforms that would result in broad tax increases.

A panel of Kentucky economists predicted earlier this month that the state will have to deal with an additional $100 million budget shortfall in the current fiscal year. That’s in addition to some $800 million in cuts that have already been made to the current budget.

The governor called on Democratic and Republican lawmakers to put political differences aside to find solutions to the financial problems.

“It’s imperative that we begin to work together on the unprecedented challenge of balancing the budget,” Beshear said.