State projects $294 million shortfall

By RONNIE ELLIS

The state is projecting a $294 million shortfall for the current budget year, just three months into the fiscal year, and Gov. Steve Beshear says “all options are on the table,” including significant spending cuts and increasing revenues.

Beshear told reporters Thursday afternoon the budget shortfall may result in “widespread spending cuts to revenue increases.” He’s asking the Consensus Forecasting Group – a group of independent economists who forecast state revenues – to offer a “second opinion” on what he called his administration’s “conservative projections.”

He then intends to develop a plan which will include spending cuts but might include ways to increase state revenues and take that plan to legislative leaders, interest groups and to the people of Kentucky through a tour around the state like one he made last summer.

“We may not be able to solve our budget problems with spending cuts only,” Beshear said.

Beshear said he will consider calling a special session after the first of the year during the interim period when the General Assembly is recessed for three weeks during the odd-numbered year “short session.” When voters approved a constitutional amendment allowing such sessions, the amendment included a provision that any revenue measures must attract a constitutional majority – 60 of 100 House seats and 23 of 38 Senate seats. Such measures could be passed in a special session with a simple majority.

“If we decide we need a special session, one of the considerations is you don’t have to have a super majority,” Beshear said.

Beshear’s general counsel, Ellen Hessen, said there is nothing in the Kentucky constitution which prohibits a special session during that time and other states have called special sessions in similar situations which have been upheld by the courts.

Beshear said he expects the forecasting group to report around Thanksgiving and he hopes to have a “concrete plan” by Dec. 1 which he can then take to the people of Kentucky.

Beshear said it’s difficult to predict what measures will be required because of the uncertainties in the national economy, uncertainty about another stimulus package by Congress and even who will win the presidential election. But, he said, anything he or the legislature do to cover the current fiscal year won’t solve the long-term problem.

“Our goal is to figure out what we have to do to survive this economic crisis,” Beshear said. But the problems will continue beyond any short-term fix, he said.

The road fund is also $71 million or 5.3 percent below budget projections, Beshear said. And while the current budget includes a budget reduction plan and he can cut spending by 3 percent, Beshear said he doesn’t think that will be sufficient.

“The spending reduction I could probably do by executive order,” Beshear said, “but other parts of the plan, I’d probably have to get the General Assembly’s approval.”

He wouldn’t say what the other parts might be.

“But we must be realistic,” Beshear said. “We may not be able to solve our budget problems with spending cuts alone.”

Asked about increasing the cigarette tax or reviving his proposal for casino gambling, Beshear said, “All options are on the table,” but it’s too soon to choose among them. Any constitutional amendment for expanded gambling, however, could not go on the ballot until 2010 and so wouldn’t affect the present budget year.

The Budget Reserve Trust Fund, often called the Rainy Day Fund, has a $226 million balance but $191 million of that is budgeted for the second year of the biennial budget.

Ronnie Ellis writes for CNHI News Service and is based in Frankfort. He can be reached by e-mail at rellis@cnhi.com.