Beshear reverses ground on tax reform

By RONNIE ELLIS

FRANKFORT — Gov. Steve Beshear and Kentucky face “probably the toughest budgetary times this commonwealth has seen in a long, long time,” but Beshear is ruling out any broad-based tax reform in recessionary times.

During an interview with CNHI News Service, Beshear said “the middle of this recession is not the time to have broad-based tax increases on our people.”

Beshear also said it’s too early to know whether basic education funding and other priorities he’s tried to protect from previous budget cuts will be spared in the next two-year budget and he’s not worried about a recent poll showing his favorability numbers slipping.

Two House members, Republican Bill Farmer of Lexington and Democrat Jim Wayne of Louisville, pushed tax reform measures in the 2008 General Assembly. When the House voted to increase tobacco and alcohol taxes at that time to fill an earlier $456 million budget shortfall, Wayne and five other Democratic lawmakers withheld their votes until Beshear – and later House Speaker Greg Stumbo, D-Prestonsburg – promised to give tax reform a serious hearing before the 2009 session.

Beshear said the recession “has gotten worse in the last year, not better,” but at the time he made his pledge to Wayne and the others, Beshear was also saying as bad as the shortfall was then, “it’s going to get worse next year.”

Beshear said he continues to be interested in tax reform but not now. He said most proposals – including Wayne’s and Farmer’s – increase some taxes to offset other tax decreases.

“They tend to talk about raising some taxes and lowering other taxes,” Beshear said. “Right now, during the recession, I don’t think is the time to raise anybody’s taxes.”

Wayne said this week the time is right to address tax inequities and produce a tax code with more sustainable revenues. He said Beshear’s reversal on the promise to consider tax reform could cost him votes on other legislation – perhaps even on gambling, which passed the House by only two votes the last time.

Without new revenue, Beshear said it’s going to be difficult to protect priority areas from cuts in the next biennium. That includes the basic funding formula for public schools, SEEK. Through three rounds of budget cuts, the SEEK formula hasn’t been cut – although it also hasn’t grown to keep pace with enrollment.

“We’re going to do everything we can to continue to protect the priorities that we feel are important,” Beshear said. “But at this point, I don’t think anybody knows what we’ll be able to do.”

Beshear met with Kentucky Education Association officials Wednesday morning and KEA President Sharron Oxendine said he promised to do all he could to spare SEEK funding. Other areas of education funding, however, are likely to see more dramatic reductions – things like pre-school and drop-out prevention funding.

But cuts to SEEK could face an obstacle beyond the need to fund schools adequately. That’s because the state intends to use remaining federal stimulus money in the first year and a requirement of that funding was that states not reduce basic education funding from fiscal year 2009.

But Lisa Gross, spokeswoman for the Kentucky Department of Education, said after the first year of the next budget when the stimulus money is gone, it may be impossible to protect SEEK.

“I think it’s going to be in danger after that,” Gross said. “We’re worried about next year but there’s real concern about fiscal year 12.”

Kathy Goff, superintendent of Glasgow Independent Schools, said superintendents across the state are fearful of SEEK cuts in the out years.

“I think you’d have to ignore the information that’s out there if we weren’t bracing for that,” Goff said. But even if SEEK is maintained during the next two-year budget, Goff said, it’s an effective cut anyway because it’s frozen at previous years’ levels without accounting for subsequent enrollment growth.

Beshear said he isn’t concerned with the recent SurveyUSA poll which showed his favorable ratings have slumped to 39 percent across the state. He said his re-election campaign is two years away and he’s concentrating on the budgetary problems of the state.

“We periodically do our own polling and I feel pretty good about what we see in approval ratings, particularly in these kinds of times,” Beshear said. “But right now is not the time to be worried about political polls or approval ratings. We have a number of very difficult decisions to make to get our folks through this recession.”

Ronnie Ellis writes for CNHI News Service and is based in Frankfort. Reach him at rellis(at)cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/ cnhifrankfort.

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