RONNIE ELLIS COLUMN: Frankfort faces scary budget picture

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November 6, 2009

By RONNIE ELLIS The Glasgow Daily Times Fri Nov 06, 2009, 02:16 PM CST

FRANKFORT — The doldrums have descended on Frankfort. Ask passers-by in the capitol or annex hallways what’s going on and the response likely is: “It’s just really quiet.”

Now in Frankfort, that is kind of like those suspense or horror movies when deadly calm moments precede some surprise or horror. You know how those movies go – the director focuses attention on the crew getting drunk and reminiscing about old boating accidents while JAWS sneaks up underneath the boat.

There’s a huge shark looming which could rip a hole in the ship of state. While everyone talks about gambling and another special election, there awaits in the murky shadows as much as a $1.4 billion hole in the next two-year budget. That could be how much lawmakers will have to come up with just to keep the current level of services if federal stimulus money is withdrawn over the next two years.

Ask lawmakers what they can do and they almost uniformly talk about cutting expenditures. No one, including Gov. Steve Beshear, wants to discuss taxes, even by considering a couple of existing proposals to reform Kentucky’s tax code. House Speaker Greg Stumbo, D-Prestonsburg, has talked about asking some flush school districts to offset reductions in state funding with their own reserve funds.

Stumbo told me this week he never intended to “claw back” money from those districts or make across the board reductions. He said it would require a district-by-district review and those who have exceptionally large reserves might be asked to offset some SEEK formula reductions. (The state requires a 2 percent contingency fund and encourages up to 5 percent but at least a few districts exceed those levels substantially.)

Another option which has been floated is to pass a one-year budget when lawmakers come to town in January and then hope the economy improves enough or the federal government renews stimulus funding to ease the problem in the second year of the biennium. Lawmakers could then come back in the 2011 “short” session and craft a budget for the second year. After those, there aren’t many options except to cut employment which means fewer services.

The General Assembly has for years manufactured budgets built on a house of cards, raiding restricted funds, issuing bonds, and using other budgetary legerdemain to put off the day of reckoning. But that day is looming. Without new revenues or an unlikely and sudden economic boom, it’s hard to see how those painful choices can be avoided any longer. Even if they were to pass some sort of expanded gambling measure or comprehensive tax reform, the revenues wouldn’t arrive in state coffers soon enough to help in the first year. And any gambling measure without a constitutional amendment will almost certainly face court challenges.

Some lawmakers seem to think the federal government will come through with more stimulus funding, but politically that seems a stretch. Polling in the New Jersey and Virginia governors’ races where Republicans won indicates voters concerned about jobs, the economy and deficits made the difference. The just announced SurveyUSA poll which shows Rand Paul leading Trey Grayson in the Republican primary for the U.S. Senate seems to show Paul’s criticism of federal spending is gaining traction in Kentucky as well.

Add it all up and it makes for a pretty scary budget picture for the governor and the General Assembly. It’s quiet in Frankfort now, but if you listen carefully you can hear that beat from the movie score of JAWS just before that giant shark shows up.

RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.

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