Gov. Steve Beshear issued a pair of executive orders this week reducing state spending levels to plug a $90.9-million hole in Kentucky's budget.
The Office of the State Budget Director announced the shortfall last week, which is due largely to an unexpected $63-million decline in income related to capital gains.
Beshear's cuts cover the $90.9-million gap.
In a statement released Wednesday night, Beshear said the state was "somewhat limited" in its approach to filling the budget hole.
“But as in previous reductions, two goals guided our decisions—to take steps to make government as efficient and as lean as possible, and to protect as best we can the core services that offer help and hope to our people and represent important long-term investments in Kentucky’s future: education, health care and public safety," Beshear said in the released statement.
Kentucky Governor Steve Beshear has signed an order to cover a $91 deficit in the state's $9.5 billion state budget.
State officials announced the shortfall last week following sluggish collections on state income taxes. Beshear's order cuts $3 million in state spending. He made up the rest by transferring money from other sources, including $21.2 million from the state's reserves. State officials said they had few options to make up the deficit because the shortfall came at the end of the fiscal year when most of the money had already been spent.
Beshear's order also dealt with a $22.1 million shortfall in the state's road fund, with just $300,000 in cuts to construction projects.
This was the 14th budget reduction Beshear has implemented since taking office in 2007.
Kentucky is facing a $91 million budget shortfall, and one of the driving factors is a decline in a form of income primarily used by the nation’s wealthiest individuals.
In 2012, the U.S. Congress was preparing to take the country over the “fiscal cliff” over rising debt, rising healthcare costs, and spending on the wars in Iraq and Afghanistan. To reduce the deficit, President Obama proposed raising the federal capital gains tax, which largely impacted the nation's wealthiest, prompting a massive sell-off by 2013.
As a result, state budget forecasters anticipated a repeat of such revenue on what was essentially a one-time occurrence.
“All states knew of this change, and they made adjustments in their revenue estimates, but it was a much larger impact nationwide than states planned for,” said Kentucky State Budget Director Jane Driskell.
Driskell says there is no need for a special legislative session to address the shortfall. Governor Beshear could issue a budget reduction order to balance the state’s coffers.
Kentucky's general fund tax revenues increased 2.4 percent in March - enough to ward off a deficit but not enough to promise a surplus.
State Budget Director Jane Driskell announced the state collected $753.5 million in March, a $17.7 million increase from last year. State officials predicted Kentucky's revenues would grow 2.1 percent in the 2014 budget year that ends June 30. For that to happen, revenues must grow 3.9 percent in the next three months.
Driskell said she is confident the state will meet the estimate but said a surplus is becoming less likely.
Road fund revenues increased $22.8 million in March, an increase of 19.9 percent. Road fund collections must increase an additional 2.7 percent over the next three months in order to meet the estimate.
The budget Kenutcky lawmakers approved this week will give $1.5 million to a costly renovation of the University of Kentucky’s Rupp Arena.
The money would be used to finance architects' and engineering fees and other planning costs for the $310 million project.
Republican lawmakers got few answers from Lexington Mayor Jim Gray, who lobbied House and Senate leadership for $65 million for the project during marathon budget talks held in Frankfort over the weekend.
Gray said the project would create thousands of jobs in Lexington, and failing to provide the amount would “drive a stake through the heart of the project.”
Details of the project remain scarce, as Gray and other officials are under a verbal non-disclosure agreement with the university.
The director of one of Kentucky’s leading non-profit economic policy think tanks says the recently-passed state budget fails to address the state’s revenue problem.
Jason Bailey, the director of the Kentucky Center for Economic Policy, says the budget, which includes five percent cuts to over a dozen state agencies, reflects the 14th round of harmful cuts since 2008, and doesn't do enough to generate new revenue.
“There are areas that have been time after time after time, so I think for higher education, for human services, for areas like environmental and public and worker protection, I think those systems will be frayed even further by the cuts that we’ve seen.”
Bailey adds that the revenue bill passed by the legislature that gives tax breaks to the bourbon industry and beer and wine wholesalers aren’t worth the cuts to important state agencies.
After winning speedy approval in the Senate, the Kentucky House has given final passage of the state’s $20 billion two-year budget.
Lawmakers passed a series of budget bills funding the legislative, judicial and executive branches of state government with minimal debate, and earlier than they have in previous years.
The budget bills will head to Gov. Steve Beshear’s desk for approval. They largely preserve his efforts to fund K-12 education at the cost of other state programs.
House Speaker Greg Stumbo hailed the compromise with the Senate as an example of how democracy can work.
“The gridlock and the stalemate that’s engulfed both parties in Washington didn’t make it’s way to Kentucky. It worked," Stumbo said, to applause from fellow lawmakers. "And you can go home tonight and you can look your constituents in the eye while you’re on this veto break and you can say it worked. We did what you paid us to do.”
Lawmakers will now break for two weeks until returning April 14 for a veto session.
Provisions to block state money from being used on Kentucky's implementation of the Affordable Care Act will remain in the budget agreement reached over the weekend by state lawmakers. Sparring between House Democrats and Senate Republicans over the ACA dominated negotiations.
The ACA covers the costs of implementation through 2017, after which the tab will be split with the state.
Now, Senate President Robert Stivers says lawmakers will send the governor a budget that blocks general funds from going toward the state's health insurance exchange, Kynect, and the expansion of Medicaid.
"I think everybody saw that we have worked hard over the last three or four days," the Manchester Republican said. "There's been a lot of discussions. At points in time there may have been a little bit of political theater involved but we've reached an agreement, compromising and understanding the realities of each person's positions and each region's positions and each party's positions."
Currently, over 320,000 people have been insured through Kynect, with two-thirds obtaining Medicaid coverage.
Top Kentucky House and Senate lawmakers appear to have reached an agreement on the state's next two-year budget.
The Herald-Leader reports that negotiators from both chambers hammered out a budget deal after being cloistered in a committee room at the Capitol Annex in Frankfort Saturday night. They emerged from the room at around 5:30 a.m. Sunday morning.
Many of the sticking points worked out in the overnight meeting involved funding for higher education and money for K-12 education.
The blueprint would cut the operational budgets of state universities by 1.5 percent, which is less than the 2.5 percent cut proposed by Governor Steve Beshear. Most schools, like WKU, would be allowed to choose a top priority building project that would be paid for by general fund bonds and agency bonds.