| Governor: FY11-12 budget shortfall will reach unprecedented levels
Medicaid and debt service alone push shortfall to $1.5 billion
FRANKFORT, Ky. (Dec. 29, 2009) – Gov. Steve Beshear today briefed legislative leadership on the upcoming biennial state budget, and announced the shortfall is dramatically greater than has been discussed in the media.
Although the Consensus Forecasting Group (CFG) last week estimated revenue growth for the next two fiscal years, that growth is still not sufficient to fund existing expenses. Some reports regarding the CFG estimates said the shortfall is approximately $900 million over the next two years.
However, Gov. Beshear noted that figure lacks some key expenses, examples of which include growth in Medicaid and new debt service on bonds authorized by the General Assembly, which would push the shortfall to $1.5 billion. Other significant costs that would push the shortfall even higher include:
- retirement contribution increases;
- increased cost of health insurance for state workers, teachers and retirees;
- prison population growth;
- courthouses coming online; and
- needs in our education system.
“It’s critical that we – the General Assembly and I – have a clear picture of the real shortfall figure,” Gov. Beshear said. “With accurate information, we can make better decisions on balancing this budget.”
In addition, the current year budget still faces a revenue shortfall of $100 million. Gov. Beshear will present his plan to balance that budget next week. It will be the sixth time the governor has balanced Kentucky’s budget in less than two years. Like most other states, Kentucky is being squeezed by the global economic crisis.
Budget Actions to Date
Spending reductions and efficiencies have been a major part of the Governor’s budget balancing strategy. Since taking office, he has reduced spending by more than $850 million and reduced the state workforce by more than 1,600. However, Gov. Beshear’s commitment to state government’s core mission has enabled him to preserve funding for the SEEK formula for K-12 education, healthcare for our most vulnerable citizens, and certain public safety and economic development programs.
As a result, in the last round of budget cuts, 85 percent of state spending was exempted. That left 15 percent of government to bear the brunt of cuts, with some agencies reduced 20 percent to 25 percent.
“The cumulative impact of these cuts is troubling,” Beshear said. “Further significant cuts to some of these agencies could effectively close them down. We have to be innovative and inventive as we approach the next budget to ensure we continue to provide the services our citizens need.”
Gov. Beshear, who will present his proposed FY11-12 budget to the General Assembly on January 19, challenged legislative leaders to work with him and said he would welcome any ideas they may have for responsibly managing the upcoming budget.
“I’ll be working hard with my team to develop a responsible, thoughtful budget proposal that preserves our highest priorities to the greatest extent possible and meets the needs of our citizens,” Gov. Beshear said. “I invite any legislators who have thoughts on managing this budget to bring them to me. Kentuckians need leaders to work together during this difficult financial time.”
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Although the Consensus Forecasting Group (CFG) last week estimated revenue growth for the next two fiscal years, that growth is still not sufficient to fund existing expenses. Some reports regarding the CFG estimates said the shortfall is approximately $900 million over the next two years.
However, Gov. Beshear noted that figure lacks some key expenses, examples of which include growth in Medicaid and new debt service on bonds authorized by the General Assembly, which would push the shortfall to $1.5 billion. Other significant costs that would push the shortfall even higher include:
- retirement contribution increases;
- increased cost of health insurance for state workers, teachers and retirees;
- prison population growth;
- courthouses coming online; and
- needs in our education system.
“It’s critical that we – the General Assembly and I – have a clear picture of the real shortfall figure,” Gov. Beshear said. “With accurate information, we can make better decisions on balancing this budget.”
In addition, the current year budget still faces a revenue shortfall of $100 million. Gov. Beshear will present his plan to balance that budget next week. It will be the sixth time the governor has balanced Kentucky’s budget in less than two years. Like most other states, Kentucky is being squeezed by the global economic crisis.
Budget Actions to Date
Spending reductions and efficiencies have been a major part of the Governor’s budget balancing strategy. Since taking office, he has reduced spending by more than $850 million and reduced the state workforce by more than 1,600. However, Gov. Beshear’s commitment to state government’s core mission has enabled him to preserve funding for the SEEK formula for K-12 education, healthcare for our most vulnerable citizens, and certain public safety and economic development programs.
As a result, in the last round of budget cuts, 85 percent of state spending was exempted. That left 15 percent of government to bear the brunt of cuts, with some agencies reduced 20 percent to 25 percent.
“The cumulative impact of these cuts is troubling,” Beshear said. “Further significant cuts to some of these agencies could effectively close them down. We have to be innovative and inventive as we approach the next budget to ensure we continue to provide the services our citizens need.”
Gov. Beshear, who will present his proposed FY11-12 budget to the General Assembly on January 19, challenged legislative leaders to work with him and said he would welcome any ideas they may have for responsibly managing the upcoming budget.
“I’ll be working hard with my team to develop a responsible, thoughtful budget proposal that preserves our highest priorities to the greatest extent possible and meets the needs of our citizens,” Gov. Beshear said. “I invite any legislators who have thoughts on managing this budget to bring them to me. Kentuckians need leaders to work together during this difficult financial time.”
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