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Governor offers defensive budget: no strategic plan for the future

 

(Clinton, KY Jan.18, 2012) - Governor Steve Beshear delivered his tenth budget to Kentucky’s General Assembly last night at 6:00 pm central time. Overall, it was a budget that offered little hope but rather a series of patches to forestall economic disaster for Kentucky state operations.  

From around the state the reaction was mixed. Most of the traditional media lead with headlines that spoke to these points: (1) Paducah Sun “Sweeping cuts to budget proposed, Governor puts forth 8.4 percent cuts across most state agencies.” (2) Lexington Herald “Beshear outlines 'inadequate' budget proposal for Kentucky” (3) Louisville Courier Journal “Austere Plan has painful cutbacks” (4) Bowling Green Daily “I-65 Project in Budget (5) Hopkinsville New Era “Beshear outlines budget cuts” and (7) Ashland Daily Independent “Day of Reckoning.”

Beshear wasted no time defining the theme of his address. At the fifth line of his speech he said “It’s a budget that –to be candid-is inadequate for the needs of  people.”

From this early point within his speech, the governor explained why the situation was so bad.

“ The historic recession of the last four years has inflicted deep hardship on our families. And we continue to address longstanding fundamental weaknesses in the health and education of our people that have kept Kentucky at a persistent disadvantage. We should be making substantial investments in our physical and intellectual infrastructure to bring transformational change to our state. This budget does not allow us to do enough of that. Not like we should. Instead, it requires painful cuts that may well force us to retreat on some core services … and that risk jeopardizing progress we've made over decades in education. Given our current resources, these cuts are unavoidable.

Ten times in four years we've come together to fill holes in Kentucky's budget. Each time, we've had two goals: To reduce the suffering of our people …And to preserve our top priorities – education, health care for the most vulnerable, job creation and public safety.

To meet these goals, we reduced the size of government … identified and eliminated waste … applied federal stimulus dollars … restructured debt … sold surplus property … deferred payments … transferred money from other funds … reduced energy costs in our buildings … furloughed workers … created a Smart Government Initiative to reduce costs in government's daily operations … and made fundamental changes in major cost areas like Medicaid, Corrections, public pensions and employee health insurance.

We even sold planes on e-Bay. In short, to protect our people we have used every trick in our bag, patched holes with every bandage we could find and reached for every helping hand extended in our direction. But my friends, the major efficiencies have been found, and the tricks and Band-aids are about used up.”

It is my opinion that the best most comprehensive analysis of the governor’s speech was provided by the Kentucky Center for Economic Policy. The following is their statement.

The Kentucky Center for Economic Policy is a non-profit, non-partisan initiative that conducts research, analysis and education on important policy issues facing the Commonwealth. Launched in 2011, the Center is a project of the Mountain Association for Community Economic Development (MACED). For more information, please visit KCEP’s website at www.kypolicy.org.

 I think the KCEP crew, led by Jason Bailey, stayed up all night to analyze the budget. Here is there take on how this will play out.  

Governor’s Budget Proposes Unprecedented Level of Cuts

The Governor’s Executive Budget for 2012-2014 proposes an unprecedented level of cuts of up to 8.4 percent to many state services that have already been slashed deeply over the last few years. The cuts would leave even more agencies with budgets far below 2008 levels, ranging from the Attorney General’s office to the Division of Air Quality and from public libraries to public health departments. Many other services, including K-12 education, would face lesser cuts or their funding would be flat-lined under the Governor’s plan.

This austere budget stems from inadequate state and federal revenue, a difficult economic context, and the impacts of past budget-balancing measures that are no longer available or whose bill has come due.  To move forward, Kentucky needs to advance conversations about generating additional revenue through tax reform.

Balancing the Budget through Deep Cuts and One-Time Sources

The Governor’s budget documents describe a $742 million spending gap over the years 2013 and 2014, a gap that includes both the cost of maintaining the base level of spending on services and targeted additional spending. The Governor proposes to close that gap in the following ways:

* $286 million in budget cuts (closing 38 percent of the gap).

*Transferring $128.5 million from other state funds to the General Fund the first year of the  budget and $116.1 million the second year (33 percent).

*Taking $50 million out of the state’s rainy day fund the first year of the budget and $51.7  million out the second year (14 percent).

* Raising $61 million through a tax amnesty program that would forgive penalties and interest  on those who owe back taxes (8 percent).

* Other measures including use of a small ending balance at the end of 2012 (7 percent).

Some budget-balancing measures that have been part of recent budgets, including debt restructuring and the delay of the last payroll of the year to future years, are not part of the Governor’s proposed plan this time.

Many agencies are cut 8.4 percent from their 2012 levels across state government. The following agencies and services are cut at lower levels, according to the Executive Budget:

 Universities and community college system: 6.4%

 Aging and independent living: 6.4%

 Grants to local school districts (non-SEEK): 4.5%

 Career and technical education, Kentucky Educational Television, libraries and archives, vocational rehabilitation, mine safety: 4.2%

 Public safety including state police, commonwealth and county attorneys, juvenile justice, local jail support: 2.2%

The cumulative impact of the proposed cuts on top of the ten rounds of budget cuts over the last few years is substantial. Figure 1 identifies the funding decreases from 2008 to 2013 for a selected set of agencies and services, and includes those cuts inflation-adjusted to November 2011 prices.

Figure 1: Cuts in state funding

                   

 


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