Increase in projected shortfall to more than $450 million
confirms Kentucky’s economic crisis
Gov. Beshear says spending cuts necessary along with bipartisan
approach to address state’s looming shortfall
FRANKFORT, Ky. (Nov. 21, 2008) – Gov. Steve Beshear said new projections issued today by the Consensus Forecasting Group (CFG) estimating a more than $450 million shortfall this fiscal year confirm a crisis is looming that will require not only extensive spending cuts, but also a bipartisan resolve to work together to meet the challenges ahead.
An internal projection nearly a month ago estimated a $294 million shortfall in General Fund revenues, a 3.3 percent decline. The revised estimate of $456.1 million, which includes an additional month of economic data, represents a 5.1 percent decline in revenues.
Gov. Beshear asked the CFG, a panel of independent economists who by law set the official revenue forecast for the state, for the updated projections, which they released today.
The CFG also projected a $104.7 million shortfall in the Road Fund, a decline of nearly 8 percent. This number is up from a projected shortfall last month of $71 million, a 5.3 percent decline.
“This financial crisis is neither imagined nor exaggerated. It’s real and it must be addressed,” Gov. Beshear said. “Kentucky’s elected leaders, regardless of party or politics, must come together to confront this challenge.
“Make no mistake, only tough choices lie ahead.”
To that end, Gov. Beshear said he would formulate a plan to address the shortfall by early December and then meet with legislators and people throughout the state for input in “finding the best way to navigate an economy as challenging as any in U.S. history.”
Gov. Beshear said three principles will guide the proposed plan:
- Broad spending cuts throughout state government will be necessary. “The shortfall is too large, and it comes too far along in the fiscal year,” Gov. Beshear said. “Let me be clear: I’m talking about cuts that will bring pain.”
- Cuts may not be enough to responsibly balance our budget. “Families are hurting,” the governor said. “State government services are needed in this time of crisis more than ever, and I have no intention of letting them down.”
- Cuts must not compromise future needs. Any budgetary steps taken now to address the fiscal crisis “must not compromise our ability to meet future needs,” Gov. Beshear said. Most economists predict our economy will remain deeply troubled for several months, if not a couple of years.
“Next year, the budget shortfall may be even larger.”
As a result, Gov. Beshear said it was critical that any solutions to this year’s shortfall must keep in mind the long-term fiscal health of the state.
Yet, even in the midst of a clear financial crisis, Gov. Beshear said he is confident that the state can, and will, emerge stronger.
“If we work together, if we put progress ahead of partisanship, I believe we will emerge stronger than before,” he said. “But we must commit ourselves now to working strategically and thoughtfully. I stand ready and committed to that work, confident that Kentucky’s best days lie ahead."