Declaring “the day of reckoning has come,” Gov. Steve Beshear called Tuesday for 8.4 percent cuts to most government agencies.
Only coal mine permitting and enforcement, education, public safety and a handful of other programs would be spared to make up a $742 million deficit. He presented his proposal to a joint session of the House and Senate.
“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,” he told lawmakers. “But my friends, the major efficiencies have been found, and the tricks and Band-Aids are about used up.”
Beshear said the next round of cuts would come in the first year of his two-year, $19.5 billion budget proposal. Funding would be unchanged in the second year.
The cuts, totaling $286 million, would be especially difficult for agencies that have already trimmed their budgets by more than 30 percent over the past four years.
On the subject of energy and the environment, Beshear said his “proposal recognizes the importance of coal to our economy — both as an energy source and as a job provider — by making limited or no reduc tions in mine permitting, enforcement, safety and licensing. We must preserve our ability to mine coal and to do it cleanly and safely.”
Initial responses from lawmakers were favorable.
“I think the governor’s did a good job of trying to manage the situation we find ourselves in,” said Rep. Rick Rand, D-Bedford. “He has worked very hard to save K-12 education funding which will be viewed very favorably in the House.”
Sen. Jimmy Higdon, RLebanon, called the revenue outlook “very ugly” for the next two years.
“ These are very difficult times in the state of Kentucky, and I think the governor approached it in the right way,” he said. “He didn’t beat around the bush. He said it’s a difficult budget, and it is.”
The governor also used his biennial budget address to promote casino-style gambling in Kentucky, a state that now allows residents to try their luck only on horse races, lotteries and charitable bingo games. Beshear has proposed a constitutional amendment that, if approved by lawmakers, would be placed on the ballot for voters to ratify or reject.
“An economic analysis just released estimates that, in 2010, Kentuckians spent $451 million on casino gaming in our neighboring states,” Beshear said. “These states are enhancing their budgets with hundreds of millions of dollars they rake in by taxing this Kentucky money.”
Beshear said Kentucky needs to keep money in the state to generate revenue to bolster future General Fund budgets.
“That same analysis estimates that, under one scenario, expanding gaming at our tracks alone would bring in one-time license fees of $266 million and $377 million annually into the General Fund,” he said. “These are conservative estimates.”
State economists have predicted that Kentucky’s economy will grow over the next two years, and that revenues will increase as a result. But that won’t happen fast enough to fund current spending.
“Revenues are improving, but they are not improving fast enough to make up the loss of federal stimulus money and to cover growth in the costs of Medicaid, health insurance, retirement benefits and debt service,” Beshear said. “And so the day of reckoning has come, because with this budget, we begin to carve into some of our most critical services.”
The second-term Democrat’s proposal would spare a handful of government programs from cuts, including education, public safety, public advocacy, student financial aid and Medicaid.
The governor called for some $21 million in additional spending to reduce social worker caseloads, expand preschool programs and drug treatment and prevention programs.
To help fill the budget gap, the governor also is proposing Kentucky’s first offer of tax amnesty in a decade. It would forgive some penalties if people come forward and pay their taxes.
He said the move could net $61 million.
Agencies that would see the sharpest cuts include Beshear’s own office and those of the attorney general, auditor, agriculture commissioner, secretary of state and treasurer.
“In these agencies, the fat has long been burned away,” he said. “ Now we’re cutting muscle and bone. Thus the impact of additional cuts will include things like delays in service, loss of federal funds, possible facility closures and even possible layoffs.”
Beshear said he doesn’t plan to impose mandatory unpaid furloughs on state employees but that he couldn’t rule out layoffs as a means for some agencies to slash their budgets.
“There could be some layoffs,” he told reporters in a briefing earlier in the day. “We just don’t know yet.”