KENTUCKY (12/23/13) - Over the past week we have examined the need for a stronger economy, especially job growth. But bringing in new jobs takes more time than Kentucky has to give. We need new revenue, and we need it now.
That begs that question: what are we, as a Commonwealth, facing in terms of revenue needs and another budget shortfall over the next two-year budget cycle?
In the past six years, the state has made $1.6 billion in cuts to cover shortfalls caused by steep revenue losses and funding imbalances seen since the 2007 recession. Certain areas of spending, like Medicaid and guaranteed base funding for public schools, have escaped the budget ax but they, too, are financially strapped as the numbers of people they must serve continue to grow. The belief was that the next budget cycle—the one for which we must pass a budget in the upcoming 2014 Regular Session—would not require deep cuts state agencies have seen since 2008 as the economy recovered. At least that has been our hope.
That hope is now a little more dim, as state budget officials explained in a presentation to the Ken-tucky Chamber of Commerce in mid December.
Financial numbers shared with the Chamber by the Office of the State Budget Director, although unofficial, portend a shortfall of at least another $370 million. Now, it is yet unknown what that means in terms of additional cuts. There has been no decision by members of the Kentucky General Assembly on future cuts because, 1) no official revenue estimates have yet been released and, 2) state agencies are traditionally asked by Gov. Beshear to plan for cuts then appear before lawmakers to explain their “budget reduction” plans. So, it will likely be at least a few weeks before House and Senate party caucuses meet to discuss any legislative plan of action.
The good news in all this uncertainty (yes, there is some good news!) is that state budget experts think the economy is rebounding, slowly but surely. They expect state revenues to improve in future years—an expectation reflected in the fact that 1) there is estimated new revenue through 2016, with room for growth in those numbers if recovery is more robust than anticipated, and 2) the fact that State Budget Director Jane Driskell said at the end of October, and I quote: “Overall, the outlook for the next three quarters is positive, but with expectations for slow growth...”
Good news can also be gleaned from 2013’s final meeting of the independent state budget forecast-ing panel, the Consensus Forecasting Group (CFG), which gave its unofficial revenue projections for the next two years last Thursday. I will share details of the CFG’s projections in my next article. It is those very projections on which the Governor says he will base the budget proposal that he presents to the General Assembly on Tuesday, Jan. 21. The panel’s official revenue estimates will be released on or before the session’s 15th legislative day scheduled for Jan. 28.
Now, some of my readers have some many questions about recent stories in the news that mention using expanded gambling or tax code changes to boost state revenue. As far as I am aware, Gov. Beshear has said any budget plan he presents to lawmakers will NOT include revenues from those sources, which are yet-unapproved by the Kentucky General Assembly anyway. He has also said, however, that getting the necessary revenue to make new investments in education, etc., will “require some cuts in other agencies.”
It only stands to reason that those cuts would be less severe if there were new state dollars to be had.
That said, I understand there is a bipartisan effort underway by key House and Senate leaders to draft and present expanded gambling legislation in the upcoming session. There is also support among some lawmakers for tax reform changes, although getting a tax reform agenda through in an election year could be like shooting for the moon. The outcome of either or both will ultimately depend on how the thought of a 7th consecutive year in cuts to state programs sits with a majority in the House and the Senate.
I do not want my constituents and Kentuckians across the Commonwealth to lose heart about our economic future. We are, really, holding our own. As for decisions made over the next three and a half months during the 2014 Kentucky General Assembly: please, make your voices heard. Share your com-ments and concerns with lawmakers in the House and Senate by calling the toll-free Legislative Message Line at 800-372-7181. If you want more revenue, say so, and how. The future is in all our hands.
Happy New Year!
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