Tuesday, December 29, 2009

8 steps to understanding Kentucky's budget crunch

8 steps to understanding Kentucky's budget crunch:

From today's Herald-Leader, an easy to understand guide to Kentucky's budget problems. I am assuming they prepared this graphic in advance of today's budget briefing by Governor Beshear where he will likely lay out his approach to solving Kentucky's latest $100 million budget deficit and give a preview to his budget address set for January.

"Although the economic recession, which has brought double-digit unemployment to Kentucky, is the major factor behind Kentucky's budget woes, their roots run much deeper. Here's an eight-step primer in advance of the 2010 General Assembly, which begins Jan. 5.

1. Kentucky has a longstanding cash crisis. Since 2000, the General Assembly has spent about $3.6 billion more from the General Fund than the state collected in revenues.

2. Lawmakers have used a series of short-term fixes to balance the budget over the years. Sometimes, they raid other pots of money that are set aside for specific purposes, such as cleaning up leaky underground storage tanks. More recently, they've relied on federal stimulus money.

3. Meanwhile, lawmakers have been borrowing big. As of June 30, Kentucky had $6.875 billion in outstanding debt. It takes 6.43 percent of the state's revenue to pay interest on those bonds.

4. These long-term budget issues were already in place before the current decline in state revenues. General Fund revenues peaked at $8.664 billion in fiscal year 2008, but that number is expected to dip below $8.2 billion this year.

5. Lawmakers responded to the budget crunch in the first half of the year by increasing taxes on alcohol and cigarettes, cutting expenses and spending federal stimulus funds. When the fiscal year ended June 30, the state had decreased overall spending for the first time since 1993.

6. They didn't cut enough. Now, lawmakers face another projected shortfall in the current fiscal year, which ends June 30, of $100 million. Gov. Steve Beshear has warned most state agencies to plan for a 6 percent spending cut.

7. The outlook for the next two years is not good. To continue spending $9.09 billion a year in the next biennium, Beshear and lawmakers must come up with $890 million more than is projected to flow into the General Fund over that time.

8. The governor, who says he opposes broad-based tax increases, will lay out his budget plan to lawmakers by Jan. 19. The House and Senate, whose leaders have signaled they might consider "tax reform," each get a chance to rework the budget. Leaders from both chambers must smooth out their differences by April 15." From Kentucky.com

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