The Governor is talking about calling the legislature back to Frankfort for a Special Session in mid-May to address the budget situation. He has not set a date as of yet, and appears to be trying to work with House and Senate to get an agreement on the budget before calling them into Special Session. Here is a letter the Governor sent to all legislators on the budget situation, click to download: Governor Letter to Legislature
What happens now? The Governor has said he will call a special session in May. There is nothing on the horizon that could change the fiscal dynamics. The state will still be facing a $1.5 billion deficit, gaming is still not going to pass and don’t expect any new state revenue.
What are the consequences? The Governor has said a good portion of the budget he presented and both chambers adopted was predicated on restructuring debt. He believes this must be done by June 1 to be able to utilize some $120 million in the General fund and $81 million in the Road fund. He is also saying he would need 30 days to plan for any layoffs or shutdown in state government. According to court decisions the last time this happened, a Governor cannot spend money that has not been appropriated by the General Assembly.
What do we think the resolution will be? We believe the continuing appropriation would be the easiest to do. Both chambers could probably agree on additional cuts to make it work. The House could give on their objection to a two year budget and allow for larger cuts in the second year knowing they will be back in January and the state financial future might improve by then.