Facing a $90.9 million shortfall in the previous fiscal year’s budget, Gov. Steve Beshear on Wednesday signed an order plugging the gap with reserve funds, unexpended appropriations, fund transfers and agency cuts.
Beshear’s budget office announced last week that the state collected 1 percent less revenue than expected, creating the $90.9 million budget hole in the 2014 fiscal year that ended June 30. Wednesday marks the 14th time the Democratic governor has slashed the general fund budget, totaling nearly $1.7 billion in cuts since taking office, according to Beshear’s office.
“We were somewhat limited in our approach to fill this budget hole given it occurred at the end of the 2014 fiscal year,” Beshear said in a statement. “But as in previous reductions, two goals guided our decisions — to take steps to make government as efficient and as lean as possible, and to protect as best we can the core services that offer help and hope to our people and represent important long-term investments in Kentucky’s future: education, health care and public safety.”
The governor transferred nearly $50 million from a number of agency funds. The largest sums came from funds for behavioral health development and intellectual disabilities residential institutions ($15 million), kynect’s Kentucky Access fund ($8.6 million), insurance agent licensing ($2.5 million), petroleum underground storage tanks ($2.1 million), Facilities and Support Services property management ($2 million) and the Kentucky Firefighters Foundation program ($2 million).
Beshear’s order calls for nearly $3 million in cuts to state agencies, with the harshest reductions in budgets for the Public Service Commission ($500,000), the Council on Postsecondary Education ($383,632), the Department for Military Affairs ($350,000) and the Education Professional Standards Board ($297,700).
The budgetary ax could have chopped deeper in executive branch agencies without Beshear’s ability to draw from various funds, he said.
“The use of fund transfers is a valuable tool in how we manage and balance the overall budget of the Commonwealth, and one that keeps us from making deeper cuts to state agencies,” he said in a statement.
‘Rainy day’ fund
Beshear also tapped $21.2 million from the state’s budget reserve trust fund, commonly known as the “rainy day” fund. The trust’s balance will fall from $98.3 million to $77.1 million, and Wednesday’s action increases the amount budgeted from the fund in fiscal year 2014 from $49 million to $70.2 million.
Although drawing from the state’s “rainy day” fund isn’t ideal, Rep. Rick Rand, a Bedford Democrat and chairman of the House Appropriations and Revenue Committee, said the trust exists for matters such as budget shortfalls.
“I think it was probably a good move on their part to do that,” he said in a phone interview. “Preferably we would have had a surplus and wouldn’t have to deal with it, but we do, and that’s why the reserve is there.”
Another $14.9 million in lapsed appropriations helped bridge the funding gap, and judicial and legislative budgets were cut $1.5 million and $287,600, respectively.
“While it’s never easy to have to return part of our budget, we don’t anticipate that the $1.5 million will have a detrimental effect on court operations,” Chief Justice John D. Minton Jr. said in a statement.
The General Assembly’s Republican leaders pinned the $90.9 million shortfall on different culprits.
Senate President Robert Stivers, R-Manchester, called Beshear’s actions “appropriate” and blamed President Barack Obama’s economic policies for Kentucky’s budgetary woes, particularly in the state’s coal industry. He noted coal severance taxes have dropped 14.3 percent from 2012.
House Minority Leader Jeff Hoover, though, called the constant cuts to various state agencies “short sighted” and said House Democrats have stymied bills that would help Kentucky’s economy.
“Time and time again legislation like comprehensive tax reform, public private partnerships, and other bills have been filed in the House that could help improve the revenue outlook for Kentucky,” Hoover, R-Jamestown, said in a statement.
“But these ideas continued to be bottled up by House Speaker Greg Stumbo and House Democrat leadership. Until we change the culture in Frankfort with new leadership in the House, Kentucky will continue to rob Peter to pay Paul just to make ends meet.”
Beshear also filled a $22.2 million gap in the state road fund Wednesday, largely through $12.2 million in unexpended appropriations. Year-end fuel tax adjustments accounted for $4.5 million while cuts and fund transfers provided $3.7 million and $1.8 million, respectively.
“No budgeted road projects will be negatively impacted by this necessary balancing action,” Beshear said in a statement.