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Beshear relying on cuts, stimulus

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Photo By AP/Ed ReinkeGov. Steve Beshear talks about the state's budget as he announces his call for a special legislative session Wednesday.

There’ve been several methods of dealing with budget crises in other states, including more gambling and higher fees, but Gov. Steve Beshear says he’ll rely on federal stimulus dollars and cuts.

Beshear announced Wednesday he’ll call lawmakers back to Frankfort on June 15 to address a $1 billion budget shortfall. Most state agencies will get a cut of 2.6 percent but not Medicaid, education or prisons.

“My plan protects our families and businesses in this vulnerable time; preserves investments in critical priorities like education, health care and public safety,” Beshear said.

However, his plan would eliminate three paid holidays for state employees making less than $50,000 and five holidays for those making more than $50,000. Beshear said the plan would avoid layoffs or furloughs.

Employees currently receive 11.5 paid holidays. Under the proposal, offices will remain closed but employees will not be paid. It’s unclear what holidays will be eliminated.

Lee Jackson, president of the Kentucky Association of State Employees, said in reference to the unpaid holidays, “We want to make it as painless as possible for state employees,” and that he’s glad to see there aren’t any plans for layoffs or furloughs.
“These are tough times,” Jackson said.

Sen. Julian Carroll, D-Frankfort, said he’s glad to see the plan tries to treat employees equitably based on salary. However, he said he’s concerned about the impact the plan could have on employees earning less than $35,000.

“They live on every penny they make,” Carroll said.

Carroll also suggested that lawmakers could share in the sacrifice and also forgo some paid holidays.

“None of us should insist on sacrifice unless we are willing to sacrifice ourselves,” he said.

However, Rep. Carl Rollins, D-Midway, and Rep. Derrick Graham, D-Frankfort, said they were disappointed with the plan to cut paid holidays.

“State employees have made sacrifices already,” Graham said.

Both lawmakers suggested there are better ways to address the deficit. Rollins said cutting holidays would only save $11 million – approximately one percent of the $1 billion shortfall.

“I’m going to be looking for other places to save $11 million,” he said.

Cutting paid holidays would reduce employees’ salaries by 1 to 2 percent, Rollins said. Last year they received a 1 percent pay raise.

“It doesn’t make sense to me,” he said.

Only three states – Wyoming, North Dakota and Montana – are not facing a budget crisis, according to Sujit CanagaRetna, senior financial analyst for the Council on State Governments.

The other 47 states have used a variety of solutions to address deficits including raising taxes or increasing fees, approving expanded gambling, raiding “rainy day funds” and cutting programs, he said.

Many state legislatures are still in session although Indiana plans to hold a special session in June to deal with the budget.
States are also using federal stimulus dollars to bridge funding gaps in education, transportation, healthcare and unemployment insurance.

Beshear’s plan to tackle the budget crisis will use $740 million federal stimulus funds coming to Kentucky during the next fiscal year.

However, the special session does not include immediate plans to approve expanded gambling. Beshear said he wants lawmakers to consider a plan to allow for video slots at tracks and could amend the agenda later.

Several states are considering or have approved additional gambling revenues, CanagaRetna said. Hawaii, which has no gambling at all, is considering a plan to allow casinos.

Florida recently approved a new deal with the Seminole tribe to run slots at racetracks. Arkansas will debut its first lottery game next year.

Another tool for addressing deficits includes raising taxes or fees – which Beshear said he will not do.

CanagaRetna said a number of states have implemented tax or fee increases. Florida will collect $630 million to $970 million in new revenue by increasing fees for divorce filings, fishing licenses, driver’s licenses, motor vehicle tags and grave registrations.
Washington state increased hunting and fishing license fees by 10 percent.

Camping fees at parks in Colorado went up $2 per night and boating fees increased between $10 and $25.

“A blizzard of fees is sweeping the country,” CanagaRetna said.

Beshear said most state agencies will be cut a further 2.6 percent – a total of $200 million.

CanagaRetna said 22 states have cut K-12 education and 30 have cut funding to colleges and universities.

Nineteen states have cut services to children and 21 states have cut services to the elderly, he said.

A number of states have laid off or furloughed public employees, CanagaRetna said. Hawaii has told 46,000 employees they will be furloughed for 72 days in the next two years – equal to a 14 percent pay cut.

Wisconsin is considering sending employees home for 16 days to save $121 million in the next two years.

More than 200,000 state workers in California have been furloughed.

Despite the “gloom and doom”, CanagaRetna said there’s reasons to be optimistic. There are a number of high-technology programs underway, including an all-electric car in Tennessee and solar cells in Oregon.

“Like Federal Reserve Chairman Ben Bernanke said, there are some ‘green shoots of growth’ visible on the horizon,” CanagaRetna said.

The Associated Press contributed to this report.

Special Session Starts June 15

Gov. Steve Beshear has summoned the Kentucky General Assembly into a special session to begin on June 15 to deal with the state’s looming budget shortfall. Below are some highlights of his plan to close the $1 billion budget hole:
STIMULUS FUNDS: Use about $742 million in federal stimulus funds.
BUDGET CUTS: 2.6 percent budget cuts to most government agencies.
MAINTAIN FUNDING: Maintain current funding levels for education, Medicaid, local jails and state parks.
FUNDING INCREASES: Appropriate additional money for prosecutors, public defenders and state prisons.
PAY: Beshear and inner circle will maintain their 10 percent pay cuts, teachers to get 1 percent raises. State employees will have three to five unpaid holidays depending on their salaries.