FRANKFORT — Gov. Steve Beshear plugged a $108 million budget shortfall Monday with a combination of 3 percent spending cuts in most state agencies, transfers from other funds and the use of one-time federal stimulus money.
He also said he plans to return $30 million to $40 million in excess education funds to the state's school districts to cover previous cuts.
Beshear released details of his budget reduction at a news conference at the Capitol. It is the sixth budget reduction he has made since taking office in December 2007 and the second time since the fiscal year began in July that he has had to cut this year's budget. Many agencies have had their budgets reduced by more than 20 percent.
The plan includes using $25 million in federal stimulus funds, more than $33.9 million in transfers from state programs with unallocated funds and various cuts to state government. Beshear said the plan does not include furloughs or layoffs of state workers for this year.
But Senate President David Williams, R-Burkesville, said Beshear has not cut enough and was depending on money the state will get once to fix an ongoing structural imbalance in the state's budget. For years, Kentucky has spent more than it makes in tax revenue, Williams said.
"It appears to be a stop-gap measure at most," Williams said.
House Speaker Greg Stumbo, D-Prestonsburg, applauded Beshear's resourcefulness.
"He has to meet certain obligations with less money," Stumbo said. "To do that, he is using his managerial skills, and we should applaud him for that."
Beshear had expected to make 6 percent cuts to deal with the latest budget shortfall. He said Monday that the cuts would be 3 percent because an independent group of economists for the state lowered the expected deficit for this fiscal year from $160 million to $100 million. In part because of an increase in Medicaid enrollees, the state also had an $8.4 million shortfall in the health insurance program for the elderly and the poor.
Beshear said he will continue to protect areas of government such as basic school funding, Medicaid, student financial aid, state police, mental health services and higher education.
The final amount to be returned to school districts will be calculated at the end of February, Beshear said.
In past years, that money has been swept into the General Fund, but language was added to the budget bill last year promising that any excess money in basic school funding. known as SEEK, would be returned to school districts. How much the districts receive will be based on the SEEK funding formula, which is largely based on a district's enrollment.
Schools will see a 3 percent cut in non-SEEK funds in the latest budget reduction, Beshear said, but the excess SEEK funds will effectively offset those cuts for all school districts.
"The bottom line — every district will see some budgetary relief, and many will be made whole," Beshear said. The school districts will see those increases in their April, May and June payments, State Education Commissioner Terry Holiday said.
Holliday said in a statement that the move is "good news for Kentucky's school districts, which have endured some deep fiscal cuts over the past few years."
Although many state agencies said they were relieved that the cuts were smaller than expected, they added that the various rounds of cuts have made it increasingly difficult to provide basic services.
The Cabinet for Health and Family Services, one of the state's largest cabinets, includes such agencies as public health, child and adult protection, food stamps and services for the elderly. Since January 2008, the cabinet has sustained about $64 million in general fund cuts and has lost an additional $31 million in enhanced federal dollars and other money because of those cuts. That does not include money the state has borrowed from the Medicaid program.
Janie Miller, the cabinet's secretary, said Monday that the cabinet does not plan to cut the Department for Community Based Services, which oversees child protection and eligibility for food stamps. However, county health departments will see $325,000 in cuts across the system.
Other cuts include reductions in contracts to Norton Poison Control Center as well as cuts to two health education centers run by the University of Kentucky and University of Louisville that help keep and retain health professionals in the state.
"We recognize the downward spiral in our funding is eroding our ability to provide basic services to some of the state's neediest families," Miller said. While the cabinet has undergone a series of cuts, the number of households it serves has increased by 16.3 percent since January 2008, cabinet statistics show. "It is just getting very difficult for us to maintain services. Quite frankly, it's because of the commitment of our employees that we are able to meet the increased needs despite the declining funding levels."
