FRANKFORT — Gov. Steve Beshear outlined one of the most austere state budgets in recent history Tuesday, proposing 8.4 percent spending cuts for many agencies and limited money for new construction projects.
Beshear called the two-year, $19.5 billion General Fund budget "inadequate for the needs of our people."
"We should be making substantial investments in our physical and intellectual infrastructure to bring transformational change to our state," Beshear said during a speech to a joint session of the House and Senate. "This budget does not allow us to do enough of that."
Lawmakers will take the next few months to evaluate and alter Beshear's proposal before approving a final two-year budget by mid-April.
The budget does not call for layoffs of state workers, but Beshear cautioned that some state agencies might have to trim staff to achieve the $286 million in cuts he proposed. Agencies would receive the same amount of money in both years of the budget.
Several key programs would be exempt from the 8.4 percent cuts, while others would receive smaller cuts.
Exempted programs include: Medicaid; the main funding formula for K-12 schools; preschool; veterans' affairs; child and adult protection; mental health; prisons, probation and parole; public defenders; student financial aid; mine permitting and reclamation; and the Kentucky Horse Park .
Programs that would receive smaller cuts include: universities and community colleges, 6.4 percent; aging and independent living services, 6.4 percent; grants to local school districts, 4.5 percent; career and technical education, KET, libraries and archives and vocational rehabilitation programs, 4.2 percent; mine safety, 4.2 percent; Kentucky State Police, commonwealth and county attorneys, juvenile justice and local jail support, 2.2 percent; and property valuation administrators, 2.2 percent.
Although the main funding formula for K-12 schools wouldn't be cut, population growth means spending per student would decline. Also, education officials say the current year's population estimate was low, resulting in a cut of more than $50 million to that funding formula.
The legislative and judicial branches of state government also would face an 8.4 percent cut in their operating budgets, Beshear said Tuesday. However, the judicial branch would get some increases in its funding for projects, including an overhaul of its computer system.
Despite calling for budget cuts, Beshear did propose $815 million in new spending, including:
■ $372 million to pay existing debt obligations and $19 million for new debt payments.
■ $79 million for retirement contributions for state workers.
■ $88 million for increased health insurance costs for state workers and retired teachers.
■ $84 million for Medicaid.
■ $21 million to add more than 300 social workers and support staff in an effort to reduce caseloads of front-line social workers.
■ $16 million to operate the new Eastern State Hospital.
■ $14 million for parole and pretrial officers.
■ $15 million to expand preschool to an additional 4,430 Kentucky children.
■ $2 million to fund an adult abuse registry to track workers who have had substantiated cases of abuse or neglect.
■ $4 million to expand the state's prescription drug-tracking program.
Beshear's budget proposal does not include raises for state workers. State workers have not received raises in four years, a move that Beshear said he regretted. There also are no furloughs proposed in the budget. Beshear had required most state employees to take six days of furlough, or unpaid time off, in the previous budget, a highly unpopular move.
To help balance the two-year budget, the state would spend $102 million from its "rainy day" fund, leaving about $20 million in the account. The state also would launch a tax amnesty and enhanced enforcement program that is projected to generate $61 million in additional revenue from past-due taxes.
The Democratic-led House will make a few changes to reflect its own priorities, but its version of the budget might end up looking a lot like Beshear's, said Rep. Rick Rand, chairman of the House Budget Committee.
"We all knew going in that it was going to be a tough budget," said Rand, D-Bedford. "The governor has done a good job trying to protect the items that are important to all of us. It's certainly grim, but under the circumstances, I think it's the best we can do."
House Speaker Greg Stumbo, D-Prestonsburg, said that the governor's speech contained "no surprises" and that he did not envision the House making many changes to the proposed budget.
Senate President David Williams, R-Burkesville, told Kentucky Educational Television that Beshear should have made the deeper cuts proposed by the Senate last year and in previous years. If he had, the state would not need to make such drastic cuts in the upcoming two-year budget, he said. Williams, who lost to Beshear in the November election, was not available for further comment after Beshear's speech.
Beshear, now in his second term, has cut the budget 10 times since taking office in December 2007. That means some agencies have seen their budget cuts by 38 percent during the past four years.
The Democratic governor warned Tuesday that Kentucky has cut past the bone. The state has used $3 billion in federal stimulus money, one-time money and accounting tricks to balance its books in recent years. It no longer can do that, Beshear said.
"The day of reckoning has come because, with this budget, we begin to carve into some of our most critical services," he said.
Those cuts probably will result in delays in service, loss of federal funds and possible facility closures, he said.
If Kentucky does not get new revenue soon, it cannot invest in key areas such as education and infrastructure, Beshear said.
Lt. Gov. Jerry Abramson has been tapped to lead a commission on reforming the state's tax structure. Beshear said Tuesday that he would like to see a proposal that would increase revenue by $200 million or $300 million, but that proposal will not be ready until the 2013 General Assembly.
Beshear again pushed during his speech for a constitutional amendment to expand gambling to the state's race tracks, a measure that could add revenue to the state's coffers. That bill has not been introduced.
Before Beshear spoke to the General Assembly, a Frankfort pastor railed against expanded gambling in his opening prayer.
The Rev. Hershael W. York, senior pastor of Buck Run Baptist Church, asked God to help Kentuckians "to foster salaries, not slot machines, to build cars, enable jobs, not license casinos."
Sen. Kathy Stein, D-Lexington, called York's prayer "a political speech that was disrespectful to the governor and the voting members of the General Assembly."
York told reporters that he "does not question the governor's motives, just his methods" and that he prays "about real-life issues."
York said Williams asked him to deliver the opening prayer but did not tell him what to say.
"I believe that gambling is immoral," York said.
General Fund appropriations
FY 2013 Percent recommended changeGovernment appropriation from agency (millions) FY 2012
General government $644.47 -2.08%
Economic Development $28.52 -21.94%
Department of Education $3,820.95 -0.05%
Education and Workforce Development $71.33 -2.56%
Energy and Environment $76.96 5.38%
Finance and Administration $579.25 47.82%
Health and Family Services $1,998.89 -1.43%
Justice and Public Safety $649.80 -0.49%
Labor $4.65 -6.43%
Personnel $8.16 10.37%
Postsecondary Education $1,173.04 -4.87%
Public Protection $6.69 -6.64%
Tourism, Arts and Heritage $49.14 -15.32%
Transportation $4.26 -8.98%
Total (includes rainy day funds) $9,237.84 0.69%
Herald-Leader staff writers Jack Brammer and John Cheves contributed to this article.