Beshear snatches surplus money and taps 'rainy day' fund to deal with $90.9 million shortfall

jbrammer@herald-leader.comJuly 16, 2014 

Gov. Steve Beshear

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    The two budget-reduction documents can be viewed atwww.osbd.ky.gov.

FRANKFORT — Gov. Steve Beshear raided the couch cushions of state government Wednesday to deal with a $90.9 million budget shortfall in the fiscal year that ended June 30.

In his budget-reduction order, Beshear snatched surpluses and unspent money from a variety of state agencies and transferred $21.2 million from the state's $98.2 million rainy day fund, which is set aside for emergencies.

Beshear, who now has managed 14 budget shortfalls totaling nearly $1.7 billion since he took office in 2007, did not tap "carry forward" funds that are budgeted for spending in fiscal year 2015, which began July 1.

"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 news release. "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 Kentucky Constitution requires a balanced budget at the end of each fiscal year.

The state budget office announced the $90.9 million shortfall last week after General Fund revenue for fiscal year 2014 came in one percent less than official revenue estimates of the $9.46 billion budget. The General Fund pays for most state programs.

To deal with the shortfall, $15 million will come from unspent General Fund appropriations. Beshear's order transfers $50 million from various state agencies that produced more revenue than budgeted.

"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," Beshear said.

He noted a recent ruling by the Kentucky Supreme Court that upheld the constitutionality of taking money from funds that produce revenue for specific purposes, such as fixing leaky underground gas tanks or operating the state's health-benefits exchange.

Beshear also reduced General Fund appropriations for the operating budgets of several executive branch agencies, including $200,000 from the attorney general and $100,000 from the secretary of state.

Additionally, he received permission to transfer $1.5 million from the judicial branch budget and $287,600 from the legislative branch.

The judicial branch's contribution will come from the court system's criminal-record report account, which collects money for conducting criminal background checks.

"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," said Chief Justice John D. Minton Jr.

Senate President Robert Stivers, R-Manchester, said Beshear's reduction was "appropriate," but he repeated his concern about future budgets.

"The real problem is the downward spiral of Kentucky's economy," he said, blaming the administration of President Barack Obama for a large reduction in coal severance-tax revenue.

"Two years ago, the commonwealth collected nearly $300 million from the coal severance tax; this year that number was just $197.5 million. If this reduction had not occurred, or had not been as precipitous, there would have been no need for a budget-reduction plan," Stivers said.

Although many Republicans blame Obama for the coal industry's decline in Eastern Kentucky, where half of coal jobs have disappeared since 2011, industry analysts point to a number of factors.

Environmental policies have played a role, but so have competition from low-priced natural gas and from coal from other parts of the country; the depletion of easy-to-reach reserves in Eastern Kentucky after a century of mining; and higher mining costs in the region.

House Speaker Greg Stumbo, D-Prestonsburg, was not immediately available for comment.

Stivers said Beshear should be credited for leaving untouched an $80 million surplus that lawmakers budgeted to "carry forward" into fiscal year 2015, when it is scheduled to be spent.

Beshear also signed a budget-reduction order Wednesday for the Road Fund to fill a $22.2 million shortfall.

"No budgeted road projects will be negatively impacted by this necessary balancing action," Beshear said.

Jack Brammer: (859) 231-1302. Twitter: @BGPolitics. Blog: bluegrasspolitics.bloginky.com

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