FRANKFORT — Kentuckians can expect more state budget cuts or tax increases this summer, a leading lawmaker warned Tuesday as newly released data showed state revenues taking a nose dive in February.
House Speaker Greg Stumbo, D-Prestonsburg, said he thinks the General Assembly will be back in session this summer to address a budget shortfall for the fiscal year that begins July 1.
His comments come less than a month after the General Assembly passed a combination of cuts and tax increases to plug a $456 million shortfall for the fiscal year that ends June 30.
The billions of dollars in federal stimulus funds Kentucky is set to receive will help, but that influx of cash will only go so far, Stumbo said.
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"We will be voting on something, either more budget cuts or more revenue measures," Stumbo said.
Stumbo said one potential source of new revenue could be his controversial proposal to place electronic slots at racetracks. Lawmakers have also said previously that they intend to study the state's overall tax structure in coming months.
Gov. Steve Beshear said Tuesday he would have to wait until the end of the current fiscal year to determine whether the state's books will balance next year.
The state's General Fund receipts fell 9.3 percent in February compared with the prior year, or a decrease of about $54.3 million, the state budget director's office said Tuesday. The state's road fund was also hit hard with a 11.7 percent decline in revenues over last year.
Beshear said he expected the revenue drop in February.
"It shows that the economy is moving in the wrong direction right now," Beshear said. "We expect an even bigger problem next year if these receipts continue to go in the direction they are going right now."
Still, he was cautious about the need for a special legislative session. "It's too early to know the direction that we're going because we don't know the size of our problem yet."
Beshear said he would probably ask the Consensus Forecasting Group, a group of independent economists, to look at the state's economic forecast sometime after the General Assembly adjourns.
The group predicts what the state's revenues will be in the coming year and the legislature and governor set the budget based on those figures. After the Consensus Forecasting Group makes its prediction "we will decide how to tackle it,' Beshear said.
Senate Budget Chairman Charlie Borders, R-Grayson, said he wasn't surprised by February's revenue decline, but finds it troubling.
"We definitely have to be concerned and that's why we were so fiscally responsible in addressing the budget to get us through June 30 of this year," he said.
State Budget Director Mary Lassiter said the rate of decline in tax receipts is increasing, particularly the sales and individual income taxes.
"Both of these revenue sources have fallen prey to state and national recessions," Lassiter said in a news release. "Just three months ago general fund receipts were $85 million greater than in the previous year. Since then, sales tax receipts have fallen by nearly 2 percent and individual income tax collections are off by 6.4 percent."
Overall, tax receipts were flat during the first eight months of the fiscal year.
The Consensus Forecasting group called for a 2.7 percent decline for the entire fiscal year. To meet that estimate, receipts must decline 7.6 percent over the final four months of the year, according to the state budget office.
Greg Harkenrider, of the state budget director's office, said Tuesday that the state's road fund, which is used to fund road and other projects, is in dire condition. That fund is paid for through a combination of motor-vehicle and other taxes. It is down 7.3 percent for the entire year.
The one bright spot in the state's financial picture is coal severance tax receipts, which are up by more than 28.3 percent compared with February 2008, Harkenrider noted.