House leaders told Gov. Steve Beshear on Monday that they have discarded his state budget proposal and probably will present three to four unpleasant budget options to lawmakers by Wednesday.
The five top House Democrats and the budget committee chairman spent an hour in Beshear's office. When they emerged, it was unclear what the meeting accomplished other than Beshear pledging that he and his agency leaders would provide any budget information and feedback requested by lawmakers during the ongoing funding debate.
Beshear, who built his two-year budget recommendation on the assumption of having $780 million in new revenue by allowing slot machines at racetracks, told reporters that "we're just beginning the conversations."
"It's way too early to make any judgment calls" about potential areas lawmakers might suggest cutting, he said.
Minutes before, House Speaker Greg Stumbo, D-Prestonsburg, said Beshear was gracious in accepting their message that his gambling proposal has been tossed, leaving lawmakers with tough decisions about how to bridge a more than $1 billion gap during the next two years.
"There's going to be a lot of areas that probably won't receive the attention or funding that most of us would like to see," Stumbo said. "I think some of those he obviously feels strongly about."
Stumbo declined to say which areas of state government the House might suggest cutting. House budget committee chairman Rick Rand, D-Bedford, outlined to House leaders Monday several options to balance the budget without new revenue.
The three or "maybe four" choices, which House leaders are guarding closely, probably will be presented to the House Democratic caucus Wednesday, Stumbo said.
Without new revenue, state agencies and schools would face a $400 million shortfall in fiscal year 2011 and a $750 million shortfall in 2012, Stumbo said.
Earlier, Stumbo seemed to dismiss another of the governor's suggestions to find money: selling more than $400 million in bonds to cover student financial aid, which would free up lottery money for other uses.
"I personally think (it) is poor public policy, the way he's done it," Stumbo said.
Stumbo said lawmakers could cross their fingers for new federal stimulus money to help in 2012 and "then have an alternative plan in the event that that money is not forthcoming."
One approach that Stumbo said "could be" a backup plan to lessen the blow of cuts would be for the General Assembly to consider tax overhaul options that Reps. Jim Wayne, D-Louisville, and Harry Moberly, D-Richmond, have been working on.
Wayne and Moberly have been looking at reducing the number of tax exemptions — which would bring in $389 million in 2012 — and spreading the 6 percent sales tax to some services. Those revenue gains would be partly offset by eliminating income taxes for the working poor and cutting income tax rates for corporations and the middle class.
"If the budget is too bloody, then these are some medical remedies we can use," Wayne said. "But none of them are going to be painless."