FRANKFORT — Kentucky's chief budget officer told the House on Tuesday that the next two-year state budget will be the toughest yet for lawmakers to craft and more cuts to state agencies are likely.
"It will be the most difficult budget we will face," said Mary Lassiter, the state budget director and secretary of Gov. Steve Beshear's cabinet.
Even though modest revenue growth is expected for the next two years, Lassiter told House members during a briefing that the state's finances remain shaky.
The state tapped more than $3 billion in federal stimulus dollars to help plug holes as state revenues plummeted during the recession, but that money is now gone. Lawmakers also have used one-time fixes — such as delaying state paychecks by a day to push them into another fiscal year and delaying debt payments — to save money and not cut key areas such as education.
But the state can no longer use those one-time tricks, Lassiter warned.
Beshear may give more details about his budget proposal in his State of the Commonwealth”speech on Jan. 4.
Lassiter said Beshear will not propose any broad-based tax increases and "he will not be basing a budget on expanded gaming revenues."
Beshear said in his inauguration speech last week that he will again back a proposal for a constitutional amendment to allow expanded gambling in Kentucky.
Beshear has predicated previous budgets on revenue from gambling, angering both the Democratic House and Republican Senate.
With no new revenue, more cuts are likely, said Rep. Rick Rand, D-Bedford. Rand is chairman of the House budget committee.
There have been nine rounds of budget reductions since Beshear first took office because of declining state revenues. Some agencies have seen cuts of 21 percent over the past four years, Lassiter said.
The Consensus Forecasting Group, a panel of independent economists, will meet Wednesday to predict the state's revenues for the current fiscal year and for the next two years. Beshear and the legislature will use those numbers to develop a two-year budget.
After enduring several years of spending cuts and little money for capital construction projects, the state's public universities will probably ask for $1 billion in new buildings and other capital projects for each year of the biennium, Rand said.
Lexington Mayor Jim Gray also is expected to request $20 million to begin renovating Rupp Arena. But Rand said before Monday's meeting that lawmakers may find it particularly difficult to borrow money for the project since city officials and the University of Kentucky appear not be in total agreement about making the project a top priority.
The state also must pay increased contributions to its underfunded pension system and come up with a way to repay the interest on a federal loan that was used to pay unemployment insurance benefits.
"We are in for another tough session as far as the budget is concerned," Rand said.