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Beshear: Spending cuts needed

FRANKFORT — Kentucky faces a budget shortfall of nearly $300 million that will require spending cuts and possibly new revenue measures, Gov. Steve Beshear said Thursday, calling the state's future "ominous."

At a Capitol news conference, Beshear, who unsuccessfully proposed raising the state's 30-cents-a-pack cigarette tax to $1 earlier this year, said he would develop a plan over the next several weeks to address the shortfall for the current fiscal year, which ends June 30.

"All options are on the table," said the Democratic governor.

He has told members of his Cabinet to prepare for inevitable spending cuts, he said.

If there is a need for lawmakers to act on any part of his plan, Beshear said, it is likely that he would call a special legislative session in January. The General Assembly has a three-week recess between a brief organizational session early in the month and the lawmaking session later.

It would be to Beshear's advantage to seek any revenue measures in a special session because in 2009 the session will last only 30 days. In even-numbered years it lasts 60 days.

In addition, any tax increase during sessions in odd-numbered years requires a super majority — 60 percent — in the House and Senate. In 60-day sessions and special sessions, which only the governor can call, a simple majority — 50 percent plus one — of votes in each chamber is needed.

Besides a higher cigarette tax, Beshear this year proposed changing the state constitution to allow casino gambling in the state as a way of increasing revenues.

The 2009 General Assembly could pass a constitutional amendment to allow casino gambling, but it could not go to voters until November 2010.

The $294 million shortfall is 3.3 percent of expected General Fund revenues.

Beshear also said money for the state Road Fund is projected to be nearly $71 million less than expected — a 5.3 percent shortfall.

"This is a serious shortfall, and it will require action," said Beshear. "But considering the extreme volatility of our economy, that action must be neither rushed nor rash. We are going to act decisively, but in a measured and strategic way."

'A silver lining'

House Speaker Jody Richards, D-Bowling Green, said he was not surprised by Beshear's announcement, given the downturn in the national economy.

"If there is a silver lining, it is that many other states are facing a crisis much worse than ours," Richards said in a statement. "For now, we will monitor the budget in the months ahead and will be prepared to work with the governor and the Senate."

Senate President David Williams, R-Burkesville, was not immediately available for comment.

Beshear said he will also seek an opinion about the state's revenue projections from the Consensus Forecasting Group, an independent board of economists. The group would estimate how much money the state is expected to collect for its General Fund, which pays for most programs, and for its separate Road Fund.

The group probably will meet right before or after Thanksgiving, he said.

A plan to deal with the shortfall should be in place by the beginning of December, Beshear said. He would then meet with citizens, interest groups and legislators to discuss the plan.

The governor also announced that state deputy budget director John Hicks will become acting budget director. Hicks will replace Mary Lassiter, who is retiring Friday after nearly 25 years in state government.

Hicks said the Beshear administration will follow a general budget reduction plan outlined in the two-year budget bill legislators enacted this year.