Beshear plugs hole with stimulus funds

FRANKFORT — Gov. Steve Beshear proposed slashing $200 million in planned spending and tapping more than $700 million of federal stimulus money on Wednesday to rectify a projected $1 billion budget shortfall.

After unveiling his plan, Beshear issued a formal call for a special legislative session that begins June 15 to consider his budget proposal. Leading lawmakers said Beshear's plan was likely to pass.

The Democratic governor's $9.1 billion budget proposal for fiscal year 2010, which begins July 1, includes 2.6 percent cuts for many state agencies, but largely spares the two largest areas of state government: education and Medicaid.

Beshear's plan actually increases funding to some agencies, including prosecutors, prisons and parks. Overall, his proposal would increase state General Fund spending by about $24 million over the current year, said State Budget Director Mary Lassiter.

Teachers and state employees will still receive a 1 percent pay raise, but state workers will not be paid for some holidays. Those who make less than $50,000 annually would forfeit three paid holidays, while those making $50,000 or more would lose five. State workers now get 11.5 paid holidays.

Though his plan does not call for any layoffs or furloughs, Beshear said it's possible an agency might have to implement layoffs to make the 2.6 percent cut.

Most of the shortfall would be erased by using $740 million in federal stimulus dollars. The state would also refinance some of its debt and step up its collections of taxes to help generate more revenue, Beshear said.

Without the federal money, "the pain we are experiencing would be magnified many times over," Beshear said. "We must realize, however, that this is one-time money. We cannot and should not use it to create new programs we would be unable to sustain in future years."

Beshear's plan would maintain current spending levels on higher education and the per-pupil funding formula for elementary and secondary education. However, there will be a 2.6 percent cut to some other education programs, including after-school tutoring, professional development and textbooks.

Funding for mental health services, state police, county jails and Kentucky Educational Television would continue at current levels.

Educators, prosecutors and health advocates expressed relief Wednesday that the state's gloomy revenue forecasts didn't translate into more steep cuts.

State agencies have already cut more than $600 million in planned spending over the past two years, Beshear said. Prosecutors and public defenders have been particularly hard hit.

County and commonwealth's attorneys were cut last year, and many offices had to furlough prosecutors to balance their books. Under Beshear's proposal, prosecutors would receive an increase of $4.5 million. The state's public defenders, who almost had to close shop earlier this year because they nearly ran out of money, will get an increase of about $3.2 million.

Chris Cohron, the president of the state commonwealth's attorneys association, said the $4.5 million increase — which brings the county attorney and prosecutors' budget to $65 million — will help immensely.

Without the influx of new money, the criminal justice system would have come to a halt, Cohron said. "This is going to put us in the position so that we won't have to relive the nightmare of fiscal year 2009."

Sheila Schuster, executive director of the Kentucky Mental Health Coalition, said she was thankful that the state's mental health and mental retardation system was spared, noting that community mental health centers have not had a General Fund increase in 12 years.

"For a system of care that's been chronically underfunded and is going to be looking at increased need, this is absolutely wonderful news," Schuster said. "It saves us from possible layoffs."

Lawmakers also welcomed Beshear's proposal.

Senate President David Williams, R-Burkesville, said early Wednesday that Beshear's plan backs up what he has said all along — the state's financial problems were manageable. Williams had argued that Beshear could make the cuts without legislative approval and that a special session was not needed.

Williams said Wednesday that he will respect the governor's wishes but said he wants the legislative session to last only five days — the minimum amount of time needed for a bill to become law.

Williams also said that the General Assembly should pick up the tab for the session — roughly $60,000 a day — out of the Legislative Research Commission's existing budget.

House Speaker Greg Stumbo, D-Prestonsburg, said he found nothing controversial about Beshear's plan. "I don't see anything that the General Assembly would take issue with," he said.

Although a group of independent economists has predicted that revenues will gradually improve over the next two years, shortfalls will continue, Beshear said. That's why he proposed leaving a little less than half of the state's federal stimulus dollars available for the following fiscal year, he said.

"Revenue projections do not return to 2008 levels for three more years," Beshear said. "The end result is ... that we are facing at least a three-year budget problem."

This story was originally published June 4, 2009 at 12:00 AM with the headline "Beshear plugs hole with stimulus funds."