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State layoffs possible, Beshear says

FRANKFORT — Gov. Steve Beshear said Monday that he could not rule out the possibility of layoffs as he cobbles together a two-year budget proposal that could be the most austere in recent history.

Beshear, in a wide-ranging interview with reporters, said the state already has cut more than $800 million in planned spending from agency budgets since he took office in December 2007. Many programs have gone through five rounds of budget cuts as revenue declined.

"It's impossible to tell at this point," Beshear said when asked whether his budget proposal would include the layoffs of state workers. "Further reductions in spending at some of these agencies may result in some layoffs."

Beshear said he would like to avoid layoffs if possible. But some agencies have warned him that any further cuts probably will mean some sort of personnel reduction — either layoffs or furloughs. Many of the easy cuts — such as reducing spending on travel and capital projects — have been made.

"It is going to be the most difficult budget to put together that this state has seen in modern times," Beshear said.

Beshear said no details of his budget will be finalized until after Dec. 21, when the Consensus Forecasting Group meets to determine revenue projections for this fiscal year and the next two fiscal years. Beshear then will use those numbers for his budget, which he must deliver to the General Assembly by mid-January.

Although final revenue estimates have not been released, preliminary numbers released in October show a potential two-year shortfall of $1 billion.

Although Kentucky's slice of the federal stimulus program is $3 billion, only about $485 million remains to offset potential shortfalls in the state's General Fund.

Beshear has been able to continue funding key parts of state government — including mental health and mental retardation services, Medicaid, state police and the main funding formula for schools — but that could change.

"I can't make any guarantees," he said.

Still, Beshear again said he hopes to avoid cutting the main funding formula for the state's school systems, known as Support Educational Excellence in Kentucky, or SEEK.

House Budget Chairman Rick Rand, D-Bedford, said lawmakers share Beshear's goal of protecting school funding.

"I think that would be the last place that we would cut," Rand said of the SEEK formula.

Some in Frankfort have talked of passing a budget that covers only the first of the next two fiscal years, with hopes that Congress might approve an additional stimulus package to help states balance their books in 2012.

But Beshear said he will present a two-year budget because the law requires him to do so.

Rand said that the General Assembly could approve a two-year budget but that the second year of that budget might have "place holder" numbers in it. The legislature could return the following year to tackle the budget for fiscal year 2012.

Rand also said Monday that layoffs and furloughs cannot be ruled out.

"I think we will be able to manage for 2011, but if things continue on their current path and nothing changes ... I think we will have to look at some sort of personnel action, either a layoff or a reduction in benefits," Rand said.

Kentucky is one of the few states that has not had to lay off or furlough state employees. According to the National Conference of State Legislators and the Pew Center on the States, about 22 states have had to furlough state employees. And at least 13 states have had to lay off state employees during the past 18 months to balance their books, data from the two organizations show.

Beshear said Monday that the state has lost about 2,000 positions through attrition since December 2007.

Lee Jackson, president of the Kentucky Association of State Employees, which represents about 3,000 employees in all 120 counties, said state employees have been hoping for the best but bracing for the worst.

"We are anxiously awaiting the governor's budget request and his address to the state legislature about the budget," Jackson said.

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