FRANKFORT — State agencies are planning for additional spending cuts to balance the state's books for the fiscal year that began Thursday.
State Budget Director and Cabinet Secretary Mary Lassiter sent letters to most agency heads Thursday asking them to plan for an additional 1.5 percent cut on top of the 3.5 percent cut most agencies took at the beginning of the fiscal year.
In total, the state is looking for an additional $35 million in savings to help balance the two-year, $17 billion budget that lawmakers approved in late May.
Lassiter, in an interview Thursday, said the information is being used for planning purposes. Agency heads have until July 15 to return those plans.
Some programs that were exempt from cuts in this year's budget are exempt from the additional 1.5 percent cut. Those programs include the main funding formula for schools; most of the Department of Corrections; and Medicaid, the already underfunded state-federal health care program for the poor and disabled.
Agencies use General Fund money — money raised from taxes and fees — and restricted funds — funds the agencies generate from other sources. The 3.5 percent cut included in the budget for this fiscal year comes just from agencies' General Fund money. But the additional 1.5 percent cut can come from general or restricted funds, Lassiter said.
That should help agencies cushion the blow, she said.
In addition to the 3.5 percent cut in the first year of the budget and a 4.5 percent cut in the second year of the budget, the legislature required Gov. Steve Beshear to save an additional $131 million to balance the books this fiscal year.
The $35 million cut that agencies are now making plans for is part of the $131 million in savings mandated by the legislature.
Lassiter said the governor is looking at statewide solutions to make up the additional $96 million in savings. Some previous ideas included selling some of the state's surplus property, such as airplanes and real estate, and renegotiating contracts for technology services.
"We're still working on it," Lassiter said of the other possible reductions.
The state also is waiting to close out its books for the fiscal year that ended Wednesday. It's not clear if there will be any carry-over money from the last fiscal year that could offset future cuts, Lassiter said.
The legislature originally had mandated cuts for specific areas — such as salaries of political appointees and contracts with private businesses — to make up the $131 million, but Beshear vetoed those instructions from the final spending plan.
Lassiter, in her letter to agencies, asked that cabinet and agency heads include in their planned cuts information about how they will reduce the number of non-merit employees and private contracts.
"It's for planning purposes for us to gauge the impact of these cuts," Lassiter said. "After we receive this information, if there are areas where it is too onerous, then we may or may not want to make those cuts.
"We have not yet had to take some of the draconian measures that other states have."
Les Fugate, the deputy assistant secretary of state, said the state might be sacrificing too much. The secretary of state's office and other state agencies have been through seven rounds of budget cuts since December 2007.
"Although we have limited resources, we have been able to implement several new online services and implement new technologies within the office that will allow us to absorb most of these cuts," Fugate said. "The question remains, when will we no longer have the financial resources in the short term to implement technological advances that will save the commonwealth money in the long run?"