Raiding Ky. funds no way to budget

What Gov. Steve Beshear had to do to close out the fiscal year with a balanced budget might feel like a fix.

But it's really a symptom of a tax system that's failing to meet Kentucky's needs.

The $9.45 billion General Fund came up $91 million short in the fiscal year that ended June 30.

Beshear filled the biggest part of the shortfall by raiding $50 million from state funds and agencies, including some funds made up of licensing fees paid by relatively small professional groups such as nurses.

This is nothing new. Governors and lawmakers have been balancing the budget by raiding these fee-created funds for a long time, and the state Supreme Court has upheld the practice.

But it's not fair to Kentuckians who pay fees for specific purposes, such as operating the state Board of Nursing.

Nor is it fair to consumers who pay a surcharge when they buy gas to clean up pollution and remove leaking underground storage tanks. Beshear raided $2 million from the tank fund, as well as $1 million to properly shut down old landfills and $300,000 from a tire-disposal fund.

The governor also tapped the rainy-day fund, draining $21.2 million of its $98.2 million.

Also coming up short, by $22 million, was Kentucky's road fund, paid for by the gasoline tax.

Revenue shortfalls still beset Kentucky while some states ended the fiscal year with surpluses.

Problems in the state's economy account for some of the shortfall. The coal industry's decline in Eastern Kentucky has cut into severance tax revenues that won't be coming back.

And while Kentucky is creating jobs, outpacing the national average in some places, the jobs are low-paying, according to a study commissioned by the Kentucky Chamber of Commerce. Temporary employment agencies are the state's fastest-growing sector, followed by low-paying service industries such as food and beverage, restaurants and nursing homes.

A more robust economy would generate more revenue to pay for state services. But here's the rub: Even if Kentucky's economy roared back with higher-paying jobs, our decrepit tax system could not capture the growth.

Beshear has now managed 14 budget shortfalls and cut nearly $1.7 billion in state spending since becoming governor in 2007.

His blue-ribbon commission produced some solid ideas for tax reform.

Kentucky exempts more in taxes than it takes in, but the legislature almost never revisits the many tax exemptions to analyze how well they are serving the state.

Beshear has a little more than 16 months left in his two terms as governor. The jockeying to succeed him is well under way, and the two parties are battling this year for control of the legislature.

Under the circumstances, comprehensive tax reform would be a feat. It's worth the effort, though, and would leave Kentucky in far better shape than Beshear found it.