The Governor's Budget Proposal
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Here's the Governor's proposal:
- $147.1 million in spending cuts
- $81.5 million from a 70-cent cigarette tax increase this fiscal year, which ends June 30, 2009.
- $8 million by furloughing state workers three days, during which they won't get paid.
- $40.6 million in money transfers from various "restricted" funds throughout state government.
- $178.9 million by tapping the state's "rainy day fund."
The $147 million in spending cuts plus the $8 million from the three-day furlough of state workers is considerably less than the original proposal of 4% across-the-board cuts. A 4% cut would have netted $373 million in less spending. The Governor's new proposal does not affect the P-12 education SEEK funding formula, Medicaid or corrections, and only asks for a 2% cut from the rest of the education budget. These exemptions mean that he only looking for savings in about half the state's budget, which is why he achieves less than half of the original savings projection.
The Governor proposed a $0.70 cigarette tax increase, which stands no chance of passing the legislature. Earlier the Courier-Journal reported that 20+ state senators were uninterested in raising the tax, a sentiment repeated this week by Senate President David Williams:
"If he is truly empathetic with Kentuckians' financial situation, perhaps a more appropriate response would be to join me in holding the line on taxes."
While we're listing good quotes, this one from Senator Damon Thayer is good too:
"I just ran a campaign where I got 61.7 percent of the vote, and I told my constituents that I'm not for raising taxes."
Even if a tax increase had the votes in the Senate, even the House won't palate one that would put Kentucky's rate higher than our neighbors. A lower increase might pass, but not this rate, and the Governor knows it.
“I don’t think realistically you could pass a 70-cent tax increase,” said Rep. Jimmie Lee, D-Elizabethtown, noting that he would vote for it.
“Those legislators that live close to a border state may find 25 cents more palatable because it would keep Kentucky cigarette taxes lower than most states,” Lee said. “I think he has a lot of selling to do.”
His answer to the question about a cigarette tax was so typical Beshear-ian.
"We may get there (to the point we need it), and if we get to that point, it's an option to look at."
Seriously. After spending 45 minutes bemoaning the state's economy, he's wondering if we're going to get to the point of desperation in which we'll need money from a cigarette tax. This from a man who campaigned on a soapbox about leadership. We don't know about you, but waiting to see if we're going to need it, a point at which it will be too late to do it, isn't the kind of leadership we need.
The Rainy-Day Fund
Governor Beshear proposes spending money that's already spent. As we have pointed out, the "Rainy Day Fund" is scheduled to be practically bankrupted in FY 2010, with $191 million of the $226 million scheduled to be spent next year. The Governor would spend next year's money this year, planning to replace it with cigarette tax money.
Overall, he probably won't get his tax increase, but it is a fairly bold proposal to furlough state workers for three days. A tax increase would have to pass the legislature, and Beshear thinks a furlough would as well, although there are provisions already in state law that allow for it.