More Scary Revenue Fictions
We've written about Frankfort's spending problem and how state revenues are likely to grow in FY 2009. In our last post on state revenues we noted that "the state must average a 7.5% reduction in revenues over the last half of the year" to meet the projection of a $456 million shortfall, yet Governor Beshear continues to use the $456 million number. He's not the only one. In a recent meeting, Senate President David Williams said:
the projected $456 million shortfall is “an accepted figure” that lawmakers are trying to address.
State revenues are currently growing at more than 2%, and
State General Fund revenues look like they'll end up somewhere between 1% and 2% growth, not the forecasted 2% decline. The fact that 1%-2% revenue growth would leave the budget with a $45 million to $130 million shortfall still points to a spending problem in Frankfort.
Nonetheless, it's probably time for the Governor to stop trying to scare people into tax increases and casinos.
Beshear hasn't stopped pedaling this worst-case fiction, but he's expanded on it. Where he earlier asked for agencies to plan for a 4% reduction, he's now asked for them to plan for bigger reductions. One agency says that they're planning for 6.7%. If that were across-the-board (it's not), that would represent $578 million in cuts. If a 4% cut represented $147 million in cuts, 6.7% would mean a $246 million reduction.
Does this mean he's given up on increasing cigarette taxes? $246 million more than covers the shortfall the would result from flat revenue ($215 million), and is $200 million more than the $45 million shortfall that would result from the current 2% increase.
And there's reason to believe revenues are not about to disappear. Here in Lexington, revenues are up 4.1% so far, including a 2% increase in payroll taxes.
So there's still reason to believe general fund revenues are going to be fine. Let's hope President Williams keeps his word and uses this opportunity to address the spending problem, creating a more stable budgeting foundation for the future.
