Beshear Failing to Make Promised Spending Cuts, Plans on Calling Special Session
In our piece yesterday on the budget, we asked if Kentucky could end June with a budget surplus.
We answered yes, if current revenue trends are sustained. We forgot to mention that it is also contingent on Governor Beshear actually tightening the budget as he promised to do in December.
It seems that most are realizing the potential for a better budget picture with flat receipts through the first three quarters of the fiscal year. The Courier-Journal reports on the abatement of rhetoric calling for a special session since the revenue picture is rosier. But the article buries some significant information at the end from State Budget Director Mary Lassiter ("She"):
She said federal stimulus funds and some cuts made to balance the budget this year will help in balancing the budget next year. But next year, the state will not be able to tap its Rainy Day Fund to ease the pain, because that fund was exhausted in addressing this year's shortfall.
Beshear has said that in the week of May 4, after he gets a quarterly revenue outlook from his budget office and knows April's revenue totals, he may ask for an official forecast of next year's revenue from a team of experts that makes such predictions. That will produce the first official forecast of the shortfall for 2009-10.
Let's take this in two parts:
1) The Rainy Day fund was exhausted in addressing this year's shortfall.
As we pointed out yesterday, the Governor was given the authority to used the Rainy Day Fund this year. We also pointed out that it would be unnecessary to spend any of it with current revenue projections, the new alcohol tax and higher cigarette taxes, and Beshear's proposed $147 million in cuts. In fact, that scenario would lead to an $8 million surplus in FY2009.
If the $191 million in the rainy day fund has already been spent it means some combination of three things:
- that Kentucky's natural disasters cost $191 million (probably does explain some spending, but closer to $20 million than $200 million)
- that Governor Beshear has spent $191 million outside of the budget (not likely a significant explanation, probably illegal)
- that the Governor actually hasn't made any cuts and is simply spending every dollar he can find (AH-HA!)
So what's Governor Beshear's next step? Here's the second point from the C-J passage.
2) In the week of May 4, he will provide an analysis of April receipts and find a new, significant shortfall for FY 2010 and call a special session.
How can we be sure of this? This answer is found in both our post yesterday and in the C-J article.
Both mention that last year, April and May receipts were incredibly volatile, with April 2008 receipts increasing 36% over April 2007, but a 21% decrease in May receipts versus 2007. With such a spike last April, receipts are almost determined to be down this April, just as they are almost determined to be up in May.
Governor Beshear says he's going to make his determination in early May, based only on the April numbers that we all know should be down, instead of waiting until late May when we'll have a better idea of how those volatile months shape up. That will allow him to paint the economy as weak, and completely ignore the fact that he has completely neglected to reduce spending in any significant way.
The Kentucky Opportunity Coalition notes in their first blog post the dangers of allowing better budget numbers to relax efforts to reduce spending. What they fail to mention is that, in Kentucky, there is never any serious effort to reduce spending in any budget times, only occasional rhetoric.
