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August 21, 2009

Ky. jobless rate hits 11 percent - Courier-Journal

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December 11, 2008

The Governor's Budget Proposal

This is a reposting of the first article of email update sent out earlier today.  If you don't receive them, you may want to sign up.

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."

Spending Cuts

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. 

Tax Increase

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. 

UPDATE: State Rep. Jimmie Lee seconds our opinion:

“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.”

This legislative opposition is likely why just days ago he didn't know if it was time for a tax increase.  From PageOne KY:

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.  

He probably won't get the full $456 million he's proposed, but he probably won't need it...

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November 26, 2008

$373 Million in Cuts

Governor Beshear has told agencies to plan for 4% budget cuts, suggesting that he's either expecting to raise taxes, or not expecting the $456 million shortfall to materialize.  4% of FY 2009 appropriated spending is only $373 million.

Posted by Andy Hightower at 11:06 AM | Permalink | TrackBacks (0)

October 31, 2008

Governor Announces Administration Exploring Cuts, Taxes

Governor Steve Beshear announced that he is expecting a $294 million budget shortfall and is going to gauge public reaction before making a specific proposal to address it in December.  Cuts and taxes are on the table.

Waiting until December is strange, and suggests broad tax changes are not on the menu.  Waiting until December puts the timing of his proposal right up against the holidays and the 2009 regular session.  In the short 2009 session, a supermajority is required for any legislation affecting state revenues, making any tax changes difficult.  By waiting until December and the holidays, legislators will be difficult to convince that a special session is necessary before they are already scheduled to return in January, and they certainly won't want to consider any substantial tax changes while the rest of Kentucky is shopping for Christmas.

While there is always the January interim period where a special session could possibly be called during a regular session, it seems more likely that the Governor will be left by the legislature to address the situation making spending cuts on his own.  Let's hope he makes them prudently rather than picking programs sure to fire up the interest groups in support of a tax increasing agenda.

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October 9, 2008

Strapped

"Frankfort chronically faces a cash crunch, but during a Wednesday night televised debate, candidates in a Northern Kentucky state senate district distanced themselves from raising taxes."

Begins an article covering a debate in Northern Kentucky.

State's revenue drops, governor tries to reassure KY

Reads the headline over at polwatchers.

The media is so sure there's a revenue problem, that it's hard to even fathom that the reality is that state revenue is increasing.  David Adams at BIPPS explains:

Revenues for the first quarter of the 2009-10 fiscal year were $17,798,488 higher than they were a year ago. Even if you include the $15 million drop in the Road Fund, increased revenues point yet again to the need to get spending under control rather than hitting taxpayers any harder.

We aren't strapped for cash, we're strapped for truth!

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October 7, 2008

Business Tax Climate

We're #34 according to the Tax Foundation's 2009 State Business Tax Climate Index.  Kentucky receives low marks across the board with the exception of sales tax.  Kentucky is indexed at a particularly high unemployment insurance rate.

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October 6, 2008

Financial Troubles

David Adams has a good find over at KyProgress:

The Lexington Herald Leader and the Louisville Courier Journal were too busy this weekend to print it, but bond rating agency Fitch had this to say about Kentucky:

"The Negative Outlook reflects plans to continue to deplete fund balances and virtually drain the budget reserve trust in the current biennium. Further, Fitch remains concerned about the weakened pension funding levels and the commonwealth's rising debt position as an additional $1.65 billion in debt has been authorized for the biennium."

I'd like to bullet out these notes with specifics:

• "virtually drain the budget reserve trust in the current biennium"
  

The biennial budget spends $191 million of the Budget Reserve Trust Fund, dropping it from $215 million to only $24 million.

• "weakened pension funding levels"

After no action on pensions during the 2008 Regular Session, the General Assembly passed a bill in Extraordinary Session committed to actually funding pension system deficits in future budgets (just not right now).

• "the commonwealth's rising debt position "

Appropriation supported debt service as a percentage of total revenue is projected by the budget office to average 6.1% in this biennium, a higher level than any in history and a 17% increase over FY 07-08.

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January 29, 2007

Projected state budget surplus is trimmed - by John Stamper, Lexington Herald-Leader

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January 23, 2007

UK study: Tax breaks create fewer jobs than state claims - by John Stamper, Lexington Herald-Leader

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Tax breaks don't create as many jobs as state claims, UK study finds - by John Stamper, Lexington Herald-Leader

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November 21, 2006

Ky. minimum wage fight likely - editorial, The Enquirer

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November 19, 2006

A brisk rise in American Wages - By Mark Trumbull, The Christian Science Monitor

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November 5, 2006

Fletcher expects $278.9 million surplus - by Jack Brammer, Lexington Herald-Leader

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November 4, 2006

Unemployment lowest in 5 years - By Jeannine Aversa, Associated Press

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