Beshear plugs $91 million budget shortfall

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Associated Press

Posted on July 17, 2014 at 8:01 AM

Updated Thursday, Jul 17 at 8:01 AM

FRANKFORT, Ky. (AP) — Democratic Gov. Steve Beshear plugged a $91 million hole in Kentucky's $9.5 billion budget on Wednesday - marking $1.7 billion in total budget reductions during his two terms as the state's chief executive.

State officials announced the shortfall last week following a year of sluggish collections on state income taxes.

Beshear said he had few options to balance the budget because the shortfall happened at the end of the fiscal year when most of the money had already been spent. That's why his plan cut just $3 million in state spending. The rest comes from dipping into the various budget accounts at several state agencies and taking from the state's reserve fund.

The $21.2 million transfer from the state's reserves leaves the state's "rainy day fund" - only to be used in emergencies - with $77 million, or less than 1 percent of the state's budget. The Government Finance Officers Association suggests states set aside between 5 percent and 15 percent of general fund operating revenues.

"You never really like to dip into that, but that's why it's there," said House budget chairman Rick Rand, D-Bedford. "It's really conservative how much he dipped into it. I don't think that will cause any great distress going forward."

Beshear said two goals guided his decisions: to make government as "efficient and as lean as possible" and to protect the core services of "education, health care and public safety."

Beshear's plan trims a little more than $260,000 from the Education Cabinet. He did not cut the budgets of the Health and Family Services and Justice and Public Safety cabinets. But he did transfer $23 million from some Health and Family Services accounts and $250,000 from the Juvenile Justice program operations fund. He said both departments had surplus funds over what had been budgeted.

"The use of fund transfers is a valuable tool in how we manage and balance the overall budget of the Commonwealth, and one that keeps us from making deeper cuts to state agencies," Beshear said in a news release.

Republican Senate President Robert Stivers called Beshear's plan "appropriate," but lamented what he called the real problem of Kentucky's economy, which he blamed on Democratic President Barack Obama. House Republican leader Jeff Hoover said Beshear's action "continues to illustrate the short-sighted way our Commonwealth deals with revenue shortfalls by continuing to make cuts to agencies that provide services and support to Kentuckians."

In addition to the executive branch cuts, the judicial branch trimmed $1.5 million from a fund generated by fees from state background checks. State Supreme Court Chief Justice John D. Minton Jr. said the judicial branch would not furlough employees or have other cutbacks.

The legislative branch cut $287,600 from its budget.

Beshear's order also dealt with a $22.1 million shortfall in the state's road fund. As with the state's general fund, Beshear relied mostly on transferring money from other accounts. But he did cut $3.6 million from the road fund. Deputy State Budget Director John Hicks said only $300,000 of that came from road construction projects - not enough to delay or stop construction.

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