Published: April 25, 2008 03:52 pm            

Shared misery — 04/28/08

Kentucky is hardly alone in facing a revenue shortage

If it’s true that misery loves company, then many other states would likely join Kentucky in a huge “pity party” lamenting the shortage of money. Indeed, that so many states have simultaneously encountered a serious shortage of revenue to meet essential needs is ample evidence that the much talked about recession has already begun.

In fact, if anything, Kentucky is better off financially than other states. Not that Kentucky’s financial picture is good, mind you. Because of an anticipated $900 million shortfall in revenue and the refusal of legislators to increase taxes, the 2008 Kentucky General Assembly recently adopted the leanest two-year budget in many years, one that reduces funding for higher education and many social services.

But is could be worse. In Neighboring Ohio, Gov. Ted Strickland, a Democrat, and the Republican-led Legislature are wrangling over the exact size of a projected shortfall. The administration has put the figure at between $733 million and $1.9 billion by June 2009.

The largest and most prosperous state — California — has projected a $16 billion budget shortfall over the next two years, the report said. That’s nearly the size of Kentucky’s entire budget for the two years beginning July 1.

According to the National Council of State Legislatures, 23 states and Puerto Rico already are reporting budget shortfalls totaling $26 billion. The fact that so many other states are facing similar or as worse revenue shortages as Kentucky destroys the contention of skeptical Kentuckians who claim the budget crisis was manufactured by Gov. Steve Beshear to help win support for casino gambling. Both states that have casinos and those that do not are facing revenue shortages.

Expect the state’s money problems to get even worse if the recession continues. The sales tax is a major source of revenue for the state, but in tough economic times, people are less likely to purchase cars, furniture, appliances and other big-ticket items that boost sales tax revenues. They are even less likely to buy clothes. By the same token, revenue from the state income tax declines as people are laid off because of the recession.

Not all the states are experiencing money problem. In fact, because of record oil prices, Alaska is expecting an $8 billion surplus next year, or almost double its annual budget.

In an odd sort of way, we see a positive from the shared misery of states facing financial crises. Because of its budget woes, Kentucky has reduced state funding for universities, and professors and teachers should expect only minuscule raises in the next two years. However, the fact that universities in most other states are facing similar money woes should limit the exodus of talented professors who depart Kentucky universities for more lucrative offers in other states.

Now that’s what you call finding a positive from a negative. Misery really does love company

        

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