Published: October 10, 2008 03:11 pm            

Lean times — 10/12/08

An already tight state budget is ikely to have to be trimmed

Even before the events of the past two weeks, the economy of Kentucky was far from robust. The two-year budget approved by the 2008 General Assembly is an extremely lean one, projecting a $900 million drop in revenue during the two years that began on July 1.

But it could be worse than that. Gov. Steve Beshear said Thursday that state revenue for September was $40 million less than in September of 2007. “Storm clouds continue to gather over our economy,” the governor said.

State revenue is directly tied to the economy. If fewer Kentuckians are working, revenue from the state income tax declines. If a family’s income drops, people are forced to delay the purchase of clothes, televisions, toys, furniture and other items not considered essential. Purchasing a new car or truck is impossible. The less people buy, the less revenue Kentucky receives from the sales tax.

If people are driving fewer miles — and they are — the less revenue the state receives from the gasoline tax, which is earmarked for highway construction and maintenance.

And if a family is on the verge of losing its home, it is likely to become delinquent in paying the property tax.

Of course, Kentucky is not alone. Just about every state is seeing a decline in revenue because of a worsening economy. While misery may love company, that doesn’t make it any easier to cope.

When tax revenues drop, Kentucky can’t just do what Congress does. While out politicians in Washington do not have to balance the federal budgets, Kentucky does have to balance the state budget. Like most states. Kentucky’s constitution bans deficit spending.

The problem is that two-year budget that went into effect July 1 has little wiggle room. In fact, many in this state — including us — believe the budget woefully underfunds some critical programs.

Although lean, the two-year $19 billion state budget approved in April is balanced only if state revenue grows by 2.6 percent over the next two fiscal years. But instead of revenue increasing in September, it dropped by 4.6 percent over the previous September.

If the trend continues, Governor Beshear will be forced to order state agencies to cut spending — again.

Of course, there are some — led by Senate President David Williams — who seem to think that state can solve its budget problems by simply tightening its belt. No doubt there is some waste in state budget, but if the downward trend continues, some important programs are going to be cut. And if the state’s universities and community and technical colleges are again ordered to reduce spending, they likely will again raise tuition to make up for some of the lost revenue. That, of course, will make college unaffordable for more people in a state that already has a severe shortage of college-educated adults.

We don’t envy Beshear. He became governor at a time when the state’s needs exceeded its revenue. And the situation keeps getting worse.

        

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