Daily Independent (Ashland, KY)

Local News

November 29, 2011

Some state agencies facing more cuts

FRANKFORT — Some state agencies will face yet another round of 2 percent budget cuts as Gov. Steve Beshear’s administration tries to close a $190 million budget gap in the current year.

But the moves didn’t fully satisfy the two chairmen of the Democratic-controlled House and Republican-controlled Senate budget committees who wanted to see more cuts in recurring expenses and predict a difficult task in crafting a new two-year budget for the state.

Budget Director Mary Lassiter told the Interim Joint Committee or Appropriations and Revenue that the 2 percent cuts will exempt several priority services such as school funding, Medicaid, corrections, community-based services and state parks. She said those cuts were arrived at after carefully evaluating their impact on services and priorities such as education and public safety.

“The reductions will be done in the least impactful way possible to the citizens and programs,” Lassiter said in explaining why some services and agencies were exempted.

But the administration thinks it can balance the budget without furloughing state employees or layoffs; although some of the affected agencies might decide to lay off employees to help reach the required 2 percent cuts.

Senate A&R Chairman Bob Leeper, I-Paducah, said after the meeting he’d have liked more information on the upcoming budget which he told the committee will “be a very, very difficult situation.”

Both Leeper and his House counterpart, Rep. Rick Rand, D-Bedford, wanted more of the $190 million in savings to come from recurring costs. Otherwise, the problem remains in next year’s budget, they said. Lassiter’s presentation Tuesday indicates the 2 percent cuts to some agencies will produce about $29 million in ongoing reductions. Leeper pointed out that translates to about one-third of 1 percent reduction in the overall General Fund budget.

But it also means a disproportionate burden falls on the unprotected agencies. Cuts to those agencies in prior years account for another $27.5 million in recurring cost reductions. Lassiter said those agencies,  including most of the constitutional offices and services which aren’t related to public schools or public safety, have endured cuts of between 20 and 25 percent during the past four years.

Most of the remaining $57.9 million in reductions, from unspent debt service funds in the current fiscal year, which ends June 30, will be one-time cuts. All the cuts add up to $114.4 million. The remaining gap will be covered by spending $76 million of an estimated $107 million in excess revenues, money that won’t automatically recur next year.

“I would’ve liked to have seen more recurring cuts,” Rand said after the meeting. “But I’m for the exemptions (to priority programs). It’s very difficult to keep going back to the same agencies.”

Leeper said most Kentuckians haven’t understood the impact of the recession on the state budget because lawmakers used federal stimulus money to cover the shortfalls. Because of the stimulus, state government had not “really spent that much less money” during the last three years, but that money has ended and now lawmakers will have to cut spending to compensate.

Leeper has estimated that gap to be about $337 million in the next budget, a figure he termed “very, very conservative” Tuesday.

Lassiter said her projections account for no new bonding, although in response to questions from lawmakers she said it would be “premature” to say Beshear will propose no new borrowing for such projects as new bridges across the Ohio River in Jefferson County.

Leeper said it’s likely costs for Medicaid will increase while legislation passed last year to reduce costs in the corrections system require half of the savings to be used for drug treatment programs. In addition, the legislature is scheduled to increase its payment to the employee retirement system.

There’s another wild card facing lawmakers: the federal government is set to automatically cut funding in 2013 in the wake of a “super committee” failure to come up with $1.2 trillion in deficit reduction. Those would affect the second year of the state budget, said Deputy Budget Director John Hicks, but neither lawmakers nor the governor will know if they will occur when the budget is passed this spring.

RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.

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