Gov. Beshear Spares Education From State Budget Cuts

January 15, 2010

 Gov. Steve Beshear used more federal stimulus funds, siphoned money from small state accounts and cut spending 3 percent for lower priority state agencies to fill a $108 million budget gap in the current state budget.

Beshear’s plan, announced Monday, at a news conference in the Capitol, won’t cut public school funding or lay off state workers through the end of the fiscal year on June 30, he said.

Beshear said his decisions were made with a goal of protecting "important long-term investments in Kentucky’s future: education, health care, public safety and economic development."

Later Monday, Senate President David Williams, R-Burkesville, complained that Beshear had failed to cut base spending sufficiently, making it more difficult to solve a looming revenue shortage of more than $1.4 billion that Beshear has said awaits in the 2010-12 budget.

"He should already be working to reduce the base by personnel reduction, not just attrition …" Williams said. "It’s going to take serious action by him, and the sooner he takes those actions, the better."

By sparing education, Medicaid benefits and other administration priorities, Beshear’s 3 percent cuts again strike at smaller programs and agencies, including: the Department for Natural Resources, cut $555,800 ; local public health departments, cut $322,000; and the Department for Juvenile Services, cut $2.4 million.

"I commend the governor for respecting our top priorities, but these are painful cuts and represent the sixth round of recent cuts which have mostly affected smaller, but important programs," said Terry Brooks, executive director of Kentucky Youth Advocates.

House Speaker Greg Stumbo, D-Prestonsburg, could not be reached for comment.

The governor acknowledged that tougher decisions will be required in the 2010-12 budget he is scheduled to present lawmakers on Jan. 19.

He gave no clues how he plans to balance that budget other than to repeat that he will propose no broad tax increase and will give top priority to public school funding.

The shortfall Beshear addressed Monday was caused by last month’s projection that state General Fund revenue this fiscal year will be $8.2 billion – about $100 million less than previously expected.

That, plus an $8 million shortage in Medicaid funds, produced the $108 million shortfall.

Beshear’s plan would save about $31 million by the 3 percent cuts to smaller agencies.

He used $25 million in federal stimulus funds, which otherwise would have been available next year. He transferred more than $33 million from small accounts of state agencies that draw revenue from fees or dedicated taxes, and made other budgetary transfers.

The governor did cut elementary and secondary education funding by about $10 million. But he said that money will be more than offset because of a surplus of at least $30 million in funds appropriated this year for school funding.

The base appropriation for schools is based on a complex formula that makes assumptions on averag e daily attendance at schools and property values established for tax purposes. Some years, including this one, those assumptions were slightly off, producing a surplus, Beshear said.

Beshear said that money will be redistributed to school districts under the state’s formula for funding schools – offsetting both the $10 million in funding cuts he imposed Monday, as well as about $20 million in education cuts made last June.

"A word of caution to our school districts: conserve your funds as much as possible. The challenges confronting us in the next two-year budget are formidable," Beshear said.

Education groups praised the governor’s decision.

"We applaud the governor," said Sharron Oxendine, president of the Kentucky Education Association. "I’m hoping that this will make up the losses that districts have had to incur this year."

Brad Hughes, spokesman for the Kentucky School Boards Association, said the decision to save schools from cuts this year is "the best possible start for the new year."

"In January the boards really get into planning next year’s budget," Hughes said. "At least they will know they will not have to additionally dip into their contingency funds for the current year."

The $108 million shortfall comes on top of an earlier shortfall of about $1 billion this fiscal year, which Beshear and the General Assembly addressed last summer -largely by using about $780 million in federal stimulus funds.

The big gap waiting in the coming budget is mostly caused by the fact that that federal stimulus money goes away and revenue growth is likely to fall far short of being able to replace the stimulus funds.