State has few options in dealing with budget hole

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Ed Reinke

May 14, 2009

By RONNIE ELLIS, CNHI News Service The Commonwealth Journal Thu May 14, 2009, 01:40 AM EDT

Gov. Steve Beshear said Wednesday he will wait for a revenue forecast from the Consensus Forecasting Group before making any decision on calling a special session.

And he hasn’t made up his mind on House Speaker Greg Stumbo’s proposal to allow electronic slot machines at race tracks.

Beshear has said the state could be facing a budget shortfall of as much as $1.2 billion in the fiscal year which begins July 1. That’s after a $456 million shortfall this year, made up in part by an increase in cigarette and liquor taxes. If the CFG forecasts revenues to fall more than 5 percent below the budgeted amount, Beshear must by law call lawmakers into session to revise the budget.

But several lawmakers say there isn’t much sentiment for raising taxes again.

Senate President David Williams supported the increases in cigarette and liquor taxes in the past session but those aren’t popular among some in the Republican Party. This past weekend at a Republican statewide dinner in Louisville Williams all but drew a line in the sand.

He said those wishing for a fight to increase taxes are “about to see Armageddon when we come over there in special session or in January because we’ve given this governor as much money as he’s going to get,” Williams said.

One way to solve the problem without new taxes might be Stumbo’s bill, but Williams opposes expanding gambling and some in the House say it might be difficult to pass.

House Caucus Chairman Bob Damron, D-Nicholasville, said a couple of House members have said they can’t vote for the measure unless it is proposed as a constitutional amendment on which voters could pass judgment. Stumbo says his bill does not require an amendment. But without an amendment, lawmakers can’t pass the buck to their constituents and avoid a vote unpopular with some in their districts.

Beshear is scheduled to meet with Stumbo and House Speaker Pro Tem Larry Clark, D-Okolona, Thursday to discuss Stumbo’s proposal. But Beshear said he still hasn’t “made any decision on that legislation.”

But he said the decision by Churchill Downs to cut back on race days during its spring season “certainly makes it clear the horse industry is in some serious difficulties right now.” Stumbo’s bill uses taxes on the slots to increase purses, owner and breeder fees for the horse industry while also providing more state revenue.

Most state agencies have cut their budgets in the past two fiscal years, some as much as 18 percent, according to Beshear. About the only other way to avoid further cuts might be to use federal stimulus money to prop up state spending for a year while hoping the economy recovers. But Williams and Stumbo have insisted that is foolhardy.

“I don’t know – I just don’t know,” is how Rep. Fitz Steele, D-Hazard, answered a reporter’s question of how lawmakers could address the budget hole. Asked if his constituents would accept tax increases to avoid deeper spending cuts, Steele shook his head side to side and said, “You know the answer to that.”

RONNIE ELIS writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com.

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