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November 11, 2009

Still dismal — 11/12/09

State revenues continue to fall as recession impacts economy

Anonymous The Daily Independent Wed Nov 11, 2009, 03:28 PM EST

The more than one out of 10 Kentuckians who continue to be unemployed are not alone in feeling the impact of a nationwide recession that economists and Washington politicians assure us has ended. State revenue continues to fall, which virtually assures that the two-year budget the 2010 General Assembly will approve will be an extremely lean one that will call for less spending than the biennial budget legislators approved in 2008.

In fact, the first order of business for legislators when they gather in Frankfort in January likely will be to approve more cuts in spending just to balance the budget for the current fiscal year. If so, it will mark the fourth time the budget has been slashed since its approval less than two years ago.

We wish we could say that things are improving and the 2010 General Assembly will be able to restore some of the spending cuts they have made. However, instead of improving, if anything the state’s revenue picture is getting worse.

State budget director Mary Lassiter announced Tuesday that state government took in $27 million less in October than it did in October of 2008. That represents a 4 percent drop in revenue that would have been much worse if legislators had not doubled the state tax on cigarettes. In fact, the cigarette tax — up 53 percent in October from the previous year — was the only source of state revenue used primarily for the General Fund to show an increase in October. Revenue from the Kentucky Lottery did increase by 3 percent, but most of the lottery revenue is earmarked to fund college scholarships for Kentucky students. Little of it goes to the General Fund.

The revenue produced from various taxes in October is a microcosm of Kentucky’s ailing economy: Corporate income taxes, down a whopping 82 percent from October of 2008; individual income taxes, down nearly 10 percent as a result of the state’s double-digit unemployment rate; sales and use tax receipts, down 4 percent, a sure sign of a sluggish retail economy.

State officials are “very concerned” about state government’s ability to bring in enough money to pay for what’s been budgeted in the current fiscal year, Lassiter said. And that does not even project what the state must do to balance its two-year budget for the biennium that begins next July 1.

State agencies hoping for an increase in funding during the next two years can forget about it. With there being no mood in Frankfort to increase taxes, those that depend on state tax revenue — including public schools — will be lucky to just maintain spending at the current level.

What about more gambling? Well, even if legislators approve some sort of expanded gambling, it will take at least a year before the first tax revenue from expanded gambling is collected. And it is likely that Ohio’s approval of casinos in four cities — including Cincinnati — has made gambling that much less lucrative for Kentucky. After all, even before the vote in Ohio, some experts were contending that gambling was nearing its “saturation point” as a dependable source of revenue for states.

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State revenues continue to fall as recession impacts economy

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