FRANKFORT — Gov. Steve Beshear announced his plan Wednesday to fill a $996 million hole in the state budget by using federal stimulus funds, restructuring existing state debt and suspending some holiday pay for state employees.

Beshear issued a call for a special legislative session to begin June 15 to consider his proposal and said he “fully anticipates I will be amending that call in the next few days.” He said he may add video lottery slots at horse tracks, funding mechanisms for mega-projects, and economic development initiatives, including bringing a NASCAR race to Kentucky before lawmakers arrive on June 15.

Beshear called the proposal for slots at the tracks “very controversial,” saying several times it is a hard vote for lawmakers, but he said he continues to discuss the issue because the horse industry is in trouble.

Senate President David Williams, R-Burkesville, opposes expanded gambling and continued Wednesday to discourage the governor from putting it before lawmakers.

“If he thought he had the support, he’d call it, so obviously that means he’s not going to call it because they don’t have the support in the House,” Williams said.

Speculation about how many votes the measure – sponsored by House Speaker Greg Stumbo, D-Prestonsburg – can garner in the House has ranged from the mid-thirties to as high as 60 or 70. Williams has said it can’t pass the Senate.

Stumbo has said the measure can pass the House if its members are assured it will get a vote in the Senate.

The budget, however, was the focus of Beshear’s afternoon press conference.

He said Kentucky’s budget is “under siege” from a “global economic crisis hammering us from all sides.” This is the third year of significant state budget cuts, Beshear said, and it will likely be 2012 before the state takes in as much money as it did in 2008.

But because of the federal stimulus money, the cuts to state services won’t be as devastating next year as might have been feared. Most agencies will take a 2.6 percent cut in funding from 2009 levels, but some areas – primarily education and Medicaid – will be protected from cuts and a few will actually see increases.

Public schools will not see a cut in funding – and teachers will get a 1 percent pay increase. He will also provide additional funding for prosecutors, public defenders and the corrections system. State employees will still receive a salary increase but they will lose pay for some holidays. Those making $50,000 or less will not be paid for three state holidays; those making more than that will not be paid for five holidays.

The Department of Revenue will receive a $3.1 million increase to hire more staff but that is targeted toward enhanced tax collections which the plan anticipates will produce an extra $18.5 million.

“The governor has done a very good job with the plan to deal with the budget deficit,” Stumbo said. “It’s not pretty, but it will save our SEEK (school funding) formula. It will save further cuts in higher education. And it will save any cuts in Medicaid.”

Medicaid benefits from the federal stimulus because Kentucky’s federal match will increase from 70 cents of each dollar to 79 cents. Much of the stimulus goes toward protecting education as well.

Ed Worley, D-Richmond, the Senate Minority Leader, said the stimulus funding prevented even deeper cuts which could have been difficult to overcome. He said Democratic leaders in the Senate will begin briefing their members on the governor’s plan and determine how they wish to proceed.

One thing no one was talking about was taxes.

“It does not propose new or increase taxes,” Beshear said of his plan. “In this time of great volatility and continued hardship, broad based tax increases on families and businesses would have a devastating effect.”

He said proposals for comprehensive tax reform deserve “a hard look and some very intense discussion over the next several months” but would not be taken up in the special session. Both Williams and Stumbo have said there is no support in the legislature to raise taxes.

But Terry Brooks, Executive Director of Kentucky Youth Advocates, said the nearly $1 billion shortfall is too large to close with only spending cuts and lawmakers should consider increasing revenue.

“Across the board cuts to programs and services will disproportionately impact the most vulnerable citizens of our commonwealth,” Brooks said.



Ronnie Ellis writes for CNHI News Service and is based in Frankfort, Ky. He may be contacted by email at rellis@cnhi.com.