Gov. Steve Beshear issued a pair of executive orders this week reducing state spending levels to plug a $90.9-million hole in Kentucky’s budget.
The Office of the State Budget Director announced the shortfall last week, which is due largely to an unexpected $63-million decline in income related to capital gains.
Beshear’s cuts cover the $90.9-million gap.
In a statement released Wednesday night, Beshear said the state was “somewhat limited” in its approach to filling the budget hole.
“But as in previous reductions, two goals guided our decisions—to take steps to make government as efficient and as lean as possible, and to protect as best we can the core services that offer help and hope to our people and represent important long-term investments in Kentucky’s future: education, health care and public safety,” Beshear said in the released statement.
Most of Beshear’s savings come from about $50 million in so-called “fund transfers” from surplus pools of state agency money derived largely from licensure fees and state agency funding.
Just over $21 million is being redirected from the “rainy day fund,” reducing its balance to $77.1 million. And about $15 million will come from unspent appropriations expected to lapse into the General Fund that were initially budgeted at higher amounts. The remainder of the balancing funds come from reductions in executive, legislative and judicial branch spending.
Beshear also reduced spending in the currently enacted 2012-2014 road fund to cover its $22 million shortfall by relying on “unexpended Road Fund appropriations, the automatic budget adjustment due to actual fuel tax receipts, and Road Fund appropriation reductions.”
The state’s court system will return $1.5 million from its budget, though the cut shouldn’t lead to furloughs or other cutbacks, a court spokeswoman said. Court leaders also don’t expect the cuts to jeopardize efforts to overhaul the system’s salary struture.
Republicans Blast Cuts
Immediately after Beshear’s announcement, House Republican Floor Leader Jeff Hoover pounced on the issue with a released statement lambasting the $50 million in fund transfers.
Hoover linked the transfers to the hotly contested state House races this fall, where Democrats maintain a narrow eight-seat advantage over Republicans.
“Time and time again legislation like comprehensive tax reform, public private partnerships, and other bills have been filed in the House that could help improve the revenue outlook for Kentucky,” Hoover said in a statement.
Hoover said those ideas have been “bottled up” by Democratic House leaders.
Julia Crigler, state director for the conservative nonprofit Americans for Prosperity’s Kentucky chapter, warned that Beshear’s cuts may not leave the state with sufficient funds to salt roads in the winter.
“Responsible budgeting means making the hard decisions now so you aren’t left in a bind when in really counts,” Crigler said in a statement released Thursday morning. “We hope this is the last time Governor Beshear fails to deliver a real balanced budget that doesn’t raid our rainy day fund.”
Beshear said, however, that the road fund reduction won’t affect current projects. A request for comment from his office regarding Crigler’s comments was not immediately returned.
Criticism of such fund transfers wasn’t limited to Republicans. State Rep. Jim Wayne, a Louisville Democrat, has been a vocal opponent of using fund transfers to balance state coffers.
“He’s gone in and basically vacuumed out all that money and put it over here in the General Fund because we don’t have enough recurring revenue coming in over here to sustain the budget,” Wayne said.
Beshear’s 2014-2016 budget proposal included about $370 million in such fund transfers, which are largely combed from excess revenue generated by license fees for professions including barbers up to medical professionals.
This week’s reduction orders were Beshear’s 14th since his first term began in 2007. The orders total $1.7 billion in total reductions, according to the governor’s press office.
Here are copies of the reduction orders, including itemized breakdowns in spending: