Tuesday, April 03, 2001

Kentucky taps reserve to balance budget

Slowing economy won't cause cuts in jobs, programs

By Patrick Crowley
The Cincinnati Enquirer

        FRANKFORT — The bear has taken a bite out of the Kentucky state budget.

        The slowing national economy has trickled down to Kentucky, forcing state officials to dip into a rainy-day fund to balance a $6.8 billion state budget that is $117 million short.

        It is the first time in nearly a decade the state has had to tap Kentucky's budget reserve trust fund, which even after taking a $23.2 million hit still stands at $255 million.

        “We are not concerned the state is going into a recession. But our economy has slowed down,” state Budget Director James Ramsey said during a Monday morning news conference.

        For now, no state jobs, programs or services will be cut, Crit Luallen, secretary of the Cabinet, said during the same news conference.

        “For this fiscal year we can reach the needed reductions without any painful program cuts to agencies,” Ms. Luallen said. “That's not to say that next year we won't have any problems that will push us into actual program cuts.”

        But “next year” actually refers to the Kentucky state government's fiscal year, which begins July 1.

        Mr. Ramsey said he is concerned that the shortfall in the next fiscal year — July 1 to June 30, 2002 — could reach as high as $180 million.

        “Economic growth and (state) revenue growth will be slow,” Mr. Ramsey said. “And we need to be thinking about that as we move forward.”

        Kentucky is not isolated among state governments dealing with the slowdown in the national economy.

        Last week, Ohio Gov. Bob Taft ordered a 4 percent cut in the state's budget. And Mr. Ramsey said Monday that “well over half the states are experiencing a revenue shortfall.”

        But Kentucky is able to balance the budget, at least in part, without making significant cuts because of the rainy-day budget surplus fund that Gov. Paul Patton and the Kentucky General Assembly have built up over the past decade, during more bullish economic times in the state and nation, Mr. Ramsey said.

        Even with $23.2 million less, the reserve fund is still the highest it has ever been in state history, he said.

        The state also expects to reap savings in other ways:

        • $21.3 million by not filling jobs open throughout state government. Other personnel decisions are also being delayed into the next fiscal year. For instance, Mr. Ramsey said, a 70-cadet Kentucky State Police class that was supposed to start Monday will be delayed until July.

        • $50.4 million is being saved on the debt the state holds because of recent drops in interest rates. Some rates that were as high as 7.25 percent several months ago are now down to around 5 percent, Mr. Ramsey said.

        • $14.9 million will be returned by agencies and departments. The money was over- budgeted or won't be needed this year, Mr. Ramsey said.

        • $5.5 million through an accounting error on tax credits for jet fuel given to airlines operating in Kentucky, mainly Comair and Delta in Northern Kentucky and UPS in Louisville. Mr. Ramsey said the credit was mistakenly recorded twice on the state's books.

        • $1.9 million in coal tax severance money will be returned to the state and not allocated to programs that would have benefitted local governments.

        Mr. Ramsey said that, because of the economic slowdown, Kentucky residents are spending less on large retail items, such as appliances and automobiles, and businesses are not investing as much.

        That could lead to job reductions through the end of this year in construction and manufacturing, he said.

        Mr. Ramsey pointed out repeatedly that the state's economy is growing, but more slowly than over the past few years.


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