Friday, June 15, 2001

Budget shortfalls loom in '02

Patton predicts cuts, downplays tax hike

By Mark R. Chellgren
The Associated Press

        FRANKFORT — Kentucky will be able to muddle through budget shortfalls this fiscal year without much notice. The pain comes next year, officials said Thursday after revenue forecasts were officially revised.

        “I just don't believe that we can get through this next year without having to cut programs that people are going to feel,” Gov. Paul Patton said.

        With revenue shortfalls, and a budget enacted by the General Assembly that spent more money than the state expected to take in, the shortfall this year wound up at about $185 million.

        With the fiscal year beginning July 1, the shortfall will be an estimated $321 million.

        “We think we've got '01 in hand by a combination of measures. Shouldn't be anything radical; shouldn't be anything that people can actually see,” said deputy state budget director Bill Hintze.

        “It's a more serious problem, for sure, next year.”

        Some agencies already have been warned they may face budget cuts of 5 to 8 percent. Mr. Hintze said some planning in the central budget office could lop as much as 10 percent off some agency spending, though Mr. Patton disputed that figure.

        Mr. Patton said he wants to keep spending intact for education. But with elementary through postsecondary education accounting for nearly two-thirds of the budget, that could be especially difficult to do.

        When the state's economy hit the skids, there was about $278 million in its rainy day fund. The first round of cuts a few months ago took $21 million. Mr. Hintze said more will be taken to balance the budget this year.

        In addition, Mr. Patton said he expects to recoup some $40 million in what he termed “excess appropriations” to the state school fund. That move will put him in direct conflict with legislators, who strongly objected when the possibility was first raised.

        The state gives money to local schools based on enrollments and attendance, which are behind estimates made when the budget was put together during the 2000 General Assembly. Legislators want to give that money to the schools anyway.

        As it has throughout the economic problems, the biggest contributor to the shortfall was the sales tax. Even with the tax increase added to long-distance telephone calls in 2000, the sales tax accounts for two-thirds of the revenue shortfall.

        “We're not looking at increased taxes as a way to solve this problem,” Mr. Patton said.

        Layoffs of state employees are also a last resort, he said.


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