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Governor-elect, General Assembly face challenges

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By The Staff

As Gov.-elect Steve Beshear prepares to take office next week, it is becoming increasingly clear that the two-year budget he will present at the end of January and the General Assembly will enact by mid-April faces a serious set of challenges. In recent weeks we have learned that several state agencies have to have more money just to get through the current fiscal year, which ends next June. Medicaid has the biggest request, at $112 million. Corrections, parks and the Kentucky State Police need $45 million more. Much of this is driven by the national economy, which is not bouncing back as fast as we would like. That’s having a detrimental effect on our General Fund receipts, which comprise a large portion of the budget that funds state government. In the 2005 and 2006 fiscal years, this fund grew by nearly 10 percent annually, but slowed to less than 3 percent last fiscal year and isn’t expected to grow by much more than one percent this year. State economists predict growth will hover between 2.4 to 3.6 percent the next several years. This downward trend is a double hit in many ways, since it not only means less money coming in but also more going out because of inflation, higher fuel costs and, in Corrections and Medicaid’s case, an ever-growing number of people they serve. The state technically has some savings in what is informally known as a “Rainy Day” fund, but it is no understatement to say that this money is already obligated. We are seeing a similar, if much larger, situation in our Six Year Road Plan, which is over-programmed by more than $3 billion, meaning some future projects will be delayed longer than normal. With several large Ohio River bridge projects and possibly two new interstates set to be built over the next couple of decades, we will have to work hard to maximize every dollar we get for quite some time. One of the biggest expenses legislators will face in the upcoming session is the long-term deficit in the retirement plans for state and local government employees and teachers. There is no worry about covering retirement and healthcare expenses now, but if nothing is done soon, this situation has the potential to devastate the budget a decade or so from now. Over the years we are obligated for billions of dollars, putting us in the same boat as about every other state. Prisons and local jail costs are two other areas needing our help. Our prisons are expecting a five percent increase in the next two years in the number of inmates, while some counties are spending 40 cents or more of each dollar just to maintain their jails. There is a growing movement to take over more of the jail costs our counties are facing, but it is too soon to say what might happen. Until we get the governor’s proposal and go through the long process of seeing what we can do with the money we have, nothing is set in stone. While the financial outlook for the next two years is not too bright, I still think we can enact a budget that meets our day-to-day needs. We may not be able to take on many new projects, but I don’t foresee significant cuts like we had earlier this decade either. I hope to hear from you soon. Submitted by State Rep. Rick Rand