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Lawmakers get more bad news on revenue shortfall

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By The Staff

Kentucky Press Association News Bureau

A non-partisan group of economists has released a bleak forecast for the state's projected revenue shortfall that shows a greater deficiency than expected.

The Consensus Forecasting Group released data last week.

The group's previous forecast from October indicated that the state would be about $117 million short for the remainder of the fiscal year.

But the numbers released Jan. 16 project the shortfall at about $129 million. The decrease in state revenue will continue into the next two years with projected deficits of $54 million in 2009 and $104 million in 2010.

In his State of the Commonwealth address Jan. 14, Gov. Steve Beshear said the current budget problems would require considerable cuts in the state's operating budget.

Although tax hikes are not being publicly discussed and talk of raising the cigarette tax is circulating throughout the legislature, Beshear said he would be concerned that increasing taxes would hurt Kentucky's economy and could exacerbate the revenue problems.

Democratic leaders in the House of Representatives and the Senate have said that a cigarette tax increase could protect education from severe cuts.

Speaker of the House Jody Richards, D-Bowling Green, said the downturn in the nation's economy is partly to blame for Kentucky's current situation.

"We've got problems," Richards said. "The numbers are worse than expected. We have builders going bankrupt and that's a really bad sign because the building trade has a lot to do with the economy. The other thing, of course, is the price of gasoline. That's tough on a lot of families."

Because so many bills will be directly affected by Beshear's budget, Richards said the House is "basically in a holding pattern" on spending until the governor's proposal is released Jan. 29.

Beshear has already called on most state agencies to cut three percent from their current budgets.

Although the state's money problems may have stifled discussion on some other proposals, the movement to allow expanded gaming in Kentucky continues in the General Assembly.

Despite the fact that a bill outlining the specifics of how many casinos would be allowed or where they would be located has not be introduced in the House, the Special Committee on Expanded Gaming heard testimony from the Legislative Research Commission, groups representing local governments and representatives from the business community on the potential impact of more gambling in the state.

Sylvia Lovely, executive director and CEO of the Kentucky League of Cities, told the committee Jan. 16 that her organization generally supports the Constitutional amendment that would allow more gaming.

Lovely said two aspects that concern her membership are that some of the revenue generated by the casinos would be earmarked for public safety, such as police and emergency services, and infrastructure and that the local community have some input on the exact location on any potential casino.

Committee member Darryl Owens, D-Louisville, said it would be likely that any casino project would still have to go through the local planning and zoning board where members of the community could have a voice in the decision.

Bob Arnold, executive director of the Kentucky Association of Counties, said the members of his organization supports putting the issue on the ballot this November.

Arnold said he believes all Kentucky counties should share in the increased revenue from expanded gaming and that at least 10 percent of the money should be used strictly for upgrading public safety.

Reacting to a request from the committee on Jan. 17, Mike Clark and Jon Roenker, economists with the LRC, outlined some of the expected pros and cons of expanding gaming.

Using an expanded gaming bill sponsored last year by Rep. Larry Clark, D-Louisville as a model, Mike Clark and Roenker projected the state's portion of the revenue would be $314 million annual, a figure far short of Beshear's $500 million estimate.

The LRC economists said their estimate could be affected by other gaming opportunities in the region and a drop in revenue generated by the sale of other taxable items.

Under their model, the state would allow nine casinos across the commonwealth with five of those being located at racetracks.

Roenker noted their projections do not include additional money raised through the sale of gaming licenses, higher than expected wagering or services related to casinos such as restaurants and hotel rooms.

Clark said a study on compulsive gambling indicated that in 2003, there were about 15,000 Kentuckians addicted to gaming.

Committee member Rep. Arnold Simpson, D-Covington, questioned the idea that allowing additional gaming in Kentucky would lead to a dramatic increase in the number of compulsive gamblers.

"We already have gaming," Simpson said. "Most people have already seen an additional social cost (to gaming)."

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