FRANKFORT — A key lawmaker told members of the state House Tuesday that spending on schools, prisons and Medicaid likely will get chopped in the upcoming two-year state budget.
Those bedrock functions of government, which account for about two thirds of state General Fund spending, have been largely off-limits during five previous rounds of budget cuts since Gov. Steve Beshear took office in 2007.
After the pronouncement by House budget committee chairman Rick Rand, which came during a three-hour informational meeting for House members, House Speaker Greg Stumbo said he is “not afraid” to consider tax reform to keep the state from making crippling cuts in education and human services.
Stumbo, D-Prestonsburg, said he believes the public and state lawmakers might embrace an overhaul of the state’s tax system to avoid huge cuts in education and human services.
Told by a reporter that Beshear and many legislators don’t seem to have an appetite for tax increases, Stumbo responded: “I don’t have an appetite to turn my back on the needs of our state.”
He said he was particularly alarmed to learn Tuesday that only 12 of every 100 students in Kentucky who enter the ninth grade graduate from college.
“I’m willing to do whatever it takes,” Stumbo said.
In response, Beshear spokeswoman Kerri Richardson said the Democratic governor “has made it clear that now is not the time to raise broad-based taxes on Kentuckians.
“Tax reform means different things to different people, and we will continue to listen to whatever ideas the legislators may have.”
Last month, Senate President David Williams, R-Burkesville, said in a Louisville speech that Kentucky’s leaders should focus on tax reform and downsizing government to solve the current budget problem. He said Beshear should call together leaders from both parties to tackle the issue.
Stumbo said Rand, D-Bedford, is correct that cuts in school funding, prisons and Medicaid are likely if no more money is found. Those areas have been largely spared from more than $800 million in revenue shortfalls since 2008.
Cindy Heine, associate director of the Prichard Committee for Academic Excellence, said cutting the main funding formula for schools will only hurt Kentucky’s future.
“We’ve made so much progress over the last 19 years,” Heine said. “We can’t afford to move backwards now.”
Heine said she understands that many state agencies have had to absorb upwards of 20 to 30 percent cuts to their budgets and she realizes that legislators have few easy cuts left to make.
“There are just a lot of tough decisions,” Heine said. “But if we’re ever going to get out of this situation, we’re going to need a better educated populace.”
Jennifer Brislin, a spokeswoman for the Justice and Public Safety Cabinet, said it’s difficult to cut the Department of Corrections’ budget because the vast majority of it is based on the number of inmates in state prisons.
“Any ability to reduce our budget is going to be dependent on efforts to reduce our prison population,” she said.
Over the last two years, the Justice and Public Safety Cabinet has cut about $31 million from other departments in the cabinet.
Meanwhile, Rand noted that 831,000 Kentuckians are on Medicaid, and that the figure increases about 3,000 a month.
Rep. Jimmie Lee, D-Elizabethtown, said Kentucky is on course to have 25 percent of its population on Medicaid by 2015 at a cost of $6.5 billion a year to the state and federal government.
Stumbo expressed hope that the state will receive more federal stimulus funds to prevent cuts to schools, Medicaid and corrections.
Kentucky already has spent $780 million in stimulus funds. Kentucky still has $358 million to spend in the first year of the biennial budget, but that money runs dry before fiscal year 2012 begins.
Kentucky may face a $1.4 billion shortfall for the next two fiscal years, Rand said, adding that a specific figure for the likely shortfall is expected Dec. 21 when a group of independent economists known as the Consensus Forecasting Group makes its official revenue projections.
Stumbo did not identify any specific tax changes but noted that Kentucky is “not growing our revenue streams to adequately fund” the costs of state government operations.
“I think the debate should continue about our entire taxing structure, the entire revenue streams in this state,” Stumbo said.
“If we were running a business like we run government, we probably would be broke because we don’t re-examine and adapt our revenue sources to the changes in the economy.”
Stumbo also said he hopes legislators will pass a bill to allow electronic slot machines at racetracks that could raise money for the state.
The Beshear administration, which backs slots at the tracks, has said the measure could raise $200 million to $350 million for the state treasury.
— Jack Brammer and Beth Musgrave