FRANKFORT — Gov. Steve Beshear addressed a $108 million budget shortfall Monday with a combination of 3 percent spending cuts in most state agencies, fund transfers and one-time federal stimulus dollars.
He also announced plans to return $30 million to $40 million in excess education funds to the state’s school districts to cover prior cuts.
Beshear released details of his budget reduction at a Capitol news conference on Monday. It is the sixth budget reduction he has made since taking office in December 2007 and the second time since the fiscal year began in July that he has had to make reductions to this year’s budget. Many agencies have seen a more than 20 percent reduction in their budgets.
The plan includes using $25 million of federal stimulus dollars, more than $33.9 million in transfers from other pots of money in state government and various cuts to state government. Beshear said the plan does not include furloughs or lay offs of state workers.
But Senate President David Williams, R-Burkesville, said Beshear has not cut enough and was depending on one-time money to fix an ongoing structural imbalance in the state’s budget. For years, Kentucky has spent more than it makes in tax revenues, Williams said.
“It appears to be a stop-gap measure at most,” Williams said.
House Speaker Greg Stumbo, D-Prestonsburg, applauded Beshear’s resourcefulness.
“He has to meet certain obligations with less money,” Stumbo said. ” To do that, he is using his managerial skills and we should applaud him for that.”
Beshear had expected 6 percent cuts to deal with the latest budget shortfall. He said Monday that the cuts would be 3 percent because an independent group of economists for the state had lowered the expected revenue deficit for this fiscal year from $160 million to $100 million. In part because of an increase in Medicaid enrollees, the state also had a $8.4 million funding shortfall in the health insurance program for the elderly and the poor.
Beshear said he will continue to protect areas of government such as basic school funding, Medicaid, student financial aid, state police, mental health services and higher education.
The final total to be returned to school districts will be calculated at the end of February, Beshear said.
In past years, these dollars have been swept into the General Fund, but language was added to the budget bill last year that promised that any excess funds in basic school funding. known as SEEK, would be returned to school districts. How much those school districts receive will be based on the SEEK funding formula, which is largely based on a school district’s enrollment figures.
Schools will see a 3 percent cut in non-SEEK funds in the latest budget reduction, Beshear said, but the excess SEEK funds will effectively offset those cuts for all school districts.
“The bottom line — every district will see some budgetary relief, and many will be made whole,” Beshear said. The school districts will see those increases in their April, May and June SEEK formula payments, State Education Commissioner Terry Holiday said.
Holliday said in a statement that the move is “good news for Kentucky’s school districts, which have endured some deep fiscal cuts over the past few years.”
Although many state agencies said they were relieved that the cuts were smaller than expected, the various rounds of cuts have made it increasingly difficult to provide basic services.
The Cabinet for Health and Family Services, which one of the state’s largest cabinets, includes such as agencies as public health, child and adult protection, food stamps and aging services. Since January 2008, the agency has sustained about $64 million in general fund cuts and has lost an additional $31 million in enhanced federal dollars and other monies because of those cuts. Those cuts do not include money that the state has also borrowed from the Medicaid program.
Cabinet for Health and Family Services Secretary Janie Miller said Monday that the agency does not plan to cut the Department for Community Based Services — which oversees both child protection and eligibility for food stamps and other programs. However, the state’s public health system — the various county health departments — will see $325,000 in cuts across the system.
Other cuts include reductions in contracts to Norton Poison Control Center as well as cuts to two health education centers run by the University of Kentucky and University of Louisville that helps keep and retain health professionals in the state.
“We recognize the downward spiral in our funding is our eroding our ability to provide basic services to some of the state’s neediest families,” Miller said. While the cabinet has undergone a series of cuts, the number of households it serves has increased by 16.3 percent since January 2008, cabinet statistics show. “It is just getting very difficult for us to maintain services. Quite frankly, it’s because of the commitment of our employees that we are able to meet the increased needs despite the declining funding levels.”
–Beth Musgrave and Jack Brammer