This from Governor Steve Beshear:
FRANKFORT, Ky. – Gov. Steve Beshear today proposed a plan to address the state’s budget crisis that would utilize a 70-cent increase in cigarette taxes and double the tax rate on other tobacco products to protect funding for education as well as the state’s most vulnerable populations through Medicaid and mental health services.
Specifically, Gov. Beshear’s plan would protect SEEK, Support Education Excellence in Kentucky, the $3 billion in basic funding for elementary and secondary education; and student financial aid for higher education, while limiting cuts to the rest of elementary and secondary education and higher education institutions to 2 percent.
Medicaid and mental health services would be protected; along with corrections beds in the state’s prison system and state run juvenile justice facilities and school-based programs that are considered vital in many communities. In addition, the governor’s plan would limit cuts to the Kentucky State Police to 2 percent, which saves a new class of 60 troopers.
The plan, released this morning at a Capitol news conference, was developed in response to a $456.1 million deficit in this fiscal year that ends June 30, 2009. Gov. Beshear said his plan represents an important starting point for discussion with legislators, who will be asked to consider the plan early next year.
But the governor cautioned that even as he works with legislators and people across the state to solve the budget crisis this fiscal year, storm clouds are looming just over the horizon as most economists predict an even more troubled economy next fiscal year.
That prospect, he said, makes it essential that both the administration and legislators work together in a thoughtful and careful way to solve both the short-term crisis while positioning the state to deal with even more troubling economic challenges in the months ahead.
“I am determined that when we emerge from this fiscal crisis we emerge not shattered, shell-shocked and lethargic, but prepared and eager to take advantage of the opportunities ahead,” Gov. Beshear said.
“I cannot let our education, our health-care and our public safety systems suffer significantly more than they already have. Our future depends on our ability to build a competitive, innovative workforce, and our K-12 classrooms are the lifeblood of that mission,” said Gov. Beshear.
“To gut education is to doom Kentucky to mediocrity for as long as we can imagine. Education is my top priority and I believe it must be our state’s top priority,” said Beshear. “We cannot sacrifice our future.”
All other areas of state government – state agencies and cabinets from Energy and Environment to Tourism, Arts & Heritage, and Public Protection – would make 4 percent cuts.
In addition, Gov. Beshear, with legislative approval, would implement for the first time, a statewide furlough plan. In order to prevent massive layoffs throughout state government, the furlough plan would require all state employees take three days of unpaid leave between now and the end of the fiscal year, June 30, 2009.
Gov. Beshear’s plan consists of the following items:
- $147.1 million in spending cuts in addition to $432 million in reductions made in the last year. Under Gov. Beshear, the executive branch is the smallest it has been in 20 years, with 2,000 fewer employees than last year and nearly 600 fewer non-merit employees than under the previous administration.
- $81.5 million this budget year by increasing the cigarette tax 70 cents, as well as increasing the tax on other tobacco products.
- $8 million by furloughing state workers three days.
- $40.6 million in other funds, such as transfers from restricted funds.
- $178.9 million from the Budget Reserve Trust Fund or Rainy Day Fund, during this fiscal year. Currently, the legislature has appropriated $191 million of the $226 million fund for the 2010 fiscal year. Under Gov. Beshear’s proposal, increased cigarette tax revenues in the 2010 fiscal year – about $144 million – would be used to replenish the revenues expended from the Rainy Day Fund.
Gov. Beshear said there will be pain, even under this proposal, but the consequences of balancing the budget without new revenue would be devastating. Cuts to state government, including education and Medicaid, would be severe and would eliminate many basic services.
Without new revenue, some of these anticipated impacts would include:
“Such cuts, on top of previous cuts that reached as high as 20 percent over the last year, would devastate, if not ruin basic, fundamental services,” Gov. Beshear said. “The only solution, if we want to preserve the priorities of classroom instruction, health care and public safety, is to raise new revenue.”
- Significant layoffs of state employees.
- Universities would initiate hiring freezes, cap enrollment and cut
- Prison beds would be reduced and juvenile justice centers closed.
- Health care for low-income and disabled Kentuckians would be cut and
mental health facilities would be closed.
In addition, Gov. Beshear said a hike in the cigarette tax, while popular among a large majority of Kentuckians, would create a “healthier population and substantially decrease long-term health-care costs. This is not only a revenue measure but a permanent antidote to what ails much of our state.”
Most independent studies indicate that a significant hike in cigarette taxes lowers smoking rates, particularly among teenagers. Kentucky’s existing 30-cent tax is one-fourth the national average and lower than all but three states, Gov. Beshear said. Moreover, only one neighboring state currently has a lower rate. Three other states, Indiana, Ohio and Tennessee, recently raised their rates and the Hoosier state has begun to report declines in smoking levels.
Several other states, among them Florida and Mississippi, also are currently considering a cigarette tax hike.
Gov. Beshear has already begun working with legislators in both houses and on both sides of the aisle on next steps. He also plans to take details of the proposal across the state to gather input from Kentuckians in a series of town hall forums.
“I realize legislators may have other priorities and I look forward to working with them to discuss those priorities and find common ground,” he said.
“Is my plan the perfect and final solution? No, it is not,” said Gov. Beshear. “I see it more as a starting point for discussion about our shared values and how we protect them as best we can in very challenging and difficult times. I am open to new ideas and proposals. In fact, flexibility is a requirement.”
“We must put aside the labels of Democrat and Republican, the rivalry between the executive branch and the legislative branch and the notion that public and private can’t work together,” Gov. Beshear said. “We must be Kentuckians first. I believe we will be.”