Governor: Budget Shortfall Reaches $434 Million

Associated Press Writer

FRANKFORT, Ky. (AP) - A budget shortfall of $434 million has left the state in financial peril, Gov. Steve Beshear said Thursday.

At current spending levels, the state will run out of money before the end of June, Beshear said at a Capitol press conference.

"Although the construction and evolution of this problem occurred before I was elected, it is my job to solve it," he said. "We're setting about to do exactly that."

Beshear said he plans to announce specific spending cuts next week. He said his "utmost priority" is to sustain essential government services, especially for the state's most needy.

Last week, Beshear rescinded pay raises that had been given by his predecessor to members of the Kentucky Parole Board. Beshear said the shortfall made it unwise to give the raises.

Fletcher had issued an executive order on Dec. 10, the day he left office, to raise the pay for the seven parole board members by 20 to 27 percent. Under that order, annual income rose to $81,000 a year for members and to $82,000 for the chairman.

Meanwhile, financial problems have been popping up in a variety of state agencies, which have requested $166 million in additional funding to get through the fiscal year, which ends on June 30.

Beshear said the financial picture looks little better for the upcoming two-year budget cycle.

"We are facing nothing short of a budgetary crisis," he said.

Beshear said several factors have added to the state's financial difficulties, including a national economic downtown that has led to the slowest growth in employment in several years.

The state's $18 billion budget had included assumed revenue growth of 4.5 percent over the past year. Beshear said the actual revenue growth was less than 1 percent.

(Copyright 2007 by The Associated Press. All Rights Reserved.)

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