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Governor Beshear Offers Grim Budget Proposal To General Assembly

FRANKFORT, Ky. (AP) - Gov. Steve Beshear proposed deep cuts
Tuesday to Kentucky government - stretching from universities to
state parks - in presenting an $18.5 billion two-year spending plan
that reflects sluggish revenues mixed with growing demands from
Medicaid.

Kentucky's public universities would face 12 percent cuts in the
next budget that begins July 1, on top of an across-the-board 3
percent reduction Beshear already imposed this year. A
cross-section of state agencies would also be targeted for sharp
cuts, and the governor proposed no pay raise for public school
teachers, though local school districts could boost teacher
salaries.

"I envisioned this first budget address to be a night where I
unveiled a plan brimming with bold and creative new programs,"
Beshear said to a joint session of the General Assembly. "However,
that evening will have to wait. Because tonight, we deal with cold,
harsh reality."

Beshear's budget plan for Kentucky would include a marginal
overall increase from the current two-year spending plan, which is
$18.1 billion. But, with economic forecasters calling for
drastically shrinking state revenues, cuts to certain areas such as
education were needed to pay for unavoidable hikes in "have-to"
areas such as health care coverage for the more than 700,000
low-income and disabled Kentuckians.

Beshear pointed to other states - Florida, Maine, Virginia and
Rhode Island - as examples that Kentucky was not alone in its
budgetary dilemma.

For the Bluegrass State, Beshear proposed no cuts in the basic
formula for state aid to public elementary and high schools - a big
chunk of the overall state budget - and the per-pupil spending
would remain intact. The Department of Education itself, however,
would face a slight decrease in funding for other agency spending.

"We had to make difficult choices, and we made those choices,"
Beshear said.

The governor, however, said he was not proposing any changes to
need-based financial aid for college students, and acknowledged
some universities may consider tuition hikes to offset their
funding woes. But, he urged university leaders to find ways of
slimming down their own budgets.

"I regret what we're having to propose," Beshear said.

Other areas that would be cut in Beshear's proposal include
faith-based initiatives, the Kentucky State Police and public
defenders.

Nevertheless, Beshear said his plan was "not a budget of
retreat" and felt the state could stay on a pace of progress
despite tough financial times. The governor noted that Kentucky's
reliance on one-time revenue sources would be cut in half over the
next two years.

"This budget will put Kentucky back on firm financial
footing," Beshear said.

Beshear said he was proposing no tax increases, although various
Democrats in the legislature have said they'd rather pass a
cigarette tax hike than allow education funding to suffer.

"Taxes continue to be the last option for me in terms of
resolving this situation," Beshear said.

Reiterating a campaign theme, Beshear called on legislators to
let voters ratify or reject a constitutional amendment that would
legalize casino gambling. Kentucky already allows gambling at race
tracks, bingo halls and via a state lottery. By allowing casino
gambling, Beshear believes state government could reap an extra
$500 million in revenue and stop Kentuckians from wagering their
money in bordering states.

"Do we want Kentucky money continuing to benefit the people of
other states, or do we want to bring it home to improve the quality
of life of our own people?" Beshear said.

Senate President David Williams, however, said he felt the
revenue that would be generated from casino gambling would not be
worth the social costs and amount of money problem gamblers might
lose.

"I hope we have a free and open discussion in both the Senate
and the House and the governor doesn't try to shove this down
everyone's throat," Williams said.

Few agencies were in line for spending increases under Beshear's
budget, his first since winning election in November. Medicare, the
state-federal health insurance program, would consume the largest
share of additional spending.

Beshear proposed an extra $147.9 million for Medicaid in the
first year of the biennium, and $242.5 million in the second year.
The governor said that none of the state's current 722,000 Medicaid
recipients would be cut from the rolls.

But the governor said changes are needed to make the system more
cost efficient.

Beshear proposed $53 million in extra spending for the prison
system over the next two years, a big ticket item reflecting a
projected 6 percent growth in the state's prison population over
that period. Currently, the state's prison population totals more
than 22,000 inmates, and Beshear estimated there would be an influx
of about 6 percent over the next two years.

State employees would get 2 percent pay raises in each of the
next two years, an amount totaling $60 million over the biennium.

The state's constitutional offices wouldn't be spared from cuts.
Beshear proposed reductions of 12 percent in the governor's office,
secretary of state and treasurer's offices. The attorney general's
office was targeted for a 9.8 percent reduction, and the
agriculture commissioner's office would be trimmed by 8 percent.
The state auditor's office would also have less funding to operate.

Other cabinets would also face cuts, but Beshear said his
administration was asking the legislature for "flexibility" so
agency heads could effectively manage their areas amid tight budget
times.

Bob Vance, Environmental and Public Protection Cabinet
secretary, said areas such as mine safety should be "taken care
of" even though his agency would face cuts of about 18 percent.
The agency would find ways to compensate, and would look to cut
personnel last.

"I think we're going to be in fair shape," Vance said.

Beshear proposed using $189.8 million of the state's budget
reserve trust fund to help finance state operations in 2010. That
would leave about $25 million in the "rainy day" fund to deal
with any emergencies, such as forest fires or other natural
disasters.

Rep. Harry Moberly, D-Richmond, the chairman of the House
Appropriations and Revenue Committee, said Beshear's budget would
be a starting point for lawmakers.

"This is the worst situation that we've faced," Moberly said.
"I think the governor has done as good a job as he could have done
with the available revenue and the time that he's had to spend on
this."

Still, Beshear's budget wasn't all gloom.

He proposed the legislature reinstate more than $165 million in
various projects the legislature approved two years ago but were
vetoed by former Gov. Ernie Fletcher.

Such projects include $6 million for a polar bear exhibit at the
Louisville Zoo, $17.5 million for renovations to Kentucky River
locks and dams and $13.5 million for a livestock disease diagnostic
center at the University of Kentucky. Beshear also proposed
reinstating a $14 million technology center at the community
college in Owensboro, $5.3 million for a dairy research farm at
Eastern Kentucky University and $9 million for a renovation at
Western Kentucky University.

The plan also calls for new projects, such as $9 million for
runway improvements at Blue Grass Airport in Lexington and $39
million for an expansion of the Little Sandy Correctional Complex
in Elliott County. It calls for $100 million in various road and
infrastructure projects around Fort Knox, which is preparing to
accommodate an influx of soldiers and civilian personnel due to
base realignment. The plan proposes $10.3 million for roads around
the Kentucky Horse Park leading up to the 2010 World Equestrian
Games in Lexington.

Public universities would also be given authority to sell
hundreds of millions of dollars worth of bonds to finance various
campus improvement projects. It would be up to each individual
university's discretion on whether to proceed with such plans,
Beshear said.

"We are in tough times, and just like Kentucky families who
find themselves in a similar situation, we must tighten our belts
and balance our checkbook," Beshear said. "But, my friends, if we
work together we are going to come out of this in much better shape
than we were before."
--
Associated Press writer Bruce Schreiner contributed to this
report.

(Copyright 2008 by The Associated Press. All Rights Reserved.)


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