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Economists consider Kentucky's financial outlook

FRANKFORT, Ky. (AP) - A prediction by Gov. Steve Beshear's
administration that Kentucky may be facing a $1 billion budget
shortfall "seems plausible," the head of a panel of state
economic forecasters said.

An official projection for the depth of Kentucky's fiscal woes,
however, won't be ready until the end of the month. But a panel of
economists from across the state began work Monday deliberating the
magnitude of Kentucky's state budget shortfall in the coming fiscal
year that begins July 1.

"It is pretty glum," said Lawrence Lynch, chairman of the
Consensus Forecasting Group.

Gov. Steve Beshear's administration has predicted the state may
be facing a budget shortfall next year of up to $1 billion. That's
coming off the fiscal year that ends July 31, during which Kentucky
lawmakers grappled with a $456 million budget shortfall. They
compensated by raising taxes on alcohol and cigarettes, cutting
some government spending and tapping into the state's "rainy day

Kentucky lawmakers budgeted $9.3 billion in spending for the
coming fiscal year.

It is up to the panel to make an official prediction to
determine the amount of money that's likely available for the state
to spend and how much needs to be slashed to balance next year's
budget. Beshear may call the General Assembly into a special
session later this year to deal with the budget or other matters.

Any decisions would be based on the panel's forecast.

The governor, a Democrat, has said the state may be forced into
additional cuts or raising revenue.

House Speaker Greg Stumbo, a Prestonsburg Democrat, has favored
legislation to allow video gambling terminals at Kentucky race
tracks as a way to generate more income for the state and the
racing industry. Stumbo has predicted that the plan eventually
could bring in up to $350 million per year in additional revenue.

Senate President David Williams, a Burkesville Republican, said
at a recent GOP dinner that he did not want the legislature to
authorize Beshear to spend any more money than what's been

"He's going to have to manage his money and be responsible and
tighten his belt," Williams said.

Kentucky is expected to receive about $650 million over the next
two years in state stabilization funds from the federal economic
stimulus plan, state Budget Director Mary Lassiter has said.
Kentucky could get a total of about $3 billion in stimulus money,
but not all of that can be used to pay for government expenses.

Lassiter, Beshear's chief budget official on staff, also asked
the panel to weigh in with fiscal planning estimates for the
following two years as well. The state needed the future year
estimates to help decide how much federal stimulus money it should
spend next year and how much should be saved until 2011 and 2012,
Lassiter said.

"It would be irresponsible of us to make those decisions in a
vacuum," she said.

The panel is expected to meet again on May 29 to make its
official projection.

Economists will have to decide whether the state should take an
optimistic or pessimistic financial approach - or a blend of both -
to the coming year.

"Things don't really look good," Lynch said. "You'd love to
think it's going to turn around, you know the market being up and
all that makes you feel good. But maybe it's just a false signal."

(Copyright 2009 by The Associated Press. All Rights Reserved.)

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