The Richmond Register

January 3, 2014

Legislators face stark budget choices

By Jason Bailey
Kentucky Center for Economic Policy

RICHMOND — Kentucky faces more cuts and continued underinvestment in critical services in the next two-year state budget unless lawmakers generate additional revenue, according to a comprehensive budget preview by the Berea-based Kentucky Center for Economic Policy (KCEP).

A meager revenue forecast combined with the need to roll back deep budget cuts and pay down existing liabilities make for the most difficult budget lawmakers have faced in recent memory.

The choice is either to reinvest in our schools, health, communities and economy by generating additional revenue, or further retrench and keep Kentucky on the course to a lower quality of life.

The new budget will be built on weak revenue growth in a still-sluggish economy, the slowdown in revenue from corporate, coal severance and cigarette taxes and the need to reform an outdated and inadequate state tax system.

Kentucky also has less one-time money available to balance the budget than it has used in recent years, and federal funding to the state is being cut.

While revenue is scarce, budget pressures are growing.

There is great need to ease the pain from 13 rounds of cuts that have slashed $1.6 billion from the state budget in the last six years, fully address liabilities in the state employees’ and teachers’ retirement systems, give employees their first raise in five years and make investments in areas like early childhood education that could move Kentucky forward.

The report, “Reinvestment or Retrenchment: A Preview of the 2014-2016 Kentucky State Budget,” provides an overview of the challenges facing the services Kentuckians rely on. It outlines the extensive cuts to education, health, human services and other areas that have been made to date, and it tallies the revenue and other resources the General Assembly will have available when it crafts a new budget.

The choice facing Kentucky lawmakers has implications for the health of our economy today and the strength of our Commonwealth far into the future.

The case has been made for state tax reform by the Blue Ribbon Commission and the many examples of how budget cuts have hurt every corner of Kentucky.

It’s time for lawmakers to generate more revenue through fair tax reforms that will put us on a better path for the future.

Jason Bailey is director of the Berea-based Kentucky Center for Economic Policy. The center’s budget preview report can be accessed at kcep/files/Reinvestment%20or%20Retrenchment.pdf