Kentucky state budget (2008-2009)
|National Taxpayers Union|
Kentucky faced a $456 million budget shortfall for the current fiscal year. It is a "complex" shortfall that Gov. Steve Beshear said gives the state the opportunity to provide for a "leaner government." In order to close the budget gap Beshear suggested $150 million in additional spending cuts, limited transfer of funds and finding new sources of revenue. In February two forms of revenue were accepted, an increase on tobacco and alcohol taxes. Sen. president David Williams said,"I believe that there is more sentiment now for a cigarette tax more now than there has been in the past." However, in light of the state's budget woes some legislators call the taxes a "band aid" and seek different avenues of reform. Some lawmakers suggest a review of the state's tax code.
Impact of budget woes
- Main article: State budget crisis, 2009-2010
- In December 2008 Kentucky's unemployment rate was 7.8 percent compared to 7 percent in November and 5.3 percent in 2007. According to the Office of Employment and Training December's rate was the highest the state has seen since 1988. However, in December public education, public agencies and state-owned hospitals saw an increase of 1,200 positions. But despite the increase in government jobs the construction sector saw a decline of 5,500 positions and manufacturing lost 4,400 jobs.
- The Governor has called for an increase of the state's tax on cigarettes by 70-cents per pack to $1, and double the taxes on other tobacco products.  The tax increase takes effect April 1. Officials estimate they will generate $50 million before the fiscal year ends June 30 and nearly $160 million the following year. 
- Most of the government agency's budgets will be cut by 4 percent in order to offset the projected shortfall.
- The Governor has asked for a review of the 1990 education-reform law in light of the state's budget deficit. The law increased funding for schools and how progress is assessed through testing. 
- The Department of Education is proposing $46 million in education budget cuts thus reducing the agency by 12 percent. The cuts will affect areas of professional development, textbooks, safe schools and extended school services. 
In Kentucky the legislature passes biennial budget bills which includes two fiscal years. However, the state's fiscal year begins July 1st and ends June 30th of the following year. The budget includes appropriations for the state's operating and capital budget and recommendations made by each state agency. Estimates of the General Fund and Road Fund revenues are compiled by the Consensus Forecasting Group. Prior to the Governor's approval the budget passes through first the House of Representatives and then the Senate for amendments. After a series of hearings the Governor can either approve the budget as approved by the Legislature or continue to amend the bill through vetoes. Once the budget is approved, amendments can be made to the budget bill as necessary. 
The following table provides a history of Kentucky's expenditures and gross domestic product (GDP).
|Fiscal Year||Expenditures (billions)||GDP (billions)|
|2000||$21.5 ||$111.9 |
|2003||$25.8 ||$124.9 |
|2009||$38.6* ||$171.0* |
- NOTE: The figures for FY 2009 won't be finalized until the end of the fiscal year.
Ideas about why the crisis exists
- In January 2009 Kentucky was hit with an ice storm that state officials said may have been the cause of a spike in unemployment in the month of February. Some mining companies were forced to shut down. Steve Earle, a vice president for the United Mine Workers of America in Madisonville, said,"Just about all of western Kentucky was shut down." The state and local governments incurred approximately $45 million as a result of the ice storm.
- The state's Medicaid program is seeing nearly 2,000 more people, a 200 percent increase on the previous estimate bringing the total to 3,000 and pushing the state program further into deficit. The state is facing an approximately $70 million deficit in it's Medicaid program. 
- The state's Road Fund has seen a reduction in revenue because of a downturn in car sales and uncertainty about proceeds from the gasoline tax.
Governor Steve Beshear
On February 12 the Kentucky Senate finalized the Governor's proposition of raising taxes for both alcohol and tobacco throughout the state in an attempt to eliminate the $456 million budget deficit. The bill will double the tax on a pack of cigarettes to 60 cents from 30 cents and impose a 6 percent tax on beer, wine and liquor bought in stores. The increase will take effect April 1 and is estimated to produce $50 million in revenue before the end of the fiscal year and approximately $160 million the following year. In addition, in Beshear's budget proposal he suggested a three-day furlough for state employees.
Some Republicans were hesitant to support the Governor's tax increase bill because it was just a "band aid" that only addresses part of the budget deficit problem said Rep. John Carney.  Carney added that a one-half to one cent increase could have raised sufficient funds for the deficit. Like the Governor's proposal, however, most Republicans support the review of the Kentucky Education Reform Act and the protection of Medicaid, Medicare and education funding.
With a looming half-million dollar deficit Kentucky Democrats said that they agree with the Governor's budget proposal, namely the alcohol and tobacco tax increase. Former budget chairman Harry Moberly Jr. said,"People are used to paying six cents for water, for soft drinks, and I would be very surprised if there’s one person who fails to buy a fifth of Maker’s Mark or a six pack of beer because they have to pay sales tax on it." However, in another form of revenue House Speaker Greg Stumbo revised a version of a bill that would allow video lottery terminals at racetracks. The bill sets a tax rate of 28 percent for the first five years. House Speaker Pro Tempore Larry Clark estimated that $1.178 billion in total revenue for the fifth year.
Re-work the tax code
In light of the state's budget crisis some lawmakers are calling for the state's tax code to be revamped. Rep. William Farmer Jr. suggests eliminating individual and corporate income tax and extend sales tax to services with the exception of medical and other business services. He also added that he would lower the 6 percent rate to 5.5 and exempt food and agriculture products.
However, Rep. Jim Wayne suggests an alternative approach - making the state's income tax more progressive. Wayne said that he would like to establish increasing rates at the upper income levels, retain the estate tax for estates over $1 million and increase the Earned Income Tax Credit for lower income wage earners. And like Farmer, he too would like to extend the sales tax to some services.
Economic Stimulus Package
Kentucky is expected to receive approximately $2 billion from the $787 billion economic stimulus package. According to White House officials the stimulus bill is estimated to create or save 48,000 jobs.
According to preliminary reports Kentucky is expected to receive:
- $305 million for low-income and special education students
- $46 million to renovate and improve school buildings and technology
- $268 million in Pell grants
- $421 million to build and repair roads and bridges throughout the state
Check It Out Kentucky, V.I.E.W., and Kentucky's Open Door are the names of the online transparency databases that are currently available for citizens of Kentucky. Check It Out Kentucky! is the name of the Secretary of State's publicly available online spending database. The spending incurred by the Office of the Secretary of State is recorded in a searchable format, and is updated monthly.
V.I.E.W. (Vendor Income and Expense Watch) is a website sponsored by the Kentucky Office of the Treasurer.
Kentucky's Open Door has expenditure information on state grants, contracts, and employee salaries. Visit the site here.
Economic Stimulus Transparency
- The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the U.S. Of that $787 billion stimulus package, it is estimated that 69%, or over $541 billion, will be administered by state governments.
- Kentucky will receive an estimated $2,090,341,858 
- The economic recovery website to show how legislators and government officials in Kentucky are spending Federal funds is available here.
Kentucky's comprehensive spending transparency website, called "Kentucky's Open Door," continues to be updated with new state spending information. Information about state employee salaries, contracts, and grants is now available online.
Check It Out Kentucky! provides a searchable database of the Secretary of State's financial information, organized by categories such as expenditures and vendors. In addition, the Office of the Treasurer has developed a site, V.I.E.W. (Vendor Income and Expense Watch), that posts information on contract amounts, contractors, and the government agency issuing the fund. Currently, V.I.E.W. contains financial information for only a handful of state agencies, including the Auditor of Public Accounts, the Department of Highways, the Kentucky State Treasury (State Treasurer), and the Office of the Controller. Data from other agencies will be placed online as that data is approved for release. See the official V.I.E.W. website for more details.
Kentucky's Open Door provides spending information including state expenditures on grants, contracts, and public employee salaries. Click here to visit the site.
The following table is helpful in evaluating the level of transparency provided by Check It Out Kentucky!, V.I.E.W., and Kentucky's Open Door:
|State Database||Searchability||Grants||Contracts||Line Item Expenditures||Dept/Agency Budgets||Public Employee Salary|
|Check It Out Kentucky!||n/a|
|Kentucky's Open Door|
Limitations and Suggestions
The individuals who developed www.opendoor.ky.gov realize it's not perfect yet, and they welcome suggestions for improvements. According to the site, "Governor Beshear realizes that Kentucky’s Open Door will not be complete. Nor will it ever be. The site will be ever-evolving and ever-improving; it will be a continuing goal to refine and supplement the site, providing more and more information to Kentucky taxpayers in an easy-to-access format. And we treasure YOUR input."
Suggestions for improvement can be posted under this section, or submitted here.
Support for creation of the databases
Visit www.freedomkentucky.org to see an "open, collaborative database of information that seeks to inform Kentucky's citizenry about issues that are important to them. Through making knowledge accessible and easily understood, FreedomKentucky empowers Kentuckians to restore lost freedoms by holding public leaders accountable."
Kentucky's Open Door now provides salary information.
The Louisville Courier-Journal provides state employee salary information here.
The Herald Leader provides this database of salaries of state employees, Lexington-Fayette Urban County Government, and the University of Kentucky for the year 2006: Kentucky State Salary Database.
- Kentucky Budget Process on FreedomKentucky.org
- Kentucky's Open Door
- Bluegrass Institute for Public Policy Solutions
- Check It Out Kentucky!, official website
- V.I.E.W. (Vendor Income and Expense Watch), official website
- Kentucky Secretary of State website
- Office of State Budget Director
- Kentucky Finance and Administration Cabinet, Office of the Controller
- Kentucky Government spending
- Model transparency legislation from the American Legislative Exchange Council is available at this link.
- Stateline.org,"Kentucky State of the Commonwealth Address 2009," February 4,2009
- Associated Press,"Bourbon spills to protest Ky. tax hike on booze," February 10,2009
- ↑ 1.0 1.1 WAVE3-TV,"Fixing budget shortfall is main topic of State of Commonwealth address," February 4,2009
- ↑ 2.0 2.1 2.2 The Adair Progress,"Stimulus money can't be used for KY 55 south bridge," February 24,2009
- ↑ 3.0 3.1 3.2 CNHI News Service,"Budget, education issues top legislative agenda," February 6,2009
- ↑ Business Courier of Cincinnati,"Ky. unemployment highest in 20 years," January 30,2009
- ↑ 5.0 5.1 The Courier-Journal,"Kentucky jobless claims shot higher earlier this month," February 20,2009
- ↑ 6.0 6.1 6.2 Associated Press,"Budget woes still loom when Ky. lawmakers return," February 2,2009
- ↑ 7.0 7.1 The Courier-Journal,"Increases in tobacco, alcohol tax approved," February 14,2009
- ↑ The Courier-Journal,"Beshear calls for budget bravery, review of KERA," February 5,2009
- ↑ Courier-Journal,"Proposed Kentucky school budget cuts," retrieved February 24,2009
- ↑ Kentucky's Open Door,"How the budget is made," retrieved February 24,2009
- ↑ 11.00 11.01 11.02 11.03 11.04 11.05 11.06 11.07 11.08 11.09 11.10 11.11 11.12 11.13 11.14 11.15 11.16 11.17 11.18 11.19 ,"Kentucky state and local spending," retrieved February 24,2009
- ↑ The Murray News,"Costs from storm prove substantial," February 5,2009
- ↑ The Courier-Journal,"Kentucky weighs expansion of children's health-care program," February 21,2009
- ↑ The Herald-Leader,"Important legislative issues remain," February 14,2009
- ↑ Herald-Leader,"State employees protest budget cuts," February 6,2009
- ↑ WFPL,"Kentucky budget plan clears first legislative hurdle," February 10,2009
- ↑ The Courier-Journal,"House panel passes revised slots bill," February 13,2009
- ↑ Reuters,"Governor says roads top Kentucky stimulus list," February 17,2009
- ↑ Courier-Journal,"Kentucky schools to get $305 million," February 18,2009
- ↑ Courier-Journal,"Lawmakers consider spending priorities," February 18,2009
- ↑ National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009
- ↑ Wall Street Journal,"Stimulus Spending by State," March 12,2009
- ↑ e-Transparency Letter from Jonathan Miller, Secretary of Finance and Administration and Chair of the e-Transparency Task Force
- ↑ e-Transparency Task Force Information
- ↑ Kentucky Executive Order, "Creation of the e-Transparency Task Force," June 6, 2008
- ↑ V.I.E.W. (Vendor Income and Expense Watch) official website
- ↑ www.opendoor.ky.gov About
- ↑ "An Open Letter to the Kentucky House of Representatives: Taxpayers Support Spending Transparency Web Site (HB 105)," March 2007, 2008
- ↑ Americans for Tax Reform, "Letter to Kentucky State Legislators," March 7, 2008
- ↑ www.freedomkentucky.org home page