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June 2012
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AUSTERE On balance, Beshear's budget is a good one

The $20.3 billion two-year budget Gov. Steve Beshear proposed to Kentucky lawmakers in a joint session Tuesday is actually a pretty good plan. It remains to be seen if it is a sincere plan, as Beshear hinted in the lead-up to the presentation that he thought the austerity contained in the plan might prove too great for the General Assembly to swallow.

To that end, the governor has made it clear he is open to ideas for raising new revenue from the usual sources: legalized casino gambling and "tax modernization", the newest lexicon for "tax increase" now that most Kentuckians have wised up to the codec of "tax reform."

Beshear, as he had promised, proposed an extra $189 million for K-12 education. The money would go to provide teachers and school employees 2 percent raises in the next budget year, and another 1 percent the following year. It would also spend $36 million to expand preschool services to an additional 5,125 four-year-olds.

Although state revenues are projected to grow about $500 million over the next biennium, the governor had to propose $98.6 million in budget cuts to balance the books. He is looking for 5 percent reductions in expenses at the governor's office and most state agencies the first year, and holding expenses flat the second year. He also proposed 2.5 percent reductions in the first year of the cycle for universities, community and technical colleges, and the Kentucky State Police. But he did propose $145.5 million in agency bonds to support expansions in the community/technical college system.

Boosting primary and secondary education while cutting higher education may seem counterintuitive. However the state's colleges do have more flexibility when it comes to funding gaps, by way of tuition, fees, endowments and alumni giving.

At the K-12 level, the funding increase would bring per pupil spending (perhaps aided by declining enrollments) to the highest level in state history. We're ambivalent about that, since most studies find little correlation, and in fact at times an inverse correlation, between per pupil spending and academic achievement in public schools. But we don't begrudge the school personnel the raises, and it becomes hard to argue that Kentucky's K-12 education is not adequately funded if spending rises to these levels.

We do take exception to the part of the governor's plan that would further reduce money for the Kentucky State Police. Public protection is a fundamental role and responsibility for state government. Rural counties with small sheriff's departments and few or no municipal police forces are dependent on KSP for law enforcement support. It is simply not in the public's best interest to further cut the state police budget, and we hope legislators will find elsewhere to cut in order to prevent that from happening.

But we generally like the governor's plan, tough medicine though it may be. And we hope and expect that efforts to add revenue by "broadening the tax base" and/or adding casino gambling will be resisted, particularly in the Republican-controlled Senate.

As we have noted several times recently, Kentucky has yet to emerge from the Great Recession. The unemployment rate in Kentucky in November 2013 (the last numbers available) was higher than it was in November 2012, a disturbing divergence from what is going on with employment in the rest of the country. Overall Kentucky unemployment is 1.2 percent higher than the national rate.

That reflects a state economy that is still far from healed, in what is in terms of per capita income one of the poorest states in the nation. This is no time to be raising taxes.

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