BRADENTON, Fla. — Kentucky Gov. Steve Beshear forwarded a proposed budget for 2010-2012 on Wednesday that he hopes the General Assembly will adopt in a five-day special session later this month.
Lawmakers went home a month ago after their annual legislative session without adopting a spending plan. Since then, Beshear has warned that failure to adopt a budget could lead to a partial shutdown of government for the first time in the state’s history.
The new budget also is necessary to fund debt service for the fiscal year that begins July 1. The state’s first debt-service payment from the general fund of $14.6 million must be paid July 15.
Beshear said lawmakers resolved 95% of the decisions on the budget during their regular session, so most of the budget recommendations he proposed are not new.
“It represents our understanding of the areas of general agreement between the House and Senate on most issues and offers a compromise proposal on the major areas of difference,” Beshear said in a statement. “Any budget that emerges from this process will be disappointing because of the $1.5 billion shortfall we must address, but an austere budget is better than no budget at all.”
The two primary areas of difference between the House and Senate were over the levels of education funding and the levels of debt, Beshear said, and his budget represents a compromise.
While his proposal does not raise taxes, it cuts many state agency budgets by 3.5% in fiscal 2011 and 4.5% in fiscal 2012 compared with the current budget. In the postsecondary education budget, it makes reductions of 1.4% in fiscal 2011 and 2.4% in fiscal 2012.
Beshear said he included all bond-financed projects that both houses had agreed upon, including $441 million of general fund-supported bonding — the lowest amount in a biennial budget since 1996. Another $525 million of revenue bonds would be issued for various state agency projects.
In a letter to lawmakers accompanying his budget, Beshear said he would be calling them into special session May 24. Between now and then, he urged lawmakers to begin negotiations on his proposal or some variation of it so they can be ready to act.
“As I have mentioned previously, we must have a budget before June 1 in order to preserve significant debt service and other savings counted on by all budget proposals,” Beshear’s letter said.
Because of the state budget impasse, bond counsel recommended that Kentucky postpone a $250 million new-money bond deal, an $81 million refunding for the Turnpike Authority, and a $73 million refunding by the State Property and Buildings Commission, finance officials said.
Analysts have warned the state for some time that its double-A ratings are in jeopardy without structural balance.
Despite the budget impasse, Kentucky’s rating was raised to Aa1 from Aa2 when Moody’s Investors Service recalibrated its ratings on April 19, while also maintaining a negative outlook.
Fitch Ratings also upgraded the state to AA from AA-minus and maintained a negative outlook when it recalibrated ratings on April 5.
Standard & Poor’s issuer credit rating is AA-minus with a stable outlook.