BRADENTON, Fla. — Facing a budget shortfall of $1.5 billion over the next two years, Kentucky Gov. Steve Beshear told lawmakers late Wednesday that efforts so far to restructure debt and cut expenses won’t be enough for the state to avoid more “painful decisions about where we spend money.”

A day after the opening of Kentucky’s 2010 legislative session, Beshear gave a joint session of lawmakers few specifics about his plan for dealing with the deficit. He did speak about modest expansion of some programs.

“I refuse to use this recession as an excuse not to move forward,” he said.

Beshear said he supported expanding Medicaid to include smoking cessation programs, continuation of education initiatives such as improving access to college, increasing employment opportunities, and more efficiency in state government.

“From restructuring bonds to cutting travel expenses to reducing mailing costs by increasing use of online documents, we’ve been operating more efficiently,” the governor  said. “Through six budget reductions, including one just two days ago, we’ve cut $900 million in spending and have the smallest number of executive branch employees in two decades. But we need to do more.”

Beshear said he will unveil a new series of efficiency measures that will continue his commitment that tax dollars are “spent wisely,” 

He did not mention any new debt plans during the state of the commonwealth speech.

Beshear, a Democrat, is due to release his 2010-12 recommended budget on Jan. 19.

Lawmakers face difficult decisions during their session, which runs through mid-April.

But failure to stabilize the commonwealth’s financial operations could result in a downgrade, Fitch Ratings analyst Karen Krop warned in a report Dec. 29.

Since Kentucky has drawn down large balances and depleted its budget reserve, Krop said it must enact a structurally balanced budget and a plan to restore the rainy-day fund, which would help avoid a downgrade.

Fitch and Moody’s Investors Service have negative rating outlooks on the state’s primary credit — the Kentucky State Property and Buildings Commission, which they rate AA-minus and Aa3, respectively. Standard & Poor’s rates the commission’s debt A-plus with a stable outlook.

The agencyhad $3.18 billion of outstanding principal debt through 2029, according to the state’s financial report as of last June.

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