Transcript of Gov. Beshear’s Jan. 19 budget address

In case you missed it, here is the transcript of Gov. Beshear’s Tuesday budget address to the General Assembly:

Mr. President, Mr. Speaker, distinguished members of the Kentucky General Assembly, Lt. Governor Mongiardo, other Constitutional officers, honorable members of the Court of Justice, honored guests, including Kentucky’s First Lady and my fellow Kentuckians.

As your governor, I come tonight during a time of unprecedented financial hardship in our country to present my plan for funding state government over the next two years.

This financial crisis was created by forces beyond our control, but it has been my job to lead our people through it. Six times since I became governor in December 2007 the General Assembly and I have acted together to fill budget shortfalls ranging from $100 million to nearly a billion dollars. This budget I unveil tonight fills a seventh gap between expected revenues and critical needs, the largest shortfall in the history of the Commonwealth. And it does so by continuing the same strategic approach that I have used to guide Kentucky through these last two years of economic turmoil, an approach that has strengthened, day by day, how we serve our people. Continue reading

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More on the math of the proposed tobacco tax increase

The budget shortfall plan unveiled by Gov. Steve Beshear this week is based even more largely around a 70-cent increase in Kentucky’s cigarette tax and a doubling of the tax rate for other tobacco products than it might appear at first glance. 

That 70-cent increase, if passed, is expected to go into effect by April and all tobacco tax increases would bring in $81.5 million between now and the end of the fiscal year, according to the Beshear administration.

That figure includes not only the tax on cigarettes sold after the increase, but one-time monies from assessing cigarette inventories. Once in place, the tax increase is expected to produce $144 million for the state. 

The other large component of Beshear’s plan includes the use of $178.9 million from the state’s Rainy Day Fund. Most of that money is already committed to the state’s 2009-2010 fiscal year, but Beshear wants to use revenue from the new tobacco tax – $144 million – during the next fiscal year to replace those rainy day funds used between now and June 30. 

So the real impact of the tobacco tax increase Beshear is proposing goes beyond just the $81.5 million he is hoping to use this fiscal year and impacts how much of the state’s rainy day account can be used this year.

If a lower tax rate is approved, not only will it lower that $81.5 million figure for this year, but the state can expect a smaller chunk of change annually going forward from the increase. That means it will either have to use less than the $178.9 million in rainy day funds Beshear’s plan calls for or find another revenue stream to plug that gap in next year’s budget. 

I’m sure most folks were aware of this, but I wanted to take the time to spell it out for those that weren’t.

Tennessee also grappling with budget shortfall

The list of states facing budget shortfalls in the hundreds of millions, if not billions, looks to be growing even longer as budget teams around the country look at sagging revenues. 

Theo Emery with The Tennessean reports today that Tennessee’s budget folks are looking to patch up to a $1.02 billion hole in their current budget year which like Kentucky’s runs through the end of June. 

The State Funding Board has announced that Tennessee expects to see annual revenue collections come up short by between $884 million and $1.02 million, with a possible $1 billion shortfall next year, too. That’s from a single-year state budget there of $27 billion. 

While Tennessee’s budget shortfall could be double what Kentucky is facing for the current fiscal year, Kentucky’s two-year spending plan is about $19 billion, which puts Kentucky in worse shape than its neighbor to the south. 

Gov. Ste