Projected budget shortfall

A new projected budget shortfall was released today by the state Consensus Forecasting Group. The new number is $456 million.

First, if we are in a crisis, why is the Governor giving political cronies a $20,000 raise?

Second, anyone can identify a problem. That is not hard. I would like to help the Governor with a solution:

• Suspend the prevailing wage law for this budget cycle. We would be better off if it was repealed in its entirety. However, maybe it would be more politically palatable by suspending it through June 2010. Estimated savings- $150 million.

• Suspend the water and sewer projects put into the budget at the last minute. Now, this is also going to be hard to do. Heck, I don't want to give up the $1 million in water lines that I got for Campbell County residents. If these projects are suspended, they should sit at the top of the list if the budget turns around, or for the next budget cycle. Off the top of my head, I think those projects were for $250 million, so that is the estimated savings.

• Allow grocery stores to sell wine. First year revenue, $20 million, and $10 million every year after that.

So, I have just come of with the first $420 million of the $456 million projected shortfall. This would tide us over for a least another 10-12 months, where we can then see if the projected deficit gets better or worse. In another year we will be in the beginning of a new budget session, where we can clean up anything else.

Things got exciting today

Today during a debate on a bill that has to do with allowing public universities the ability to issue bonds for revenue generating projects on their own, the issue of prevailing wage became the focus.

The issue was brought up by my friend, Rep. Tim Moore of Elizabethtown. He brought up how we could save money on these university projects by repealing the prevailing wage law. Well, I got a good glimpse of the fervent support the issue has in the House. The supporters of prevailing wage could not jump up fast enough to defend this policy.

I applaud my friend for starting the conversation. My guess is that it is not over.

Is the budget situation a crisis or something less?

That is the question I have been trying to determine.

There are two issues, first the current Fiscal Year situation, and next years budget problem.

First, the current year. We are told that there is a $434 million shortfall for this Fiscal Year. That is broken down as follows:

$130 million less than budgeted,
$138 million in higher authorized spending
$166 million in "additional spending needs."

Now, as far as the $130 million less than budgeted, that I take at face value. However, for the entire 2 year budget, we are projected to take in $70 million more than anticipated. So for the overall budget revenue is not a problem. In fact, money remaining from the last Fiscal Year is being used to make up some of this years deficit.

My concern is with the categorization of $166 million in additional spending needs as part of a deficit. My example is, if I request $1 million dollars for something, does that push the deficit up another million? Just because something is identified as additional spending needs, doesn't make it part of a deficit. Now, the $166 million request includes $112 million for Medicaid spending and $22 million for Corrections. No one wants people to go without health care or see prisoners let out. However, requests should not just be added to a deficit automatically.

The next issue is the budget for future years. I have written about this previously, that next years projected revenue is $500 million less than this years budgeted spending. This is a problem, but can be solved in large part, if not completely, by repealing the prevailing wage law.

Monday night is the State of the Commonwealth address. I look forward to hearing the Governors plan.

How else can we solve budget problems?

Gov. Beshear has implemented a 3% across the board cut for much of state government in order to balance the budget. Something has to be done and he has had to make some difficult decisions already. Tough decisions come with the lofty position he now holds and I am glad that he has shown the backbone to make some.

But what else can be done. As I stated in an earlier post, repealing the prevailing wage law would help. Take NKU for instance. NKU has to cut $1.6 million in this budget year. This on the heels of building the Bank of Kentucky Center, a $64 million project. Because of the prevailing wage law, the project cost about $4-6 million more than it would have otherwise. That is our tax money being spent on inflated salaries.

So what could we do with $4-6 million dollars? Well, that would cover the shortfall for NKU, as well as Morehead State University, and possibly Western Kentucky University. All from one project. Imagine the money that could be saved if we eliminated prevailing wage from all public projects.

More budget bad news

In the last few days, Governor Beshear has announced that the deficit for the current fiscal year is now about $400 million. That is a big hill to climb and the Gov. is considering options that include a 3% cut across the board, with the exception of K-12 education.

Budget cuts are probably the only way out of this deficit. I have 2 other suggestions for the Governor that I hope he will consider.

1. Hiring freeze. News reports indicate that this is being considered. I applaud that. Say what you will about Governor Fletcher, but he did cut back on state employees by about 2000, resulting in large savings to the taxpayers. Furthermore, state services have not suffered. I hope we do not backslide on this.

2. Repeal the prevailing wage. I doubt the Governor can do this on his own, but if he can he should consider it. If he can't he should push for it in the legislature, even if it is temporary. This would result in hundreds of millions of dollars a year in savings on capital projects for Kentucky citizens.

The prevailing wage, in short, is a system where state government mandates that union scale wages be paid on public projects such as school buildings. This policy artificially inflates the costs of public projects by anywhere from 5-25%, depending on the project and who you talk to about the effect. This policy benefits labor unions and those who work on these projects. The taxpayers as a whole are the losers. I hope the Governor will consider it.