Beshear proposes 12 percent cut in university funding statewide

By Jill Laster and Rebecca Sweeney

FRANKFORT — Gov. Steve Beshear called for budget cuts across Kentucky last night, including a 12 percent cut in higher education funding, to overcome a decrease in state revenue for the 2008-10 biennium.

“Last year while running for governor, I envisioned this first budget address to be a night where I unveiled a plan brimming with bold and creative new programs,” Beshear said. “However, that evening will have to wait. Because tonight, we deal with cold, harsh reality.”

Last night, Beshear unveiled his recommendations for state spending before a joint session of the Kentucky Senate and House of Representatives. The recommendation by the governor is the beginning of the two-month budget process; the legislature will now start making changes before approving a final budget.

Despite the cuts to general higher education funding, Beshear called for the legislature to approve $64 million in bonds for UK capital construction projects and $60 million in bonds for the Bucks for Brains program, which helps create endowed research chairs by matching private donations with public dollars.

During his address, the governor said he is “deeply disturbed” by the state of higher education funding.

“I strongly believe in the missions and goals of our colleges and universities, and I regret offering a budget with reductions in this area,” Beshear said.

Last month, Beshear told all state agencies, including UK and other public universities, to immediately cut 3 percent from their budgets for the fiscal year ending in June. Earlier this month, Beshear asked the universities to prepare budgets with additional state funding cuts of up to 12 percent.

UK President Lee Todd said at the time that a total decrease of 15 percent would mean about $50 million less in funding. To make up for such a cut, tuition would have to increase 30 percent, which is not feasible, he said.

Beshear’s higher education cuts came in response to a drop in projected revenues across the states. The governor said last night that revenues would be about $580 million less in the first year of the biennium than the state is spending in the current fiscal year ending in June and about $306 million less in the second.

With limited resources, no reduction in K-12 education funds and the cost of funding health programs, the state cannot increase spending at the level higher education institutions want, Beshear said.

University presidents and board members must look at ways to cut operational costs to avoid “the easy option of large tuition increases,” Beshear said.

If Beshear’s budget passes, the number of merit-based scholarships would have to be reduced, Todd said.

UK is willing to work with the governor’s office to reduce state spending and keep money for higher education any way it can, Todd said.

“The state has to tighten its belt, but not all of that belt-tightening can be aimed at higher education,” he said.

Todd also said UK’s plan to become a top-20 public research university by 2020  would be damaged if Beshear’s budget recommendation were approved.

“The state has asked us to be a top-20 institution, and we can’t do that on the cheap,” Todd said.

Under the Top 20 Business Plan, UK is requesting budget increases of 6 percent, or about $20 million, each year.

Despite of budget cuts, Beshear said, Kentucky will be able to continue improving higher education throughout the state.

The governor recommended that need-based student financial aid programs and the Kentucky National Guard tuition award be exempt from the cuts.

During last night’s address, Beshear laid out his other recommendations for 2008-10, including:

n K-12 education should be the highest priority and will receive funding to maintain the Support Education Excellence in Kentucky program, which provides money to local school districts.

n Medicaid should receive the largest amount of new funding, with a $147.8 million increase in 2009 and a $242.5 million increase in 2010.

n A criminal justice task force should be created to review penal code, sentencing guidelines and other judicial issues.

Beshear acknowledged that the economy will fall again in the future, but he said Kentucky’s ability to withstand future trouble will improve after the budget is balanced with recurring sources of revenue.

“Presenting a budget with significantly less resources will force us to become more efficient,” Beshear said. “It will force us to rethink how state government operates. And by doing so, we will be on a firmer financial footing.”

Toward the end of his speech, Beshear said Kentuckians spend more than $1 billion of entertainment money at other states’ gaming facilities.

“Right now, those Kentucky dollars are educating Indiana’s kids, providing healthcare for Illinois’ seniors and paving West Virginia’s roads,” he said.

Beshear estimated that allowing expanded gaming in Kentucky will result in hundreds of millions of dollars in new tax revenue every year, and he plans to propose a constitutional amendment to allow Kentuckians to vote on whether to allow limited expanding gaming in Kentucky.

Kentucky is facing economic obstacles, Beshear said, but overcoming those problem areas could lead to growth in the state.

“Yes, we are in tough times, and just like Kentucky families who find themselves in a similar situation, we must tighten our belts and balance our checkbook,” Beshear said. “But, my friends, if we work together we are going to come out of this in much better shape than we were before.”