The Louisville Courier-Journal examines the monumental task the Kentucky legislature has before it as it attempts to cultivate a workable budget in next year’s session. When the word "bloodbath" pokes its head into an article about your economic situation, you know things aren’t good. Let’s hope our neighbors to the South can find a workable solution.

In recent years — as revenue failed to meet projections — Kentucky has used its Rainy Day fund and the stimulus money to avoid mass layoffs of state workers and deep funding cuts for its highest priorities, including the public schools.

But now the Rainy Day Fund is empty. And federal stimulus dollars are scheduled to run dry in the middle of the next fiscal year.

“It’s most definitely the worst budgetary outlook I’ve ever seen,” said State Budget Director Mary Lassiter, who has worked in the budget office for 27 years. “The outlook is a lot worse than it was two years ago.”

Lassiter’s boss, Gov. Steve Beshear, said the budget picture is “going to get more difficult because we’ve already cut out a lot of things that perhaps aren’t as essential as other things. You get down to bone at some point and cuts hurt.”

Budget process could be ‘bloodbath’

The stimulus funds, while welcome, merely delayed the day of reckoning for Kentucky.

Revenues to the state General Fund are projected to fall more than $1 billion short (about 12 percent) of the roughly $9 billion required in the 2009-10 budget as enacted by the 2008 General Assembly.

Beshear and lawmakers are using $787 million in stimulus dollars to help fill that hole.

But only about $485 million in stimulus funds will be available to Kentucky in 2010-11 — and none at all in 2011-12.

State tax revenues — which have shrunk the last two years — are expected to begin growing again next year, but not nearly fast enough to plug the gap when stimulus funds end.