Source: KCEP analysis of Office of the State Budget Director data, Consensus Forecasting Group October Estimate

Revenues Still-weak economy Tax system inadequate, outdated, too many holes Expenditures Still-weak economy Costs associated with 1) replacing one-time funds, 2) inflation and 3) paying back past liabilities Pressure to roll back harmful cuts and make investments that would move KY forward Barriers to the Budget Kentucky Needs

Source: Office of the State Budget Director

Source: KCEP analysis of Economic Policy Institute data

Source: KCEP analysis of Office of the State Budget Director, BEA data

Source: Center on Budget and Policy Priorities

Source: KCEP analysis of Office of the State Budget Director data Cuts to P-12 Education Programs Since 2008 FY 08FY 13 Dollar Change Percent Change Inflation-Adjusted Percent Change Textbooks % Extended School Services %-65% Professional Development %-68% School Technology %-29% Career & Technical Education %-29% Safe Schools %-64% Preschool %-14% Total %-40%

Source: Kentucky Council on Postsecondary Education

Health & Human Services Cuts Rapid transition to Medicaid managed care Mental health appropriations not increased for 14 years, Medicaid rates frozen since 2001 Public health department funding 23% below 2008 level Cut to child care subsidies to lowest income eligibility in country

Source: KCEP analysis of the Budget of the Commonwealth General Fund Cuts to Selected Agencies from Original 2008 Budget to Enacted2014 EnactedPercent Change Inflation-adjusted percent change Kentucky Arts Council4,182,5002,797,900-33%-41% Kentucky Educational Television16,816,10012,049,200-28%-36% Attorney General's Office14,113,10010,292,300-27%-35% Secretary of State2,298,1001,681,900-27%-35% Libraries and Archives14,689,30011,107,500-24%-33% Auditor5,828,3004,479,000-23%-32% Public Health73,823,00056,884,600-23%-31% Commission on Women266,200212,400-20%-29% Commission for Children with Special Health Care Needs 5,917,0004,761,600-20%-28% Department of Career and Technical Education29,894,50024,092,400-19%-28% Division of Air Quality1,408,6001,149,900-18%-27% Deaf and Hard of Hearing933,000775,900-17%-26% State Police80,305,90067,166,600-16%-26% Environmental Protection26,118,00021,900,400-16%-25% Vocational Rehabilitation13,134,40011,109,500-15%-25% Community and Technical College System226,331,100191,455,700-15%-25% Universities881,434,300750,119,000-15%-24% Kentucky Nature Preserves Commission1,166,5001,000,900-14%-24% Division of Water11,965,30010,513,800-12%-22% Commission on Human Rights1,859,1001,648,700-11%-21%

Source: Kaiser Family Foundation State Health Facts

Source: KCEP analysis of Council on Postsecondary Education data

Source: KCEP analysis of Kentucky Retirement Systems data

Source: CFG October forecast, June 27 Office of the State Budget Director presentation

Tax Commission Recommendations $659 million in net new revenue (8% of General Fund) – $475 million is from reducing deductions/exclusions in income tax – 15% refundable EITC – Elimination of property tax limit – Expansion of sales tax to some services – Tobacco tax increase – Utilities gross receipts tax for education

Moving Forward with Tax Reform Kentucky Center for Economic Policy