“I wanted to come and share with you the biggest thing that’s going to happen this year — the budget,” Knight said.
He said the state and its constituent entities must have balanced budgets, so he described the sources of revenue and what the monies are spent on. Forty-six percent of revenue comes from the state income tax, 30 percent from sales taxes, 9 percent from the lottery and motor fuel tax, 5 percent from corporate taxes and 10 percent from other sources.
Forty-six to 47 percent of state revenues are spent on education and 20 percent is spent on health care. Public safety only takes up 8 percent, while 5 percent is used to pay off state bonds. The remaining 40-odd state agencies consume the rest.
He said transportation will be a big issue in the coming session. The current model has produced some good roads but needs to be revised. In particular, a new revenue source is needed.
Douglas agreed that the budget will be the big issue.
Douglas said 8 percent cuts are expected for all state agencies in January, before work on the fiscal year 2011 budget begins. Revenue projections are 14 percent less than they were last year. He expects $2 billion in additional cuts, ultimately leaving the state with a $14 billion budget — less than it had in fiscal year 2004, when the state had 900,000 fewer people.
He said as far as employment is concerned, furloughs are better than layoffs, since furloughed employees still have their health insurance and other benefits.
He also predicted transportation would be a major issue in the coming year.
Yates said despite all the cuts, the state has a AAA bond rating, meaning it can borrow money on more favorable terms than other states.
However, he said the proposed federal health-care reform would lead to Medicare and Medicaid cuts that the state would have to make up for.