FRANKFORT - Although Kentucky's economy does not seem to declining as severely as that of most states, it is slowing somewhat from the record pace that defined the latter part of the 1990s.

The Consensus Forecasting Group, a group of budget officials from the legislative and executive branches, met June 14th and reported that the shortfall is expected to reach $160 million this year, and nearly $300 million next year. And that doesn't include the loss in the Road Fund, which will lose $135 million more over the two-year period.

Because the state cannot operate at a deficit, unlike the federal government, Kentucky has no choice but to find ways to balance the budget. This fiscal year, the loss was covered partly by the state's "Rainy Day" fund - the first time we have had to dip into that since 1992 - and by relatively harmless budget cuts.

The next 12 months, however, may not be as easy. University presidents have been told to prepare for the possibility of cuts reaching as high as 5 percent, though Gov. Patton has vowed to find ways to protect our schools. That might be difficult, because such a move would mean cuts of up to 10 percent elsewhere, a move no less desirable.

Even so, Kentucky is in much better position than many other states. Tennessee, for example, has relied on stop-gap measures for the last three years, and recently had its bond rating lowered, which will add to any interest payments on bonds they sell. Mississippi has already issued cuts of up to 5 percent, while North Carolina declared a budget emergency with deficits now at $850 million.

For Kentucky, the current budget problems mean that when General Assembly convenes early next year to write the 2002-2004 budget, there will be less money than in previous years, when surpluses were the norm. We should be able to continue our current commitments, but will probably take on few major projects like we did in 2000, when we appropriated millions of new dollars for programs benefiting early childhood development, the mentally disabled, and substance-abuse prevention.

One issue that could arise next year is tax reform. A legislatively appointed group is studying that issue now, and is expected to issue a report by the end of the year. Eventually, Kentucky may have no choice but to change our system, which is geared more toward the 1950s and 1960s, not the 21st century.

Our key goal is to ensure that, as Kentucky grows, the state will be in a better position to handle these changes and that the growth has the services it needs to thrive. I believe we can craft a system that is more responsive and better able to handle any future economic downturns.

If we can do that, the next decade promises to be even better than the last. I am committed to seeing that we settle for no less.

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