1. Legislative Interns January 27, 2011 Dr. James R. Ramsey

2.  Non budget but Medicaid issue Governor’s suggestion General Assembly suggestion Which brings us to Passport 2 “Short” Session

3. Other Leaks in the Bucket Corrections expenditures Public employee benefits These are expenditure problems which in combination with economic/revenue problems create our state budget problems 3

4. Sources: NBER, BEA, and BLS. * Lowest level during the current recession. The next two quarters (2009:III and IV) have been positive. PeakDecline in real GDP Dec-07 (IV)-3.70% Mar-01 (I)0.40% Jul-90 (III)-1.40% Jul-81 (III)-2.90% Jan-80 (I)-2.20% Nov-73 (IV)-3.20% Dec-69 ((IV)-0.20% Apr-60 (II)-1.10% Aug-57 (III)-3.70% Jul-53 (II)-2.60% Nov-48 (IV)-1.70% US GDP Endured worst economic downturn since WWII 4

5. Economy coming back, but job growth will be slow National Non Agricultural Employment (in 000s) 5

6. See any public policy issues here? Kentucky Non Agricultural Employment (in 000s) 6

7. Kentucky Manufacturing Employment (in 000s) Structural not Cyclical 7

8. Jobs income individual income tax/sales taxes nearly 80% of state general fund 11 budget cuts – 11 years 8 Implications

9. So an election year – a short session – lack of political will – will much happen? 9

10. Play defense Set stage for 2012 University of Louisville Strategy 10