The Associated Press

FRANKFORT - An economic recovery that was anticipated early this year but has yet to occur has resulted in a potential $81.7 million shortfall in the state budget, the governor's budget office warned.

Such a shortfall would require deeper spending cuts, and some lawmakers say it would leave them and the next governor with an even tougher job in writing a budget for the 2004-2006 biennium.

State revenues are expected to drop below even modest expectations for the final quarter of the fiscal year ending June 30, acting state budget director Mary Lassiter said in a report Friday to Gov. Paul Patton and legislative leaders.

Revenue for the final quarter of the fiscal year is expected to decline by 1.3 percent over the same time last year, Lassiter wrote in her advisory. "As a result, it is projected that receipts for the current year will fall short of the official consensus revenue estimate by $81.7 million."

Rep. Harry Moberly, D-Richmond and chairman of the House budget committee, said the report "makes it harder to be optimistic about the outlook for the next couple of years.

"If this projection proves accurate, it means some cuts or adjustments will have to be made by the current governor, and the next governor will be facing an even tougher problem than we expected in proposing a budget that will adequately fund education and human services programs."

Moberly said the problem isn't limited to Kentucky. "All of the national econometric models called for a recovery to have started by early this year. So we appear to be facing another shortfall, and that's no different than most every other state," he said.

But Senate President David Williams, R-Burkesville, doesn't see the report as presenting such a serious problem. "An $81 million shortfall is not so large," he said.

That shortfall would be about 1.2 percent of the anticipated General Fund revenue this year.

Any additional shortfall this fiscal year wouldn't necessarily mean more cuts in the year's final two months because the budget called for the current year to have an ending balance of $137 million.

However, the budget also calls for all of that money to be spent in the fiscal year that begins July 1.