President Gary Ransdell said Western officials prepared for the state’s revenue drought before officials forecasted next year’s budget deficit.

The state budget office announced last week its prediction that next year’s deficit will be between $818 million and $1.09 billion, State Budget Director Mary Lassiter said.

A group of independent economists who make up the Consensus Forecasting Group will meet this month and create their budget shortfall projection based on the budget office’s prediction, said Jay Blanton, a spokesman for Gov. Steve Beshear.

Officials use the group’s prediction to adjust the state’s budget, Blanton said.

Ransdell said Western is prepared for a major budget reduction.

But uncertainty about the deficit and federal stimulus bill money leave the university’s budget situation for next year in a yet-to-be-determined status, he said.

Fiscal year 2010’s budget was made in spring 2008 because legislators prepare the budget every two years, Lassiter said.

The Consensus Forecasting Group predicted a $456 million budget deficit for the 2009 fiscal year, which ends June 30, Blanton said. So far, the actual deficit has reached about $10 million less than that prediction.

The national economic recession’s impact on the state’s economy contributes to the projected deficit, Lassiter said.

Sales and income taxes make up the biggest portion of Kentucky’s revenue, and both of those are related to personal income, she said.

With the state’s unemployment rate rising, Kentuckians make less money which decreases their taxable income. People also spend less, which decreases sales tax revenue, Lassiter said.

Kentucky’s unemployment rate for March 2009 was 9.8 percent, according to the U.S. Bureau of Labor Statistics. The bureau reported a 6.1 percent unemployment rate for March 2008.

Blanton said it’s too early to tell how the deficit will further affect higher education.

The state dealt Western a 2 percent budget cut for next year, but officials decided to take an extra 2 percent cut to give faculty and staff one-time bonuses, Ransdell said.

He said he didn’t use that extra 2 percent for permanent salary increases because it might be needed to soak up future budget cuts.

But stimulus money could help reduce cuts to higher education or reduce the state’s budget deficit, Ransdell said.

During the next 28 months, Kentucky will get about $3 billion in non-recurring stimulus package money, Blanton said.

But the money doesn’t come in a $3 billion check for state officials to spend on whatever they want, he said. It’s earmarked for certain things, including education and healthcare.

“All of that money has significant strings attached to it,” Blanton said.

Ransdell said he didn’t know if state officials would use stimulus money to balance the budget and therefore reduce or avoid cuts to higher education.

If universities get stimulus money, they might get less funding from the state, he said.

“In the meantime, we’re doing everything we can to prepare,” Ransdell said.