Lawmakers, facing financial troubles in 2010, passed a biennial budget that defers this year's final check until the first day of the new fiscal year, helping balance the budget by transferring $72 million in personnel costs from one year to the next.

Gov. Steve Beshear said early Friday morning that he would call a special legislative session to begin Monday after the Kentucky State Senate failed to pass legislation to fund the state's road plan over the next two years.

The Kentucky governor vetoed more than three dozen line-items in the $19 billion, two-year state budget, as leading lawmakers continued trying to hammer out an agreement on a road-building plan for the next biennium.

The $19.3 billion plan cuts funds for agencies, universities.

The agreement was reached at about 2:40 a.m., which is just in time for the final version of the bill to be prepared and printed for final votes in the House and Senate on Friday afternoon.

The Democratic House and Republican Senate have until 3 a.m. Thursday to make final decisions in order for a budget to be ready for a vote by both chambers on Friday, the 59th day of the legislative session.

The Senate approved its version of the state's $19.3 billion budget for the next two years Thursday night - a plan that differs from the House proposal primarily by taking additional steps to curb the state's debt.

In a way, the very idea of state budget reform presumes some basic level of government transparency. Many simply take for granted the premise that access exists to information like budget documents and state expenditures. Yet the amount of information related to the spending of tax dollars provided by each of the state governments varies wildly.

The state's debt would be 6.8 percent of revenues under a plan approved by the House earlier this week. That's down from 7.1 percent in the governor's original proposal, but not enough to appease Senate Republicans.

With little debate, the Kentucky House voted 78-17 to pass a $19.5 billion state budget bill that cuts many state programs by 8.4 percent and cuts funding for state universities by 6.4 percent.

Senate Republicans have said they do not believe that Beshear can generate savings through a series of privately run managed care programs for Medicaid to make up for the loss of funds in the second year of the budget.

Both sides are philosophically far apart on how to deal with a potential shortfall in the $6.5 billion Medicaid budget.

Senate Appropriations and Revenue Committee Chairman Bob Leeper said Friday that final changes are being made to a proposal for shoring up the government program that provides medical services to more than 800,000 poor, elderly and disabled Kentucky residents.

Gov. Steve Beshear announced changes to save more than $142 million in the cash-strapped Medicaid program over the next two years.

A looming $470 million shortfall in the state Medicaid budget could have "a catastrophic impact" on Kentuckians, Gov. Steve Beshear said Thursday as he announced the state will not get as much federal funding for the program as expected.

House Democrats pushed through a $26billion jobs bill to protect 300,000 teachers and other nonfederal government workers from election-year layoffs, while sending $16billion to help cash-strapped states with rising Medicaid costs.  The measure includes an estimated $155million in Medicaid funds for Kentucky — about $83 million less than what lawmakers assumed the state would get for the current budget year than ends June 30.  Indiana will get about $434 million in education and Medicaid funds. The state will accept the money even though Republican Gov. Mitch Daniels has derided it as unnecessary.

The state's debt would be 6.8 percent of revenues under a plan approved by the House earlier this week. That's down from 7.1 percent in the governor's original proposal, but not enough to appease Senate Republicans.

With little debate, the Kentucky House voted 78-17 to pass a $19.5 billion state budget bill that cuts many state programs by 8.4 percent and cuts funding for state universities by 6.4 percent.

In 21 states, certian public employees can increase their pensions by buying credit for extra years, even though they did not work in those years.

Estimates show that Kentucky's largest public pensions - 46 of them at $200,000 a year or higher - will go to doctors, scientists, sports coaches and administrators at the state universities.

The $14 billion Kentucky Retirement Systems, which covers 324,000 state and local government workers, expected a 7.75 percent rate of return but earned only 5.51 percent over the past 10 years.

The largest pension fund for state workers is considered one of the most troubled public employee pension funds in the country, with administrators having to cash out investments each month to pay benefits.

This all boils down to who gets to pick taxpayers' pockets first, public pensioners or municipal bond investors? More people are waking up to the hard reality that when it comes to state and local government, somebody has to lose money over the next few decades. The National Association of Bond Lawyers is worried enough about it to issue "Considerations" for advising clients who think they're getting safe investments.

Despite an organized campaign to stop public pension reform, reality is beginning to break through.  One recent report outlines a possible path to long-term solutions and another details the necessity of states and municipalities finding their own way because federal bailout is impossible.  And Chicago Mayor Rahm Emanuel released a plan that could have been based on both reports.

Hey, young public employees, what are you going to do when your pension checks bounce after you paid in for decades? That is what will happen in many - maybe all - states and municipalities sooner or later if they do not reform right now. If you want to see the future, just look at Illinois. One citizen there did, and came up with a real reform plan that might work.

Public employees should take their pension money now and run to avoid risk of getting reduced benefits - or nothing - in the future. It's the best deal for them and for taxpayers. A growing chorus of credible voices including the Government Accountability Office, a Federal Reserve bank and now the Harvard Kennedy School Mossavar-Rahmani Center for Business and Government confirm state and local government finances are "spiraling out of control" and even draconian reforms only make it "more likely" that future benefits will paid in full.

Hey, young public employees, what are you going to do when your pension checks bounce after you paid in for decades? That is what will happen in many - maybe all - states and municipalities sooner or later if they do not reform right now. If you want to see the future, just look at Illinois. One citizen there did, and came up with a real reform plan that might work.

While state lawmakers grapple with spending issues in special sessions, the state is hemorrhaging money paying for lawmakers' overtime.

This is what it sounds like when the Federal Reserve Bank screams: "Much has been written about the various headwinds restraining economic activity over the near term. However, our economy also has other headwinds to confront over the medium- to-longer-term. ... the finances of some state and local governments are also under stress and in need of serious adjustments."  - Federal Reserve Bank of Cleveland President Sandra Pianalto

Frozen funding, mismanaged distributions, and states' fiscal uncertainty relating to disaster relief is increasing frustration over the failed disaster management practices of FEMA-the need for reform is clear.