Few states were hit harder by the recession than Kentucky, where the unemployment rate has been higher than the national average every month since January 2005. And while other states are beginning to reap the tax revenue benefits of a recovering economy, Kentucky’s still-stagnant economy and growing mandatory spending costs are keeping the Bluegrass State’s budget in a bind.

Gov. Steve Beshear (D) has slashed about $1.6 billion in spending since taking office in 2007, even while Medicaid, prison costs and debt service payments have skyrocketed. All three mandatory spending categories have more than doubled in cost since fiscal 1998, according to the state budget director.

This year, the legislature expects to see only modest 2.6 percent growth in general fund revenues, of about $9.7 billion in fiscal 2015. There is little appetite to raise taxes, especially heading into an election year. But there may be a push to better fund the state’s education system: Education Commissioner Terry Holliday has warned lawmakers that without more funding, the state will have to lay off 1,000 to 2,000 teachers, the Lexington Herald-Leader reported.

That has Kentucky lawmakers once again considering a new revenue stream that could add hundreds of millions to state coffers: Casino gambling at horse racetracks.

The proposal has come up before. Beshear and most Democrats support it, but feuds within the state’s powerful horse racing industry has slowed its progress. The legislature is likely to try again by voting on a bill that would put a constitutional amendment on this year’s ballot to allow casino gambling. A pro-gambling interest group says legalizing slot machines and table games would infuse the state budget with nearly a half a billion dollars in revenue — in just the first year.

The Herald-Leader’s John Cheves previews the rest of the session highlights: The legislature will most likely vote on restoring voting rights to convicted felons once they have served their time, with support from U.S. Sen. Rand Paul (R-Ky.). Libraries that want the right to levy taxes will need legislative action after a legal ruling invalidated years of rate increases. And the legislature may act on a proposal that would give cities and counties the ability to levy their own local sales taxes on top of the state’s tax rate.

But the most consequential issue in Frankfort this year won’t be a bill on the floor — it will be the continued fallout from sexual harassment allegations against several legislators. Several lawsuits are ongoing, and Democrats worry that the scandal could hurt their chances of keeping the majority. Republicans hold 45 of 100 seats in the state House, giving them a real shot at taking over one of the last remaining Southern states where the party doesn’t have complete control.