House Democrats raise questions about proposal to cap state debt

By Beth Musgrave
bmusgrave@herald-leader.com

FRANKFORT — A Senate bill that would cap the amount of debt Kentucky could accumulate was met with skepticism in the House budget committee on Tuesday.

House Appropriations and Revenue Chairman Rick Rand said after Tuesday’s hearing on Senate Bill 1 that he was not sure if the Democratic House would vote on the measure, which passed the Senate 34-2. The bill would not allow debt payments to exceed 6 percent of state revenue.

The bill has an admirable goal., but reducing the state’s debt will take a long-term commitment, Rand said.

The Senate’s proposal is a “short-term political answer,” he said.

The bill’s sponsor, Republican Sen. Joe Bowen of Owensboro, said concerns about the state’s growing debt prompted him to write the bill. Bowen said the state’s bond rating was recently downgraded by the major bond companies in part because of its high level of debt.

Kentucky’s comprehensive financial report for the fiscal year that ended June 30, 2011, the most recent available, said the state paid $757.34 million for general bonded debt. The state’s long-term debt obligations increased that year by $908 million to $7.96 billion.

Bowen said Kentucky carries more debt than most states, regardless of whether it is measured as a percentage of state revenues or a percentage of per capita income.

But Bowen’s bill exempts key categories of debt from the 6 percent cap — including university debt and Road Fund debt.

Bowen’s bill also has no teeth, legislators said Tuesday. Statutes can be “not withstood” in the budget bill, which means they no longer apply to the budget.

Rep. Sannie Overly, D-Paris, questioned why Bowen had exempted Road Fund debt. According to some figures, the General Fund debt ratio would be 8.6 percent in 2013. The Road Fund debt ratio would be 13.3 percent in 2013.

If House Democrats feel that Road Fund debt is a problem, they can alter the bill to include that number, Bowen said.

Overly, who oversees the state transportation budget in the House, said Bowen did not answer her question about why the Road Fund, which legislators sometimes use to fund favored transportation projects in their districts, was exempted from the debt ratio requirement.

“How can it be that 13.3 percent debt is fiscally responsible, when 8.6 percent is not?” Overly asked. “I think it does call into question, perhaps, the disingenuous nature of addressing one over the other, when one is clearly five points higher.”

Overly said people in her district are more concerned about possible layoffs of teachers and drastic cuts to other key areas of government than the state’s debt.

If passed, SB 1 would take effect in 2014.

House Minority Leader Jeff Hoover, R-Jamestown, said in a written statement after Tuesday’s meeting that he wished the House would vote on SB 1.

“It is extremely disappointing to me that the Democratic leadership in the House will not allow a vote on Senate Bill 1.” Hoover said. “The state’s spending and our debt level are very important issues facing Kentucky. Senate Bill 1 is good fiscal policy and a responsible approach to reduce our debt.”

Filed Under: Jeff Hoover • KY General Assembly • State Budget • State Government