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House budget would slash salary of economic development chief

Larry Hayes

By Beth Musgrave – bmusgrave@herald-leader.com

FRANKFORT — A little-noticed provision in the state House’s proposed budget would nearly cut in half the $250,000 salary of the state’s chief economic development officer.

The House on Wednesday passed a two-year, $17.5 billion budget that included a host of cost-saving provisions, including cutting the amount spent on service contracts by more than $100 million and saving $5 million by axing 120 political appointees over the next two years.

But deep in the budget is another provision that would cap the salary of Larry Hayes, the secretary of the Economic Development Cabinet. Hayes, who makes $250,000 a year according to the state’s transparency Web site, is the highest paid cabinet secretary.

The House budget says the Economic Development Secretary’s salary should not surpass the governor’s salary of $127,885.

Both Hayes and Beshear took 10 percent pay cuts this year.

House panel passes $17.5 billion budget

By Beth Musgrave – bmusgrave@herald-leader.com

FRANKFORT — A House panel approved a $17.5 billion, two-year state budget Tuesday night that includes $2.2 billion in borrowing for state projects, driving the state’s debt to record levels.

The proposal also cuts spending on education at all levels in an effort to erase a more than $1 billion gap between projected revenues and current spending levels.

State universities face a 1.5 percent trim in the first year of the budget, which begins July 1, and a 1 percent cut in the second year. They’ll also have to come up with about $63 million to operate and maintain buildings that will open over the next two years.

The state’s adult education programs will take a 3 percent cut under the House proposal. That’s roughly $1.3 million over two years out of the program’s $22.5 million budget.

The main funding formula for K-12 education was spared, but the spending plan would save $68 million over two years by shortening the school year by two days.

The House Appropriations and Revenue Committee voted 19-5 to pass the executive branch budget. House Bill 290 will likely go to the full House on Wednesday.

House approves revenue bill; Stumbo promises ‘aggressive’ construction plan

House Speaker Greg Stumbo, D-Prestonsburg

By Jack Brammer – jbrammer@herald-leader.com

FRANKFORT — The House voted largely along party lines Thursday to approve a bill that would raise more than $300 million to help balance the next two-year state budget.

House Speaker Greg Stumbo indicated soon after the 64-36 vote on House Bill 530 that those who supported the revenue measure will be rewarded with job-producing building projects in their districts.

“We believe this is a fairly good indicator of members who have concerns about jobs in their communities,” said Stumbo, D-Prestonsburg. “Those members who indicated that is a priority for them stepped up today and voted for the measure, and we certainly want to respond and try to create as many jobs as we possibly can across the Commonwealth.”

Stumbo said House Democratic leadership hopes to release an “aggressive” jobs-creation package focusing on schools, roads and infrastructure either Friday or Monday as part of a nearly $18 billion spending plan for the state over the next two years, beginning July 1.

All Democrats in the House except Reps. Jim Wayne of Louisville and Will Coursey of Benton voted for the revenue-producing bill. The only House Republican who voted for it was Rep. Jim Stewart III of Flat Lick.

House Minority Leader Jeff Hoover, R-Jamestown, said the bill was designed to raise a surplus of about $100 million “for pet projects.”

Bill to raise $371 million for state clears House panel

By Beth Musgrave – bmusgrave@herald-leader.com

FRANKFORT — A House committee approved a measure late Tuesday to raise $371 million in new revenue over the next two years, the first step toward approving the Democratic-led chamber’s version of the state budget.

The bulk of the revenue raised to help balance the budget comes from two big items — accelerating sales tax collections in the second year of the budget and suspending for two years a tax provision that lets businesses deduct net operating losses over a 20 year period.

The acceleration of sales tax payments would generate $90 million in the second year of the budget — which begins July 1, 2011. Not allowing businesses to deduct losses for two years would generate about $187 million in revenue.

The House Appropriations and Revenue Committee voted 17-11, largely along party lines, to approve House Bill 530.

The House is expected to take up a separate bill next week that would spend the new revenue as part of a possible $18 billion, two-year General Fund budget.

House Democrats defended the plan at Wednesday’s meeting, saying the revenue allows them to avoid draconian budget cuts.

“We are going to be able to escape this biennium with minimum pain to education and human services if we have the revenue that’s available in this bill,” said Rep. Harry Moberly, D-Richmond. “There will be a little pain for everybody.”

House leaders propose cutting two school days, university funds

By Beth Musgrave – bmusgrave@herald-leader.com

FRANKFORT — Democratic House leaders want to cut two school days and trim spending at many state agencies, including public universities, by two percent to help balance the state’s books over the next two fiscal years.

In briefings with reporters, House leaders gave a broad outline Thursday of how they plan to tackle a more than $1 billion shortfall over the two years — about $395 million in fiscal year 2011, which begins July 1, and $750 million the following year.

The plan, which leaders warned is still shy $200 million in the second year of the budget, raises no taxes, leaders said. It also would exclude several key areas from the two percent cut, including Medicaid, the main funding formula for K-12 education, the Department of Corrections and the Department for Behavioral Health, Developmental and Intellectual Disabilities.

Universities would face cuts in both years of the biennial budget, reducing their spending by about $40 million, according to House budget chairman Rick Rand, D-Bedford. Gov. Steve Beshear’s budget proposal had spared universities in the first year of the budget.

House Speaker Greg Stumbo, D-Prestonsburg, is also proposing to save $150 million by changing the state’s health insurance program and $68 million over two years by chopping two days from the state’s school year, reducing it to 175 days of instruction.

The plan also calls for the state to collect about $35 million in excess school funding that Beshear had proposed to let school districts use to offset other previous budget cuts.

House eyes Medicaid for more savings

Rick Rand, D-Bedford, is chairman of the House Appropriations and Revenue Committee

By Beth Musgrave – bmusgrave@herald-leader.com

FRANKFORT — House leaders said Tuesday they are looking at the Medicaid program to find money and more savings to help plug a looming hole in the state’s two-year budget.

House budget committee Chairman Rick Rand, D-Bedford, said leaders have determined they need to come up with about $395 million to plug a hole in the first year of of the biennial budget. Part of that deficit can be erased by removing $220 million in General Fund dollars from the state-federal health care program for the poor and disabled.

Lawmakers said the Medicaid money won’t be needed because of enhanced federal funding that will last through Dec. 30. However, all of the $220 million won’t be available unless Congress approves a second stimulus that boosts federal spending on Medicaid.

Even if all of the $220 million can be transferred to the General Fund, lawmakers must still find another $175 million in cuts or savings to balance the first year of the budget.

The second year of the budget — where the gap between revenues and costs grows to more than $750 million — is still up in the air, Rand said.

Tax breaks a major drain on state budget

Mike Sause

By Linda Blackford and John Cheves – lblackford@herald-leader.com

FRANKFORT — In the past year, horse enthusiasts bought more than half a billion dollars worth of prized Kentucky horseflesh on which they paid no state sales tax. Tax breaks covered the horses.

Utility companies spent hundreds of millions of dollars for mountains of coal on which they paid no sales tax. A tax break covered the coal.

But when business owner Mike Sause bought a DVD player and two DVDs at a Best Buy in Lexington before Christmas, he paid $12 in sales tax, the 6 percent typically charged on tangible goods.

Sause, 22, says he’s used to paying the tax, but he wants to know more about those who don’t. The state’s General Fund is expected to collect about $3 billion in sales taxes during fiscal year 2010, compared to about $2.4 billion the state will forgo in sales tax breaks for horses, coal and dozens of other items.

“I think that people should really be aware of tax exemptions being given to businesses, whether they’re local or international,” Sause said. “With all this money we’re giving away, we ought to know more.”

The basics about tax breaks are published every two years by the state budget office. Kentucky will forfeit an estimated $6.9 billion in different taxes in 2010. By comparison, the state’s General Fund is budgeted to collect $9.1 billion. The money lost to tax breaks is rising about 7 percent a year as the General Assembly — often at lobbyists’ urging — creates new loopholes in the tax laws without closing old ones.

But that’s as much as most people know.

Another cigarette tax hike in Ky. unlikely

By Beth Musgrave – bmusgrave@herald-leader.com

FRANKFORT — When legislators return to Frankfort in January for a new legislative session, they face a daunting task: how to pay for the state’s essential services while revenue continues to decline.

Although official estimates won’t be released until next month, initial projections show a $161 million shortfall for this fiscal year, which began in July. And the picture for the next two years doesn’t get much better. There could be as much as a $1 billion shortfall for the next two years if the state keeps spending at its current rate of $9.1 billion a year.

While speaking to business leaders in Louisville last week, Gov. Steve Beshear said he has not ruled out any solution — including another increase in the cigarette tax.

Beshear’s comments about raising the cigarette tax caught many health advocates and legislators by surprise.

“We welcome any and all conversations that would bring our cigarette tax higher so that we can reduce the number of people who smoke,” said James Sharp, government relations director for the American Cancer Society. The higher that you raise the cigarette tax, Sharp said, the more young smokers quit or don’t start smoking.

Yet legislators and even Beshear said last week a cigarette tax increase is unlikely to be approved during the upcoming legislative session, despite the known health benefits and the state’s desperate need for cash.

Two KET shows will discuss special session

The recently concluded special session of the state legislature will be discussed on this weekend’s “Comment on Kentucky,” a public affairs show on the Kentucky Educational Television network.

Joining host Ferrell Wellman as panelists will be reporter and columnist Ronnie Ellis of CNHI News, Courier-Journal horse industry reporter Greg Hall and Lexington Herald-Leader columnist Larry Keeling.

House approves budget bill with school projects

By Beth Musgrave – bmusgrave@herald-leader.com

House Speaker Greg Stumbo, D-PrestonsburgFRANKFORT — The state House approved a budget late Monday that plugs a nearly $1 billion projected shortfall and includes $1.1 billion in school and university construction projects, but much of the measure is already moot.

A Senate committee’s rejection of a proposal to allow slots at racetracks means there’s no money for the construction projects, so lawmakers will now likely spend Tuesday haggling over the details of their competing proposals to rectify the $996 million budget shortfall.

They’ll also attempt to negotiate a compromise bill to overhaul the state’s economic incentives programs and to create an authority that would fund and build large transportation projects, such as bridges over the Ohio River in Louisville.

House Speaker Greg Stumbo, D-Prestonsburg, and Senate President David Williams, R-Burkesville, both said they hope Tuesday will be the final day of a special legislative session that began June 15 at a cost of $60,000 a day to taxpayers.

The House on Monday rejected the Senate’s version of the budget and its economic incentives package, which also included the mega-transportation bill and a proposal pushed by Williams that uses taxes on lottery tickets and a loan from the state employee health insurance fund to aide the state’s horse industry.