KY State Budget Update

State budget bill, revenue package pass House (Frankfort, KY) A nearly $19 billion Executive Branch budget bill and $300 million revenue bill that would help to cover costs for education, health services and other areas over the next two years has passed the Kentucky House. Funding from the revenue bill, or House Bill 262, would be combined with approximately $500 million created by the budget bill, or HB 406, to provide nearly $800 million in new revenue over the biennium. Tax changes--including a 25 cent increase in the cigarette tax, an increase in the state tax on other tobacco products and applying the state sales tax to select services like air charters and armored cars--would create new funding under HB 262 while debt restructuring and state workforce attrition through the budget would provide the remaining new dollars. House Bill 262, sponsored by Rep. Jim Wayne, D-Louisville, passed 50-45 followed by an 84-14 vote on HB 406, sponsored by Rep. Harry Moberly, D-Richmond. Both measures now go to the Senate for its consideration. Not all House members were pleased with the tax plan, including increases in the cigarette tax and changes that would tax moist tobacco, or snuff, at an ad valorem rate rather than on a unit basis. "At a time we are searching for revenue, I believe this could have unintended consequences: Hurting our revenue goals, and creating an unfair (type) of taxation," Rep. John Tilley, D-Hopkinsville, said of the snuff tax changes. According to Rep. James Comer, R-Tompkinsville, the state has other ways of taking care of its revenue needs. "We can lower the cost of school projects by 20 percent by relaxing the prevailing wage law in Kentucky," said Comer. "I believe were sending the wrong message by continually increasing taxes." But Wayne defended the tax package in his presentation before the House. "This bill helps prevent serious acts of neglect. It will also help with the education system, our justice system and hundreds of needed water and sewer projects we have throughout this Commonwealth," said Wayne. Moberly has said the budget as written would not be possible without HB 262. "We tried to construct a reasonable revenue measure," he told the House. Several agencies would benefit from new revenue created by the enhanced budget proposal including state universities, which faced 12 percent budget cuts in the next biennium under Gov. Steve Beshears proposed budget. Approximately $126 million in each year of the biennium would go to universities to restore their base operating budgets, said Moberly. Also restored would be $303 million in university projects and $100 million in General Fund projects vetoed by the last administration, while $115 million would be provided for the Bucks for Brains research program--about $55 million more than was proposed in the governors budget. Public schools would also see some relief under HB 406, which would provide an additional $42 million in base per pupil "SEEK" funding for school operations and restore $33.1 million in funding for merit-based "KEES" scholarships, among other enhancements. The bill would also provide salary increases for teachers of 1 percent in 2008-2009 and three percent in 2009-2010, giving them the same two-year increase as state employees who will receive two-percent increases each year of the biennium. A total of $130 million in additional funding is set aside under HB 406 for health and human services in Kentucky, an area that also faces severe cuts under the governors budget proposal. That money will be used to reverse cuts proposed for mental health/mental retardation programs, community based services and health departments, among other needs. County infrastructure needs were also addressed in the budget bill, which would authorize $50 million in tobacco settlement dollars to fund water and sewer projects in tobacco counties and $50 million in coal severance dollars for water and sewer projects in coal counties. It would also restore $1.9 million in base funding to local jails, which have struggled with rising operational costs in recent years. Additionally, the bill would authorize the state to freeze the automatic 1.5 cent-per-gallon increase in the gasoline tax scheduled to take effect in July in order to bond $500 million in road projects over the next two years. Moberly said the bonds would allow the state to move forward this biennium with projects in the current six-year state road plan. Economic development bonds for the states Base Realignment and Closure (BRAC) efforts at Fort Knox are also provided in the budget, as is $16 million to $17 million for the states Budget Reserve Trust Fund which provides a financial cushion for the state. The House also passed the state Legislative budget, HB 407, by an 89-7 vote and the state Judicial budget, HB 408, by a 95-3 vote. Those bills also now go to the Senate for consideration. (Copyright 2007 Newsroom Solutions, LLC) Delivered by Newsroom Solutions RNS-03-13-08 0734CDT