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“This Week in Frankfort” from the LRC

March 5, 2010

The budget has been the main focus in Frankfort this week, and with just over a month until sine die, there’s still a lot of work to be done.

The House keeps rolling out a few broad details of its plan, but the actual budget legislation hasn’t been laid out to be picked apart and analyzed by lawmakers and the public.

And that doesn’t count the work the Senate will perform on the House’s version once they receive it. Or the hours spent by leaders of both chambers to iron out the budget.

That brings us to this week’s “This Week in Frankfort” from the Legislative Research Commission, which again does a good job of wrapping up the week’s action.

THIS WEEK IN FRANKFORT

The 2010 Kentucky General Assembly: Week 9

LRC PUBLIC INFORMATION

FRANKFORT – Writing an $18-billion state budget isn’t much different from writing a $50,000 household budget. First you get your bucks in a row. Then you decide how to spend them.

It’s simple. But never as easy as it sounds. Never when money’s way short. And never in a grinding recession.

That two-step process is announced plainly in the name of the budget committee in each chamber –Appropriations and Revenue. And this week saw progress on the revenue side, as House A&R passed out of committee a bill to help bridge what it assumes will be a billion-dollar-plus chasm between the money now predicted to come in and the money it will take to pay for state government over the next two years.

The measure, which then passed the full House quickly, would net around $320 million in new revenue to help sandbag that red tide.

To do it, the bill replaces a big chunk of the new money that Gov. Steve Beshear had assumed in his own budget attempt, but from different sources.  You may recall that earlier this session, Beshear proposed that $780 million in new tax revenues from slot machines at state racetracks — along with spending cuts and some borrowing — would balance the budget.

The Legislature summarily rejected the governor’s slots-based budget, and set out to write its own from scratch. Thus did the General Assembly enter a historically unique situation that explains why this year’s budget has been relatively slow to emerge.

But now, with the specifics of an initial revenue proposal past its first major hurdle of House passage, momentum is now on the budget’s side — even if uncertainty about its final shape remains.

Specifically, the measure approved this week counts on tweaks in some business taxes – including accelerated collection of sales taxes, and a temporary two-year suspension of certain operating-loss deductions – combined with caps on a couple of existing tax credits, to raise the extra money.

The revenue bill has been sent to down the hall to the Senate, where it will be taken up for a fresh look by that chamber.

Still to come though – it is hoped early next week – is the ‘appropriations’ half of the budget equation. It too will contain sections helping to bridge the budgetary gap.

As that separate bill has been taking shape in the House, some likely elements have been discussed: Spending cuts of around 2 percent at most state agencies, dropping two instructional days from the K-12 calendar, freezing salaries for state employees and teachers for two years, changing state-employee health plans to offer a lower-cost option, and cuts in the number of non-merit political appointees and contract workers, among others. Higher education, it now appears, also faces cuts, although discussion ebbed and flowed this week about if and how much.

The plan assumes federal stimulus money of $250 million to help defray recessionary increases in Medicaid costs. It contains no broad-based tax increase, no mass layoffs of state employees, and preserves SEEK funding for schools

While this is the situation as known today, it’s important to stop and note that, while writing a state budget is a legislative prerogative, both House and Senate must agree on the final version. Any House action is preliminary to the Senate putting its own stamp on the document, and then the two chambers working out their differences in conference.

It is not at this writing known what Senate reaction will be to the House revenue proposal, or to the House-passed budget generally. The situation remains fluid, unfolding almost hourly, and the final 19 days of this year’s 60-day session promise to be eventful.

Meanwhile, the Senate this week passed an ethics-reform bill aimed squarely at preventing the all-too-cozy monetary relationship some state contractors and special-interest lobbyists could develop with some elected officials.

Specifically, contractors would face new restrictions on making campaign contributions. Anyone with a state contract would be prohibited from contributing to a state campaign. Any business that makes a contribution would be forbidden to receive a state contract for five years — and even those just seeking a contract would be banned from contributing for 18 months after making a bid.

Lobbyists, meanwhile, would also face added restrictions. While they are currently limited to giving $25 in gifts annually to public officials, SB 82 would extend that limit to state agencies. In addition, lobbyist registration fees will change. Currently, a business that employs a lobbyist or multiple lobbyists pays a $125 flat fee. Under the new law, it would pay $125 per lobbyist, an increase that will help cover the costs of increased ethics oversight.

The second goal of SB 82 is transparency. Under the legislation, all financial disclosure forms that candidates and public officials must file — their business interests and relationships, contributors to their campaigns, other relevant data — would be published online for voters and taxpayers to see.

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