Senate's state budget cuts debt and building projects, adds cash for universities

jcheves@herald-leader.comMarch 24, 2014 

The Kentucky State Capitol building in Frankfort.

SAM RICHE — Lexington Herald-Leader Buy Photo

FRANKFORT — The Kentucky Senate passed its version of the $20.3 billion, two-year state budget on Monday, containing more cash for state universities but less debt and fewer building projects than the House version approved last week.

Senate budget chairman Bob Leeper, a Paducah independent, said he was "very proud" that his chamber cut $1.51 billion in general fund and agency bond debt compared to the House version and stashed $25 million more in the state's "rainy day" reserve fund.

But this isn't the final word. Budget negotiations could begin as early as Tuesday evening between the Republican-led Senate and the Democratic-led House and could continue for the next week. Legislative leaders in both chambers said they did not yet see any deal-breakers, and they're confident the legislature will send a budget to Beshear before it adjourns April 15. House Speaker Greg Stumbo, D-Prestonsburg, said there appears to be enough "wiggle room on both sides" for a compromise.

Among the big-ticket items the Senate didn't change: proposed pay raises for state employees and school teachers, although the Senate would make teacher raises optional for local school districts; full contributions to the state employees' pension funds; and the restoration of basic K-12 school funding to 2008 levels.

The state Energy and Environment Cabinet later criticized the Senate budget, which it said would further cut the amount of coal severance tax money going to the Office of Mine Safety and Licensing by 50 percent. The $2.6 million annual reduction would slash the office's full-time staff from 145 people to about 85 people, the cabinet said.

"The General Assembly, following the Darby Mine disaster (which killed five miners in Harlan County in 2006), wisely increased funding for mine safety and safety training so that this would not occur in Kentucky mines," the cabinet said in a statement. "The rate of injuries and fatalities in Kentucky mines has been decreasing since that time. With the passage of the Senate version of the House budget plan, every miner in Kentucky will be put at great risk every time they enter a mine."

The state's colleges and universities were winners and losers.

Gov. Steve Beshear in January recommended a 2.5 percent cut to the higher education operating budget, which would have been reduced 17 percent since 2008. The House agreed. But the Senate eliminated that cut and provided more funding — and then erased nearly all of $520 million in proposed bonds for university projects, including $45 million for a science research building at the University of Kentucky, $35 million for renovation of UK's law school and $66 million for a science building at Eastern Kentucky University.

Two higher education projects that survived in the Senate budget were the Breathitt Veterinary Center at Murray State University and an advanced manufacturing facility in Georgetown for the Kentucky Community and Technical College System.

The Senate also permitted the state's community and technical colleges to move forward with their plans for $145 million in agency bonds for building projects at each regional campus, funded largely by student fee increases, but it imposed conditions. Student fee hikes would have to be approved by a college's board of directors and would have to be spent at that campus, they would expire when a project's debt was paid off, and a project could not move forward unless that college raises 25 percent of the money through local donations by June 20, 2016.

Speaking Monday on the Senate floor, Sen. David Givens, R-Greensburg, said his chamber's primary goal in higher education funding was keeping tuition affordable for Kentucky college students. That's why the Senate would give the colleges and universities additional spending money while limiting their ability to take on more debt, Givens said.

In a campus-wide email sent out Monday, UK President Eli Capilouto said he appreciated the restoration of operating funds, which would prevent a $7 million cut across campus.

"They are part of our nearly $284 million annual appropriation from the state that we use to fund much of our teaching and learning enterprise," Capilouto wrote. "These dollars are absolutely critical to student success at all levels. It's how we try to fund and increase salaries that keep us competitive in recruiting and retaining the faculty and staff who support our vital work together."

Capilouto said UK officials will work to get bonding authority returned to the state budget for projects that will pay for themselves, such as more work on the new hospital and a new student center.

"Such projects do not, in our judgment, add to state debt levels since we take on the total responsibility for paying for these initiatives using resources we generate internally or through philanthropy," he said.

EKU President Michael Benson said he was disappointed in the Senate's actions because EKU's top priority was funding for the $66.3 phase two of a major science building on its Richmond campus.

"A science building of this magnitude comes along once every 10 years," Benson said. "There are ways to make up a budget cut, but this was a huge investment in our campus."

Among the Senate budget's other variations from the House budget, it:

■ Prohibits state funds from being used to implement the federal Affordable Care Act. The Beshear administration said it's using federal money to implement the law. But Leeper, the Senate budget chairman, said the state could face as much as $100 million in added Medicaid enrollment costs in its next two-year budget as federal subsidies gradually shrink.

■ Adds $1.76 million a year for the Kentucky State Police to rehire a group of 25 retired troopers, to beef up the force.

■ Cuts $3.7 million a year in state and federal funds for private child care provider reimbursement rates and $9 million a year for foster parent reimbursement rates.

■ Eliminates $50 million in bond funding for K-12 school technology; does not provide funding to expand preschool, despite Beshear's request for it; and cuts $13 million in "Flexible Focus" funds that schools use to pay for textbooks, extended school services, safe schools and staff professional development.

■ Drops House language that would require the state Corrections Department to transfer at least 100 older inmates to a privately owned care center that could be opened in a vacant prison in Stumbo's House district in Floyd County.

■ Cuts $500,000 in fiscal 2016 from the Kentucky Center for Education and Workforce Statistics, which studies data and issues reports about the readiness of the state's students and workers.

Reporter Linda Blackford contributed to this story.John Cheves: (859) 231-3266. Twitter: @BGPolitics. Blog: Bluegrasspolitics.bloginky.com.

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