FRANKFORT — The Kentucky Senate passed its version of a $17.3 billion, two-year state budget Monday night that cuts deeper than the House's proposed spending plan and axes nearly $1 billion in school, water and sewer projects.
The Senate approved House Bill 290 on a 35-2 vote, with one lawmaker declining to vote.
House Democratic leaders said the Senate's decision to drop almost $1 billion worth of construction projects — which the House said would create 25,000 jobs — might mean lawmakers end the 2010 legislative session without approving a budget.
"If it's a budget buster, it's a budget buster," said House Speaker Greg Stumbo, D-Prestonsburg. "We're so committed to the Kentucky Jobs for Kentucky Families (plan) and creating 25,000 jobs that we may have to leave here without a budget."
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A conference committee of House and Senate leaders will be formed in coming days to hammer out differences between the two chambers' budgets. If they hope to override any vetoes by Gov. Steve Beshear, lawmakers will need to vote on a compromise by the end of next week.
The Senate cut an extra 1.5 percent from nearly all areas of state government, slicing deeper than the 2 percent cuts the House had proposed for many agencies. The only area that appears to be exempt from those cuts was the Department of Revenue, which has argued that cutting its budget could limit the amount of money it collects for the state.
The Senate also put back two school days that were cut under the House plan, instead trimming the main funding formula for schools by 1.5 percent in the first year and 1 percent in the second.
The Senate plan also includes 1.5 percent cuts in the first year and 1 percent in the second for higher education, which mirrors the House plan.
Senate leaders said their spending plan does not include any tax increases or salary raises for state employees. The Senate also added a variety of business tax credits, including one for bourbon distilleries that would cost the state $8.8 million a year.
"I am convinced that this is a good, solid budget," said Senate President David Williams, R-Burkesville.
Senate budget chairman Bob Leeper, I-Paducah, defended the move to cut construction projects, saying the Republican-controlled Senate thought it was not wise to increase the state's debt when revenue was down.
It would take 6.88 percent of the budget to make payments on the state's debt under the Senate's plan. That compares to 7.6 percent in the House's plan.
Reducing the amount of money the state needs to pay its debt frees that cash for other priorities, Leeper said.
"We wanted to build a budget based on getting Kentucky to a better day," he said.
Leeper said the Senate's plan also would cut a larger number of political appointees in state government, doubling the House's original plan to save $5 million a year. The Senate version does not include the number of political hires that would have to be cut to generate that savings.
The Senate also wants the executive branch to cut $165.8 million in contracts for services over the two years — an increase from the House's cut of $112 million.
The Senate also included $1.3 million to pay for increased security at the Alltech FEI World Equestrian Games in Lexington and an additional $1 million for the Kentucky Horse Park, which will host the games Sept. 25 to Oct. 10.
And the Senate deleted two key tax measures that the House had depended on to generate $270 million — accelerating sales taxes for retailers and temporarily suspending a tax break on net operating losses for businesses.
Sens. Kathy Stein, D-Lexington, and Walter Blevins Jr., D-Sandy Hook, were the only Senators to vote against the measure. Sen. Julian Carroll, D-Frankfort, passed on the vote.
"I believe this bill sends the wrong message to the citizens of Kentucky," said Stein, noting that she objected to the education cuts. Sen. Tim Shaughnessy, D-Louisville, also objected, saying the Senate wants to pat itself on the back and say it restored the two school days, but in reality, it cut K-12 education by $25 million over the House plan.
Williams and Leeper said there was language in the Senate budget that allows the school districts greater flexibility to move money to deal with the cuts. Many in the education community had expressed concerns that cutting the two school days lawmakers added in 2008 could jeopardize the state's chances of receiving up to $200 million in competitive federal funds.
Stumbo also disagreed with the Senate's approach to reduce the main funding formula for schools, known as the Support Education Excellence in Kentucky, or SEEK program.
"We have not reduced the basic SEEK formula during these terrible economic times, and I think the House would be very reluctant to do so now," he said. "The two days — no one's ever brought any information forward to show that those two days have a beneficial effect on the educational system."
Rep. Derrick Graham, a Frankfort Democrat and a teacher at Frankfort High School, said "most people in education would have preferred" the House plan to cut two school days.
"The possibility exists that you may have (personnel) cuts and you may have larger classroom sizes because of those cuts," Graham said, adding of the Senate: "I'm disappointed but I'm not surprised that's the direction they would go in."
Kentucky Education Commissioner Terry Holliday, however, would "much prefer to see those sorts of cuts than to lose the instructional days," said Lisa Gross, spokeswoman for the Department of Education.
"If they cut those instructional days, there were districts already saying, 'We're going to put them back in and pay for them out of our own pocket,'" Gross said, noting that such moves would cause disparity between school districts.
Also on Monday, the Senate passed a $4.2 billion, two-year road plan that includes $207 million for planning and constructing roads in Fayette County.
The Senate version of House Bill 292 includes more money than the House version but does not include any new construction projects. In Fayette County, the Senate plan includes more money for planning a widening of New Circle Road.
The Senate also approved the legislative and judicial branch budgets. The $104 million, two-year legislative budget cuts the Long-Term Policy Research Center for the next two years, ending its existence unless other money is found to replace its $1.1 million budget over two years. The center, which has five employees, has helped the legislature craft long-term public policy through analysis and research.