FRANKFORT — After a day of tense negotiations, the Kentucky General Assembly approved a two-year, $17.1 billion budget late Friday, averting a broad shutdown of state government when the new fiscal year begins July 1.
However, the two chambers could not come to an agreement on the state's two-year road plan or the Transportation Cabinet's operating budget. Lawmakers will reconvene at 2 p.m. Saturday to continue negotiations.
Senate Majority Floor Leader Robert Stivers, R-Manchester, said he believes lawmakers have "parameters for an agreement" on the road plan.
Without an operating budget, most of the Cabinet's workers would be sent home and road work around the state would halt.
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On the budget, Gov. Steve Beshear must now decide if he wants to veto any particular portion of the spending plan before signing it into law.
The spending plan includes 3.5 percent cuts in the first year and 4.5 percent in the second year for most state agencies, changes to the state employee health insurance plan and funding to help replace some of the state's most dilapidated school buildings.
The measure also gives Beshear the authority to furlough rank-and-file state employees for up to 24 hours over six months. Non-merit or political appointees could be furloughed for an unlimited time period.
The budget was particularly thorny this year because of a projected $1.5 billion shortfall caused by the state's declining revenues.
Beshear called the special session to address the budget after lawmakers failed to approve a spending plan during the regular legislative session that ended April 15.
The session cost about $63,000 a day. The legislative branch is picking up the tab for the session and some legislators have said they will donate or return their pay.
Lawmakers also approved a bill Friday that would help shore up the state's bankrupt unemployment insurance program, but were unable to come to an agreement on a measure that would allow bourbon distilleries to provide free samples of bourbon at festivities such as the Alltech FEI World Equestrian Games.
The bourbon sampling bill died in the House, where lawmakers expressed frustration that the Senate has repeatedly refused to allow alcohol sales at state parks. The House also declined to pass a tax break for distillers that the Senate added to the revenue-raising bill that accompanies the state budget.
House Speaker Greg Stumbo, D-Prestonsburg, said the House Democratic caucus felt that now was not the time to give tax breaks to businesses when parts of the state's education budget were cut. For example, individual school districts must pay for one day of next year's school year.
"How do you give a break like that to an industry, when we can't afford to fund schools?" Stumbo said.
However, both chambers approved a series of new tax incentives for small businesses, donors to community foundations and a measure to fund pharmacy scholarships for students at public and private universities.
Senate President David Williams, R-Burkesville, who sponsored the pharmacy amendment, said the proposal would address concerns raised in a recent state Supreme Court decision that said state funds could not be used to build a pharmacy school at the University of the Cumberlands in Williamsburg, which is in Williams' district.
Williams said the scholarship program will be open to all Kentucky residents, but preference would be given to those from coal-producing counties. Those who receive the scholarship would have to agree to work in coal-producing counties.
Two private colleges, Midway College and Sullivan College, have recently established pharmacy programs.
Williams said he believed the proposal would not violate the state constitution, which prohibits "special legislation" for private entities; because the scholarship program would be open to all students, even though those from coal-producing counties would get priority.
The amount of money available for scholarships would fluctuate based on how much coal severance taxes are collected each year. The figure would initially exceed $1 million.
On the budget bill, House and Senate leaders were at odds throughout the day over language that would help fund the replacement of dilapidated schools, known as Category 5 schools. Ultimately, lawmakers agreed to help poorer school districts with state money if they raise property taxes to fund new buildings.
The House also killed a measure backed by the Senate that would allow the Administrative Office of the Courts to purchase a building in Frankfort instead of lease office space. Court officials said the move would save the state about $700,000 a year in lease payments.
The compromise budget also nixed more than $100,000 for a private Christian school in Breathitt County.
Some senators expressed reservations about the budget on the Senate floor Friday.
Senator Julian Carroll, D-Frankfort, said he did not like changes the budget makes to state employees' health insurance plans. The House had deleted language that mandated changes in the state health insurance plan because of concerns from state workers about high deductibles.
However, the compromise budget kept the mandated changes to the program, which is expected to save the state $94 million.
"I will estimate that it will be rather severe for most of our employees," Carroll said. "You're going to be hearing from them."
Sen. Kathy Stein, D-Lexington, was the lone senator to vote against the bill in the Senate, saying the budget did not go far enough to fund education programs.
"We should not be de-funding or cutting things that end up saving us money in the long run," Stein said.
But Sen. Damon Thayer, R-Georgetown, said although some of the cuts were regrettable, the state was finally tightening its belt and living within its means.
"It does not raise taxes on businesses that are trying to create jobs in this economy," Thayer said.