FRANKFORT — The Kentucky House will probably vote Wednesday on a two-year, $19.5 billion state budget that calls for 8.4 percent cuts to some parts of government and very little new borrowing for capital projects.
The House Appropriations and Revenue Committee voted 26-2 Tuesday to approve House Bill 265, the executive branch budget. The House made some modest tweaks to Gov. Steve Beshear's proposed budget, which was introduced in January.
The latest proposal scrapped more than $450 million in bonds for universities over concerns about the state's rising debt. The House budget also rejected a 1.5 percent cost-of-living increase for state retirees, which could save the ailing pension fund about $400 million, state officials said Tuesday.
Beshear said he was reviewing the House's changes.
"As we said in January, this is a very difficult budget," Beshear said. "It appears the House budget will not vary significantly from the budget I introduced. We will review the proposed changes carefully, and will work with both the House and Senate as the budget moves through the process."
Beshear had proposed using $15 million to expand preschool to some of the state's poorest students, but the House budget provides only half that amount. The House used the remaining $7.5 million to restore funding to other areas of education that have suffered cuts over the past several years, including after-school programs and social service programs based in schools.
The House version also restores about $5 million to the Aging and Independent Living department, which handles programs for the elderly such as Meals on Wheels. That program was scheduled to take an 8.4 percent cut under Beshear's proposal.
The House plan also protects the state's county and commonwealth attorneys from cuts, which Beshear had proposed reducing by 2.2 percent.
Beshear had also proposed additional funds for the Kentucky Horse Park, which is struggling with a $3.6 million deficit. The House budget gives the park an additional $3.5 million for the current fiscal year, which ends June 30, but does not give the Horse Park additional funding for the next two years.
Greg Rush, the deputy director of budget for the Legislative Research Commission, told the House Appropriations and Revenue Committee on Tuesday that the House budget will leave $24 million in the state's "rainy day" fund, compared $20 million under Beshear's plan.
The House plan relies more heavily on one-time money to balance the state's books, Rush said.
Rep. Danny Ford, R-Mt. Vernon, expressed concerns about the state's burgeoning debt. Rush said the House budget would result in a debt ratio — the amount of debt payments compared to the amount of revenue — of about 6.14 percent. If the House had agreed to the additional $450 million in debt for the universities, the debt ratio would be more than 7.0 percent.
Rep. Jim Wayne, D-Louisville, said if the state's debt ratio remains 6.1 percent, it would be the eighth highest in the country, according to Moody's, a leading bond rating company.
Rep. Alecia Webb-Edgington, R-Ft. Wright, and Wayne voted against the measure.
Webb-Edgington said she did not have time to read the entire bill, and she questioned some personnel policies contained in HB 265 that allow for accrued compensation of overtime to be paid in lump sums, commonly called Block 50s. Such payments can be a financial drain, Webb-Edgington said.
Wayne said he had concerns about the amount of one-time funds the House budget uses to balance the books, sometimes called a structural imbalance.
The House budget panel also passed the legislative and judicial branch budgets on Tuesday. Both branches of government received an 8.4 percent cut.
Rep. Rick Rand, chairman of the committee, said the House is expected to vote Wednesday on HB 265. It will then head to the Republican-controlled Senate, which also will have an opportunity to make changes.
Rand, D-Bedford, said concerns over the state's debt led the House to cut university bond requests for agency-supported debt, or loans that the universities repay using their own funds. But Rand and House Speaker Greg Stumbo, D-Prestonsburg, said they would be willing to work with universities to determine what projects the universities hope to fund using agency bonds.
Even though the General Fund is not used to repay those bonds, the amount borrowed affects the state's overall debt rating, Rand said.
"The amount of debt our state carries has been a concern. We decided that now is probably the time to do something about it," he said.