FRANKFORT — House and Senate leaders will be racing the clock Wednesday to come to an agreement on a host of issues involving the state's two-year, $19 billion budget.
The Democratic House and Republican Senate have until 3 a.m. Thursday to make final decisions in order for a budget to be ready for a vote by both chambers on Friday, the 59th day of the legislative session. After two days of negotiations, a host of issues remain to be decided, including how the state's coal severance tax money should be spent and whether to expand the state's preschool programs.
House and Senate budget negotiators agreed Tuesday on how to book savings from interest rates on bonds, a key hurdle in discussions on a $19 billion, two-year state budget.
The agreement — which would allow the state to book savings generated by lower-than-expected interest rates — was one of several agreements between the two chambers on the second day of budget negotiations.
The sides met twice Tuesday and will resume negotiations at 10 a.m. Wednesday. Senate Republicans wanted to continue negotiations on Tuesday to ensure more time to broker a final agreement, but House leaders said that the two sides were too far apart on some of the remaining issues and suggested returning to the bargaining table Wednesday.
The Democratic House and Republican Senate passed two-year budgets this month. Both follow Gov. Steve Beshear's recommendations in several key areas, such as an 8.4 percent cut to many state agencies, no change in the main funding formulas for K-12 schools, and no raises for state employees. The House and Senate budgets also nix a 1.2 percent cost-of-living increase for state retirees, a move designed to shore up the state's ailing pension fund.
But negotiators locked horns on some issues Tuesday, such as requiring Beshear to cut $98 million from the state's contracts.
The Republican Senate believes the administration can make the cuts, but Democratic House leaders expressed reservations, citing the deep cuts some agencies have already made. Some agencies have cut more than 35 percent of their spending over the past four years.
Senate President David Williams, R-Burkesville, said Senate Republicans believe the state spends between $400 million and $500 million on private contracts for such things as lawyers, architects and other professionals.
Greg Rush, deputy budget director for the Legislative Research Commission, told lawmakers that legislative staffers have had difficulty ascertaining how much money the state spends on contracts because the contracts are often misclassified. Large amounts of money spent on health care — such as private contracts to manage Medicaid — can distort the figures, making year-to-year comparisons difficult, he said.
House Speaker Greg Stumbo, D-Prestonsburg, said the House was not opposed to some limitations on the number of contracts but had concerns that little information is available about the effects of cutting contract spending.
There was also disagreement on $100 million in loans to help local districts build schools in 2014-2016. Those "offers of assistance" do not count toward the state's overall debt and can help the state's poorest districts build schools, Democrats said.
Senate Republicans countered that during lean budget times, every program should be examined.
House and Senate leaders also did not address a scholarship program for Eastern Kentucky students that was included in the House budget but not the Senate budget. The scholarship would be funded with coal severance money — taxes from coal.
The House plan includes $7.5 million for the expansion of preschool for some of the state's poorest students. The Senate budget did not include money for the expansion.
The Senate plan also nixed two key projects involving Lexington — an additional $3.5 million for the Kentucky Horse Park for this fiscal year and a $3.5 million bond for redevelopment, including the renovation of Rupp Arena, in downtown Lexington.
Late Tuesday, House and Senate leaders expressed frustration with the Kentucky Horse Park. The Horse Park reported that it had a deficit of about $3.6 million. It is asking for additional funding to help with that deficit, which was accumulated over several years.
Williams said he understood that the Horse Park had paid all of its bills and that it has moved money around to create the deficit. The park needs more money to maintain facilities it built during the 2010 World Equestrian Games. It had not planned for the additional facilities, Williams said.