FRANKFORT — The General Assembly approved a compromise two-year state budget Friday that provides little money for new projects and cuts funding by 8.4 percent for many state agencies and 6.4 percent for state universities.
The vote on House Bill 265 was 36-1 in the Senate and 81-7 in the House. The measure now heads to Gov. Steve Beshear's desk for action. It was the first time since 2006 that the General Assembly passed a two-year budget on time.
Friday was the 59th of 60 work days in the legislative session. The General Assembly is set to return April 12 for the final day of the session, when it will consider overriding any vetoes Beshear might have issued.
House and Senate leaders said Friday they were still working on an agreement on the two-year road plan, another contentious piece of legislation. That means the measure will be put to a vote in both chambers April 12.
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House Speaker Greg Stumbo, D-Prestonsburg, said the $19 billion two-year budget "was the best budget that we could agree upon. Does that mean everybody liked it? No."
But Stumbo said the austere spending plan had some bright spots — it included more than $21 million to hire 300 social workers, and it increased funding for community services for people with intellectual disabilities. The House was able to find some additional funding for the Meals on Wheels program, which provides hot meals to the elderly.
Beshear, in a written statement, said he was pleased that the legislature kept many key programs of his original budget proposal, unveiled in January. But he noted that the cuts contained in the budget would hurt.
"As I said in January, this is the most difficult budget I have ever crafted, and it will be the most difficult for our state to endure," Beshear said. "However, I am pleased that the state legislature has kept my budget proposal largely intact — a signal that our management decisions and investments in the health and education of Kentuckians are wise ones."
The compromise budget includes an additional $3.5 million this fiscal year for the Kentucky Horse Park, which has struggled financially in recent years. The budget also includes $2.5 million to begin reworking Rupp Arena and nearby areas of downtown. The city must come up with $2.5 million in matching money.
The budget, which calls for spending more than $19 billion during the next two years, contains no pay raises for state employees and nixes a 1.5 percent cost-of-living increase for state retirees. It does not cut the main funding formula for K-12 education.
House and Senate leaders negotiated the compromise budget early Thursday after three days of talks. Key points of contention between the Democratic House and Republican Senate over the two-year budget, which takes effect July 1, included how much debt the state should incur and the funding of some projects with coal severance taxes.
Senate Budget Committee chairman Robert Leeper, I-Paducah, said the compromise budget included less new debt and relied on less one-time money than in previous budgets. It uses $217 million in one-time money to fund ongoing programs, down from $487 million in the current two-year budget.
Using one-time money to balance the state's books was part of the reason Kentucky's bond rating was downgraded in May.
The budget also returns $72 million to the state's "rainy day" fund, the size of which plays a roll when rating agencies assess the state's ability to repay its debts.
House Bill 499, a companion piece of legislation to the two-year budget, was loaded down at the last minute on the Senate floor with an amendment that would stop the city of Corbin from collecting its own occupational sales tax, a divisive local issue. Senate Majority Leader Robert Stivers, R-Manchester, sponsored the amendment over the strong objections of Senate President David Williams, R-Burkesville.
Williams and Sen. Perry Clark, D-Louisville, were the only two senators to vote against HB 499.
In the House, there was more debate on HB 499. Rep. Regina Bunch, R-Williamsburg, urged the House not to adopt the amendment. Bunch, whose district includes Cor bin, said the amendment would prohibit Corbin from collecting the occupational tax even though there has been a court ruling that says Corbin may collect it.
Rep. Jim Stewart, R-Flat Lick, said he supported the amendment. Stewart is from Knox County, which is fighting Corbin's ability to collect its own occupational sales tax. Stewart said the amendment would give the city and Knox County two years to work out the issue.
Stewart also added that the local issue pitted Williams against Stivers, a rare split in the Republican Senate. If the House passed the amendment, "we'll get to see them do it again in two years," Stewart said, garnering applause and laughter in the House.
The House ultimately voted 45-34 to approve the amendment. It voted 65-18 to pass HB 499.
There was no debate before the House gave final approval to HB 265, the two-year budget.