FRANKFORT — The Kentucky General Assembly begins its 2014 session on Tuesday, facing the usual trouble: Not enough money is coming in to pay for the services Kentuckians want, and there's no political appetite to raise taxes, especially not in an election year.
Since taking office in 2007, Democratic Gov. Steve Beshear has ordered $1.6 billion in spending cuts across state government. Debt repayment, Medicaid and prisons have gobbled bigger wads of what money remains. The losers include K-12 schools, public universities and social services.
Meanwhile, the state employees' pension fund is 23 percent funded, needing $8.7 billion to cover future liabilities. That's one of the reasons Moody's Investors Service in New York warned bond buyers last May that Kentucky's credit outlook is "negative."
"The commonwealth's sizable budget deficits over the past few years led to a depletion of reserve balances and borrowing for budget relief," Moody's said.
Civic leaders say there must be dramatic changes this winter.
"After five years of school budget cuts and other services to kids being reduced, this whole notion of 'doing more with less' that we've been preaching throughout the state, I think that's run its course," said Roger Marcum, chairman of the Kentucky Board of Education. "People accepted it for a time because they knew the national economy was going through a rough stretch. But now we're supposed to be in recovery."
Without more funding, Education Commissioner Terry Holliday has warned, 1,000 to 2,000 teachers and other public school employees could lose their jobs later this year.
"I'm very concerned about what's going to happen to our schools in spring semester if funding is not restored," Marcum said.
Don't expect relief from the two-year budget written this legislative session, lawmakers say. The General Fund is expected to gain only 2.6 percent annually, taking it to $9.7 billion in fiscal year 2015, which begins July 1, and $10 billion in 2016. That extra $500 million is spoken for, and then some.
"The minimal amount of growth that we're going to experience is already spent in terms of pension commitments, health care costs for our state employees and new Medicaid enrollment costs," said House budget committee chairman Rick Rand, D-Benton. "If we want any more money for things like schools or state worker pay raises, we're either going to have to raise taxes or cut something else further."
There's a third option, though it wouldn't take effect soon enough to help this year.
The General Assembly could give the state's horse racetracks what they've long clamored for — casinos full of slot machines and table games, with licenses purchased from the state and a portion of annual revenue going to the General Fund through taxes.
Beshear supports casinos, and most states now allow them in some form, including Kentucky's neighbors other than Tennessee and Virginia. But past efforts in Kentucky have failed because of horse industry infighting and reluctance by conservative lawmakers who worry about the impact of expanded gambling on families. If casinos make billions of dollars, critics say, that means Kentuckians are losing billions of dollars.
Longtime casino backer Rep. Larry Clark, D-Louisville, pre-filed a bill that would put a constitutional amendment on the November ballot to let voters decide whether to permit casinos.
Another Louisville lawmaker, Republican Sen. Dan Seum, has his own proposed amendment to allow seven casinos across Kentucky, with 10 percent of the revenue guaranteed "to promote equine interests" and the state's share dedicated to "job creation, education, human services, health care, veterans' bonuses, local governments and public safety."
Kentucky Wins, the newest pro-casino lobbying group, predicts that casinos would generate $464 million in first-year gambling taxes for the state. That projection comes from a 2011 study for the racing industry that made certain assumptions, such as eight successful casinos paying 40.65 percent of their net gambling revenue as taxes.
To rally support, Kentucky Wins is enlisting politically powerful allies like Louisville Mayor Greg Fischer, bankers and entrepreneurs, the Kentucky School Boards Association and the Kentucky Association of Counties. This isn't just about the horse industry anymore, said Kentucky Wins co-chairman C. Edward Glasscock, a Louisville lawyer and horse racing enthusiast.
"We're in desperate need of new revenue in this state," Glasscock said. "I think the timing for this is good. I don't think it could be any better."
Like casino gambling, felon voting is another perennial loser in Frankfort that might have a better shot this time.
Most states restore voting rights to felons once they complete their sentences. Not Kentucky. Unless the governor issues a partial pardon, a felon in Kentucky is permanently disenfranchised from voting or holding office. The ACLU of Kentucky, which lobbies for felon voting rights, estimates that more than 180,000 Kentuckians are now barred from the polls, including one in four black adults.
Every winter, Rep. Jesse Crenshaw, D-Lexington, files a proposed constitutional amendment that would allow the restoration of voting rights to felons convicted of nonviolent and nonsexual crimes. Every winter, it dies in the Republican-led Senate.
Now, however, felon voting has a new champion: Republican U.S. Sen. Rand Paul, who is influential among Kentucky conservatives, including those in the state Senate. Speaking to largely black audiences, Paul criticizes the War on Drugs for locking up a disproportionate number of black youths and taking away their constitutional rights.
"I think particularly for nonviolent drug crimes, where people made a youthful mistake, I think they ought to get their rights back," Paul said in a Louisville speech last September.
Crenshaw declined to discuss Paul's position but said, "I hope the members of the Senate see fit to pass it and let the voters decide."
In 2013, female legislative staffers filed an ethics complaint accusing Rep. John Arnold Jr., D-Sturgis, of sexual harassment. Arnold resigned while protesting his innocence. He is scheduled to face the Legislative Ethics Commission in February to determine whether he broke the law. A lawsuit against him also is pending.
That case mushroomed into a larger controversy about lawmakers' behavior at the Capitol. First came a retaliation suit against Rep. Will Coursey, D-Symsonia, by an aide who said Coursey inappropriately pursued an intern, which he denies.
Then Robert Sherman resigned as director of the Legislative Research Commission amid criticism that he failed to act on hostile workplace complaints.
Finally, Kentucky State Police opened an investigation into documents that Sherman shredded at the Capitol during an after-hours visit following his resignation.
The fallout from the investigations could make House Democratic leaders squirm. They worry that a scandal might cost them control of the chamber in the November elections. They already lost Arnold's seat to a Republican in a Dec. 10 special election. If the GOP claims just five more, it will run the 100-seat House for the first time in nearly a century.
Over Democrats' protests, the legislature agreed to pay $42,410 to the National Conference of State Legislatures to audit the LRC's operations and find Sherman's replacement. Also, two lawmakers have pre-filed a bill requiring members of the General Assembly to undergo sexual harassment awareness training.
"I'm disappointed and embarrassed," said Rep. Robert Benvenuti, R-Lexington.
Benvenuti was a member of a special House committee that was supposed to investigate Arnold's conduct but was instead forced by its Democratic majority to disband without taking any action.
"There are children reading about this and hearing about it on television and the radio. We go to Frankfort after we tell people we're going to serve them and look out for their interests, and I think they're entitled to expect better from us," Benvenuti said.
The General Assembly passed laws in recent years to limit access to two major sources of drug abuse: prescription painkillers and methamphetamines.
Addicts started turning elsewhere for their fixes — to heroin, a popular street drug of the 1970s. Heroin-related overdose deaths in Kentucky jumped from 22 in 2011 to 143 in 2012, and they were on track to reach 174 by the end of 2013, according to the state Office of Drug Control Policy. Until 2010, Kentucky saw an average of five heroin-related fatalities per year.
Lawmakers softened penalties for some drug crimes in favor of addiction treatment when the General Assembly enacted a 2011 reform package to reduce prison crowding. Because of the rise in heroin overdoses, the 2014 session will see a small push in the other direction, to stiffen penalties for that drug and other opiates.
Sen. Katie Stine, R-Southgate, said she will sponsor a bill that would help state prosecutors pursue criminal homicide charges against heroin traffickers whose customers die from an overdose. It also would help drug addicts get better access to treatment and hit traffickers with longer mandatory prison sentences.
Last year, a previous version of Stine's heroin bill died in the House as criminal defense lawyers lobbied against it. But her reworked bill has bipartisan support from House Judiciary Chairman John Tilley, D-Hopkinsville, and Democratic Attorney General Jack Conway.
Without legislative action, 83 percent of Kentucky's 119 public library systems could lose much of their revenue due to lawsuits successfully challenging their right to increase tax rates.
The suits affect library boards established under Chapter 173 of the Kentucky Revised Statutes, which requires voters to approve any change in tax rates. For years, as advised by the Kentucky Department of Libraries and Archives, the library boards followed a separate law, House Bill 44, passed in 1979, that allows taxing districts to raise tax rates up to 4 percent annually without voter approval.
In 2012, Northern Kentucky taxpayers noticed the difference between the two laws. They separately sued the Campbell and Kenton county library boards. The suits allege that HB 44 is irrelevant for the libraries, so tax increases enacted since 1979 have been illegal because voters were not asked to approve them. The suits demand a reduction in local library tax rates to their much lower 1978 levels.
Circuit judges sided with the taxpayers last spring. The cases are before the Kentucky Court of Appeals for review. Other challenges are being prepared against libraries around the state. (The Lexington Public Library is exempt from this challenge because it's not a taxing agency. It gets a fixed share of local property taxes raised by the Lexington-Fayette Urban County Government.)
As one example of what might follow, Campbell County's library is looking at a potential 56 percent cut to its $4.6 million budget, library director JC Morgan told the Cincinnati Enquirer in November.
"We would retain some level of services, but the impact would be tremendous," Morgan told the newspaper. "Branches would close, our staff would be cut in half and some key services, such as children's outreach, would have to be cut."
Briefing lawmakers ahead of the 2014 session, legislative aides said the General Assembly could wade into the fight and clarify the taxing authority of library boards. It could make library boards an elected position from this point forward and require future tax increases to be subject to voter approval. Or it could do nothing and defer to the courts.
Speaking of taxes, some Kentucky cities and counties want the power to levy a local option sales tax on top of the state's 6 percent sales tax.
Unlike most states, Kentucky doesn't let local governments levy sales taxes. To change that, three Democratic senators from the Louisville area sponsored a proposed constitutional amendment in 2013 that, if passed, would have allowed local governments to add a 1 percent sales tax to fund specific projects if local voters approved. When the projects were finished, the local tax would expire.
The bill died without a committee hearing. Lawmakers said they worried that communities could raise taxes so high that they become unattractive places to live and do business.
But Lexington Mayor Jim Gray, the Kentucky League of Cities and the Kentucky Association of Counties, among others, continue to lobby for a local option sales tax, so the debate is expected to resurface this year. (Last fall, Gray said he would not use such funding on the redesign of Rupp Arena and the Lexington Convention Center, but other urban projects might be a good match.)
In May 2013, Williams Co. and Boardwalk Pipeline Partners proposed building a natural gas liquids pipeline through 13 Kentucky counties. The underground line would carry natural gas liquids from the northeastern United States to an existing connection in Kentucky that runs to the Gulf of Mexico.
People who live along the announced route, including many in Central Kentucky, are concerned about the risk of explosions or leaks that could pollute their underground water supply.
They're also upset that the companies behind the pipeline claim the right of eminent domain, the power of a sovereign state to condemn and seize private land for public use in exchange for fair compensation.
In legal opinions, the attorney general and lawyers for the state Energy and Environment Cabinet rejected the companies' claim that they can use eminent domain to acquire land for the pipeline.
But there is pressure on lawmakers by pipeline opponents to rewrite Kentucky's eminent domain law so that no private company could use it, at least not without some state oversight. Several lawmakers have pre-filed just such a bill.
Pipeline opponents also are urging the General Assembly to create oversight for natural gas liquids, either through the Public Service Commission, which regulates utilities, or a through board established by the legislature in 2002 to review proposals for unregulated power plants and transmission lines.
Neither the state nor federal governments has much regulatory authority over natural gas liquid pipelines, which are becoming more common as natural gas drilling increases nationally. Because the pipelines are not a public utility and they don't carry oil or natural gas — just the byproducts of gas, to be sold elsewhere — they mostly slip between the government bureaucracies meant to protect public safety and monitor potentially explosive infrastructure.
House Speaker Greg Stumbo, D-Prestonsburg: The boss of the House, Stumbo has sat in the chamber since 1980 except for a four-year stint as the attorney general who got Republican Gov. Ernie Fletcher indicted.
House Majority Floor Leader Rocky Adkins, D-Sandy Hook: Stumbo's man on the House floor and fellow Eastern Kentuckian, Adkins helps control the flow of legislation.
House Minority Leader Jeff Hoover, R-Jamestown: Hoover wants to flip the House to Republican control in November. The GOP now holds 46 of 100 seats.
House budget chairman Rick Rand, D-Bedford: The House gets first crack at rewriting Gov. Steve Beshear's proposed two-year state budget, with Rand's committee in charge.
Senate President Robert Stivers, R-Manchester: Stivers won credit for making the Senate run more smoothly last year when he replaced the often combative David Williams as president.
Senate Majority Floor Leader Damon Thayer, R-Georgetown: Stivers' No. 2 is mentioned as a potential candidate for lieutenant governor in 2015.
Senate Minority Leader R.J. Palmer, D-Winchester: Democrats hold only 14 of the Senate's 38 seats, so Palmer's caucus has little influence.
Senate budget chairman Bob Leeper, I-Paducah: Leeper, the legislature's only independent, is stepping down at the end of 2014 after helping to craft his last state budget.