FRANKFORT — Top Kentucky lawmakers emerged from a closed room about 5:30 a.m. Sunday to announce they had reached a deal on a $20.3 billion, two-year state budget that does not provide major money for a proposed renovation of Rupp Arena.
"I think it's responsible. It makes a pretty significant and strong statement toward education," Senate President Robert Stivers, R-Manchester, told reporters after the conclusion of an 18-hour negotiating session between House and Senate leaders.
One high-profile casualty was the $65 million in bonds Gov. Steve Beshear proposed in January for the renovation of Rupp Arena and the attached convention center in Lexington. Instead, the state budget will include "a small sum," to be matched with local funds, so Lexington can move ahead with more planning, engineering and programming on the project, Stivers said.
If Lexington publicly produces a formal financing plan for the Rupp Arena renovation and a signed lease agreement with the University of Kentucky, which uses the venue for its men's basketball games, then it can return for more money during the 2015 legislative session, Stivers said.
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"There are mechanisms in place for it to go forward," he said.
Some lawmakers on the budget conference committee said they were unimpressed by a personal appeal Lexington Mayor Jim Gray made for Rupp Arena funding on Saturday. Gray said UK had not signed a future lease deal for the arena, and he said he could not publicly disclose the proposed terms of UK's next lease or his own plan to pay for the renovation project.
State Rep. Kelly Flood, D-Lexington, said she thought Gray did the best he could Saturday fielding queries from lawmakers.
"There are some very good questions about the plan that right now the mayor simply cannot answer," Flood said Sunday afternoon. "I sense right now that the Senate really does want to keep the project moving forward, but they want more assurances about how the financing would work. If he (Gray) can come back, even in our next session (in 2015), having rolled out a formal financial plan, there could be some more help then. I don't think it would have to wait until our next budget in 2016."
Gray had not seen details of the budget agreement by early Sunday afternoon, said spokeswoman Susan Straub.
"We need to see it and make sure we understand it before we comment on it," Straub said.
Gray also has asked lawmakers to let Lexington raise its hotel and motel tax from 6 percent to 8.5 percent, which would yield about $3.5 million a year for the $328 million reinvention of Rupp. That proposal, which is not part of the state budget, appears to face an uphill battle in the Senate during the final days of this year's legislative session.
House and Senate leaders, who spent the night cloistered in a committee room of the Capitol Annex, reached a consensus on hundreds of differences in their proposed budgets. Most were relatively minor, but some involved huge sums or made significant changes to state policy, including:
■ A 1.5 percent cut to the operational budgets of the state's universities, which was less than the 2.5 percent cut that Beshear proposed in January. Most universities would get to pick their top priority building projects, to be paid for by general fund bonds and agency bonds. However, UK would be granted two agency bond projects, a student center and UK hospital, the lawmakers said.
■ Community and technical colleges also would see a 1.5 percent cut in their operational budgets. They would be approved to go ahead with their wish lists of campus building projects, but under restrictive Senate language that required student fees and local donations at each campus to pay for that campus' projects. The House had offered to let the community colleges pool their fundraising system wide to pay for projects.
■ Teacher pay raises would be required of school districts, not merely recommended, although the schedule for raises would be flipped, with a 1 percent increase in fiscal year 2015 and a 2 percent increase in fiscal year 2016. School districts would get technology money to expand bandwidth, as proposed by the Senate, rather than the House's plan to provide bond money to purchase computers.
■ In a victory for the coal industry, which lobbied for regulatory relief, state inspectors would have to visit each active underground mine in Kentucky just four times a year, rather than six, as the law now requires. Further, the Kentucky Office of Mine Safety and Licensing would see a significant cut to its budget, although Stivers said Sunday that he did not have the sum available.
■ The final budget would not include language the House had wanted to protect many of the state's public library systems from a growing number of lawsuits challenging the way they have raised tax revenue since the 1970s. Ultimately, if the suits continue to be successful, the libraries could have to forfeit much of their revenue. "The lawsuits would have to go forward," said House Speaker Greg Stumbo, D-Prestonsburg.
■ Language that Stumbo wanted would remain in the final budget to instruct the state Corrections Department to transfer at least 100 elderly inmates to a secured, privately owned care facility at a former prison, if such a facility opens. Stumbo has said one likely location for the care facility would be the shuttered prison in Floyd County, his district, owned by Corrections Corp. of America.
■ The Senate plan to tax "instant racing," or electronic gambling on past races at horse racetracks, prevailed, setting a flat 1.5 percent tax as of April 1.
■ The Senate's proposal to prohibit state funds from being used to implement the federal Affordable Care Act also survived, although it's a symbolic victory for Republicans who oppose "Obamacare." The Beshear administration has said it's using only federal money to implement the law during the next two fiscal years.
■ For young children of low-income parents, the budget would fund an $18 million expansion of preschool proposed by Beshear, but not until the second year of the budget. Lawmakers also agreed to adopt the Senate's plan for reversing cuts made last year to child-care subsidies for low-income working parents, providing benefits to families with incomes of up to 125 percent of the poverty level in 2015 and less than 150 percent in 2016. Beshear and the House had proposed raising the threshold to 150 percent in the first year.
The compromise budget prioritizes the welfare of children in many ways, said Terry Brooks, executive director of Kentucky Youth Advocates.
"This budget will be a force in helping Kentucky's hard-working families and local economies begin to rebound" from the cuts to child-care subsidies made by Beshear's administration last year, Brooks said in a written statement.
"Parents can work; children will be cared for in safe and caring places; the very vital industry of child care can begin to get back on its feet; and — through higher employment and local prosperity — the overall state budget will win," he said.
Overall, the budget would have less debt than Beshear proposed, and it would transfer fewer funds from the accounts of various state agencies, the lawmakers said. But the list of projects and total debt levels still are being finalized, they said.
The full House and Senate are expected to vote on the compromise budget Monday evening.
Lawmakers said they still have to negotiate the more than $3 billion, two-year state road plan and a 1.5-cent-a-gallon gas tax increase the House wants. Those talks might happen next week after the legislature begins its two-week formal break, they said.