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House panel OKs $17.5B budget

FRANKFORT — A House panel approved a $17.5 billion, two-year state budget Tuesday night that includes $2.2 billion in borrowing for state projects, driving the state's debt to record levels.

The proposal also cuts spending on education at all levels in an effort to erase a more than $1 billion gap between projected revenues and current spending levels.

State universities face a 1.5 percent trim in the first year of the budget, which begins July 1, and a 1 percent cut in the second year. They'll also have to come up with about $63 million to operate and maintain buildings that will open over the next two years.

The state's adult education programs will take a 3 percent cut under the House proposal. That's roughly $1.3 million over two years out of the program's $22.5 million budget.

The main funding formula for K-12 education was spared, but the spending plan would save $68 million over two years by shortening the school year by two days.

The House Appropriations and Revenue Committee voted 19-5 to pass the executive branch budget. House Bill 290 will likely go to the full House on Wednesday.

The plan includes borrowing about $1.3 billion to replace or renovate some of the state's worst schools and for water and sewer projects. Another $412 million will be borrowed for state road projects and an additional $485 million will be borrowed by state agencies that rely on other funding sources.

About 7.43 percent of the state's revenue will be needed to make payments on the debt — an all-time high. The state typically keeps debt payments at about 6 percent of revenue to please bond rating companies.

House leaders defended the debt, noting interest rates are at historic lows and construction companies are competing heavily for work.

House budget chairman Rick Rand, D-Bedford, noted that Gov. Steve Beshear's proposed budget would have pushed the state's debt-to-revenue ratio to 7.66 percent. Beshear had proposed a major construction project at each university, but the House chose to spend nearly $700 million to replace more than 60 aging schools in Democratic House members' districts.

House Speaker Greg Stumbo, D-Prestonsburg, said the capital projects — dubbed "Kentucky jobs for Kentucky families" — could create 25,000 jobs over the next several years.

But Rep. Jim Wayne, D-Louisville, who voted against the executive branch budget, said he was concerned that the state was digging deeper into debt during a national recession.

Wayne called the possible historic high debt rate "appalling." "So I don't think it's a responsible thing to vote for this," he said.

All but one of the 35 House Republicans voted against an earlier bill that contained more than $371 million in new revenue to help balance the budget. The proposed budget contains no school construction projects in their districts.

The House plan targets some of the schools that have been designated as Category Four and Category Five schools by the Kentucky Department of Education. Those schools are deemed the oldest and most decrepit.

There were no schools in Fayette County in the House's school renovation or replacement plan. Fayette County has no Category Five schools and two Category Four elementary schools. Three schools in Stumbo's home county of Floyd are included in the House project list.

However, Fayette County did receive almost $10 million for water and sewer improvements, including $2 million for the Town Branch waste water treatment plant.

The House plan also includes $16 million to renovate the Reynolds Building at the University of Kentucky. The Reynolds Building houses UK's art department and was one of the few university projects funded in the House budget.

The budget also allows the Lexington-Fayette Urban County Government to borrow about $129 million to replace Eastern State Hospital in Lexington — one of the oldest psychiatric hospitals in the nation. Ultimately, the state will repay the debt for the new hospital.

Other highlights of the House budget include:

■ Cuts of about 2 percent to many state agencies;

■ Tweaks to the state's health insurance plan to generate about $150 million in savings;

■ An assumption that the federal government will provide more than $250 million in additional stimulus money for the Medicaid program;

■ No pay raises for teachers or state workers, but reduces the number of political appointees in the executive branch by about 125;

■ Reducing spending on state contracts with private companies by $112 million over two years.

The House did restore funding to some areas of government that Beshear had proposed to slash. For example, Kentucky Educational Television received $2 million more than Beshear proposed over the biennium. KET's budget has shrunk by more than 30 percent over the past two years.

"This will bring them back to where they were in 1991," said Rep. Tommy Thompson, D-Owensboro, of KET's total budget.

Kentucky's School for the Blind and School for the Deaf will also receive a bump of about $343,000 over two years. The Governor's Scholars Program will also see an increase of about $288,000 over two years.

In one of the state's largest agencies — the Cabinet for Health and Family Services — some money will be restored to improve security for social workers and to provide more meals for the elderly.

The House wants to redirect $37 million of unallocated money within the Cabinet for Health and Family Services to beef up a variety of programs. Specifically, the proposal would put $10 million back into the Department for Community Based Services, which includes adult and child protection programs.

Rep. Jimmie Lee, D-Elizabethtown, said much of the $10 million will go toward improving security for social workers through updating office security, ensuring that all social workers have working cell phones and improving training.

Hank Cecil, a legislative agent and spokesman for the National Association of Social Workers, said social workers were ecstatic that they might finally get money that was promised two years ago to beef up safety and security.

"We're delighted," Cecil said. "We are hoping that the Senate will keep that money in the budget."

About $2 million will go to the Department for Aging and Independent Services. The bulk of that money would fund Meals on Wheels, a service that provides hot meals to seniors in their homes. The program has a waiting list with more than 5,200 seniors. The $2 million will not erase the entire waiting list, Lee said, but it will reduce it.

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