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Beshear criticizes budget bill

FRANKFORT — The House's version of the state budget would stymie Kentucky's efforts to lure and keep companies in the state over the next two years, Gov. Steve Beshear warned Friday.

To help fund a massive school construction program, the bill would remove the Cabinet for Economic Development's ability to borrow more than $60 million to fund a key economic development program.

"We have grave concerns with any budget that diminishes our efforts to attract and maintain jobs for Kentuckians in the midst of the worst recession in our lifetimes," Beshear said in a statement to the Herald-Leader.

As part of its $17.5 billion, two-year budget, House leaders are proposing borrowing nearly $2.2 billion for a host of capital projects that they say could generate up to 25,000 jobs. About $685 million of that amount would be used to remodel or replace 65 schools, mostly in Democratic districts.

The House passed the budget Wednesday. It now heads to the Senate, where significant changes are likely.

House Speaker Greg Stumbo, D-Prestonsburg, defended the move Friday, saying the Cabinet for Economic Development has not used all of its bonding capacity for economic development projects in past years. And if there is an economic development project that needs additional dollars, Beshear could call the legislature back into session.

"That money has laid there in that pool for the last couple three years. We don't know anything that is on the table at this time that would require that type of additional capacity in the bonding market," Stumbo said. "There has been a great deal of concern about the type of return that the commonwealth is getting on some of these job-creation ventures."

Beshear countered that the cabinet has effectively used its ability to borrow money over the past few years, allowing businesses get the help they need without waiting several months for legislative approval. "Economic development effectively uses its bonding authority to be nimble, flexible and receptive to the specific needs of businesses seeking to add jobs in our state — that ability disappears in the current proposal," Beshear said.

The economic development money is used to fund infrastructure improvements or other capital projects for businesses that want to locate or expand in Kentucky. For example, the Kentucky Economic Development Finance Authority approved in December a $250,000 grant from bond funds to help EQT Corp, a natural gas company, expand its regional headquarters in Pikeville.

Stumbo said leaders also have been concerned that some of the economic development programs run by the cabinet need more scrutiny.

In February, the House passed House Joint Resolution 122, which authorizes the legislature to hire a consulting firm to study how tax incentives are awarded under 15 programs. The resolution is pending before the Senate Economic Development, Tourism and Labor Committee.

Also included in the House budget is a provision that would slash Economic Development Secretary Larry Hayes' salary by more than $120,000 a year. Hayes, who makes $250,000, could make no more than the governor's salary of $127,885.

Beshear has questioned the move, saying that capping the salary of the state's top job creator could limit the pool of future applicants.

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