Budget Talks Deadlock | Final Legislative Day April 12
On the 59th day of the 60-day session, negotiations between House and Senate leaders ended without an agreement on the state's next two-year, executive branch budget (HB 303). The good news is that both House Democrats and Senate Republicans recognize the urgency for addressing Kentucky's looming unfunded liability for the state pension plans. However, the basic differences in the proposals have kept legislators from reaching a compromise during the conference committee process. Overall, Senate Republicans have a more conservative, structurally balanced spending plan that includes cuts to most state agencies in order to make larger contributions to the state's financially troubled pension funds. On the other hand, the House Democrats' proposal relies on the use of one-time, non-reoccurring money in order to avoid cuts to important policy areas like higher education.
The major sticking points are: 1) the amount of funding - beyond actuarial required contributions - to contribute to pension funds; and 2) restoration of cuts to higher education. During negotiations, it seemed both sides were ready to compromise on restoring funding to K-12 programs and in providing some level of funding for the Governor's proposed "permanent fund" to address future pension issues.
Senate leaders supported the Governor's proposed 9 percent cuts to higher education, but leadership offered a counter proposal to House leaders that lessened the cuts to 4.5 percent over the biennium. House leaders rejected this proposal. After the breakdown in budget talks, the Governor enacted an Executive Order calling for immediate 4.5 percent cuts to the state's public universities and community and technical colleges for the current year. Attorney General Andy Beshear held a press conference following this action challenging the Governor's authority to impose current year cuts and threatening a lawsuit if the Governor doesn't rescind the order by this Friday.
Although many Capitol observers predict the session may end without a budget, the reality is that it isn't over until it's over. Budget negotiations are expected to continue informally over the veto recess period. Lawmakers will return on Tuesday, April 12, for the final legislative day of the session.
Advocates for the renovation and expansion of the Lexington Convention Center remain hopeful funding for the project will be part of a budget agreement. Both the Governor's and House budget proposals provided $60 million in state funds for the project. The Senate version of the budget eliminated this funding. The House also passed legislation (HB 441) critical to the local financing for the project. The bill provides authorization to the Lexington-Fayette Urban County Council to increase the transient room tax in Fayette County an additional 2.5 cents for the local financing part of the $250 million project. This legislation continues to await action by the Senate.
Transportation Road Plan:
This past week, the Senate passed an amended version of HB 305 - the state's two-year Road Plan. The amended proposal includes a Senate Committee Substitute that changes the bill to more closely resemble the Governor's transportation project proposal. This bill awaits concurrence by the House. This legislation prioritizes $4.5 billion funding for 1,239 total projects for Kentucky's roads and bridges. The Senate also passed HB 304, which authorizes the operating funds for Transportation Cabinet. This bill awaits enrollment.
Felony expungement legislation passed out of the Senate, received concurrence in the House and now heads to the Governor for signature. The amended HB 40 represents a compromise between the House and Senate proposals. The bill creates a two-step process for expungement that requires a judge to vacate the felony before it can be expunged. It also limits the number of eligible felonies and includes a 5-year waiting period. In January, Commerce Lexington joined Governor Bevin, the Kentucky Chamber of Commerce and other business groups in support of this issue to help remove barriers to the workforce for more than 70,000 individuals in Kentucky.
Alcohol Tourism Modernization:
SB 11, referred to as omnibus alcohol modernization legislation, has passed the Senate and House, and now heads to the Governor for signature. The bill, supported by the Kentucky Distillers Association, makes important changes to the state's alcohol laws to promote tourism, increase the competitiveness of Kentucky's booming bourbon industry and llevels the playing field for beer and wine.
Workers Compensation Taskforce:
Last week, a Senate Committee passed HCR 185 that would establish a task force made up of equal parts labor and business to look at the workers' compensation system. The resolution is awaiting a vote by the full Senate.
With only one legislative day remaining, other priority issues for the chamber such as local option sales tax (HB 2/HB 374) and workforce development reforms (HB 438| HCR 97 | SCR 75), appear less likely for passage this session. Commerce Lexington will continue to monitor issues impacting the business community and provide a comprehensive update on legislative action upon conclusion of the session on April 12.
Click to view a full listing of the legislation Commerce Lexington is tracking this session
For questions or concerns about specific legislation, contact Andi Johnson, Commerce Lexington Inc.'s vice president of public policy, at (859) 226-1614.