Budget thoughts, part 2

It has been a while since part 1, but here are some more thoughts, mainly about revenue.

The budget we passed was quite lean, due to lower revenues. There was a bill passed to increase taxes by raising the cigarette tax, along with several other taxes. It passed the House 50-45, but never received a hearing in the Senate.

There were mixed feeling in the district about the cigarette tax. Most calls I received were against it. However, the was some real support for it also.

I voted against the tax increase, and here is why. There are many methods of either increasing revenue or saving money that can be implemented. These should be addressed before we look at raising taxes. These options include:

Repealing the prevailing wage law. I have talked length about this issue on this blog. We are looking at savings of $250-500 million per biennium.

Expanded gaming. This need no explanation, as it has been talked about plenty. Estimated revenue: $600 million to 1.2 billion per biennium.

Allowing wine to be sold in grocery stores. Currently, you can't buy wine in grocery stores. I don't understand why. Estimated revenue: $20-25 million per biennium.

You may not agree with all these options. Good people disagree on these issues and that is OK. But I feel that these need to be given the chance to pass before we look at raising taxes. My suggestions would generate between $870 million to $1.725 billion per biennium. The low end would mitigate the cuts in the budget, the high end would provided additional revenue needed for human services, education, and possibly even tax cuts that would spur economic development or eliminating the state portion of the car tax.

Budget thoughts, part 1

I label this part 1 as I figure I will have other thoughts to share as we go along.

First, this is no way to run a government. This is not a reflection on the people who negotiate the budget or the staff who put it together. But when a system exists that drops a 250 page document on your desk and a 30 page summary to digest about 6 hours before you have to vote on it, there is something fundamentally wrong with the system.

The good news is that for the first time in a while the state is doing a better job living within its means. The projects in the original budget document were at a minimum. We lower our overall debt ratio. We make progress toward fulling funding the state portion of the retirement system for this biennium. NKU now has the authority to build their dorm. Plus we have a budget, which is better than leaving without one and have to spend more taxpayer dollars coming back to finish up.

The bad news is that there are many cuts. The is no increase in the SEEK formula, but it holds steady. A 3% cut to higher education. Cuts to other educational services like Safe Schools. Cuts to Human Services. No adolescent treatment center for NKY.

More thought to come.....

Budget debate

I am blogging here live from the House floor. The discussion of the budget has begun. In a strange twist, the bill is being handled by Rep. Webb, because the sponsor of the budget and the A & R Chair, Rep. Moberly, is apparently going to speak against the budget. If you are near a TV, turn it on. It should be interesting.

Since we will be here until midnight tonight, I will try to blog on the budget in general tomorrow. I can say that this is an austere budget.

budget in trouble?

OK, right now the budget is basically a series of rumors for those of us not in the budget negotiations. Even though no one has technically seen the budget, right now it does not seem to have the votes to pass the House.

Now there are strong rumors that an alternative budget proposal is being put together right now.

All this needs to be decided on by midnight tomorrow night to be veto proof.

What a mess.

session cancelled today

Leaders have cancelled session today and moved it to Wednesday. This was done so that budget negotiations can continue throughout the day. The hope of the leaders is to have a budget by midnight so we can vote on it by midnight Wednesday. From what I can gather, the chances of a budget coming together in time is getting slim.

I have to say that having to vote on a budget I haven't seen is not an appetizing one to me.

budget news

It is a little frustrating at this point. Apparently the negotiating is still going on. You can basically learn what I know at the Herald Leader or Courier Journal blogs.

What happens if there is no budget?

I have had a request from a reader wanting to know what happens if there is no budget. First, I appreciate the question and request. What follows is an explanation of the process and then what happens if there is no budget.

First, the Governor submits his suggested budget. That budget is then introduced as a bill. This year that was HB 406. It is used as a starting point. Then House passes their version of the budget, which may or may not look anything like the Governor's budget. Then the budget goes to the Senate, who then passes their version. It may or may not look anything like the House or Governor's version. When the House passes a bill and the Senate passes it with changes made, it comes back to the House for either concurrence or non-concurrence. On budget bills, the House historically has always not concurred. Therefore, the bill goes to a conference committee. This is a committee made up of members of both bodies that try to work out the differences. For budget bills, it is always made up of the leaders of both parties in each chamber. They then will either successfully work out an agreement, it will be passed by both chambers and signed by the Governor, or we will go home without a budget.

So now we get to the question at hand, what happens if we leave without a budget? Well, the budget runs until June 30. So if we leave without a budget, a special session would need to be called between the end of this session and June 30th if we are to have a new one in time. Hopefully, negotiations would continue immediately so we do not get to June 30 without a new budget.

What happens if June 30th comes and goes and there is no new budget? As I understand a recent judicial ruling, the Governor could operate only "essential" government services. Everything else would have to be cut. Now the definition of essential may be in question. You have to imagine that the state prisons and state police are essential. We have to keep the court system going. You would imagine that the state parks, new roads, filling pot holes would not be essential. The question becomes from a purely legal perspective, is education essential? How about medicaid? I truly hope it does not come down to that, and I don't think it will.

budget issues

Today there was some heated back and forth between Senate President David Williams and House budget chairman Harry Moberly. Details can be found here. Why is this important? Because it probably increases the chances that there will be no budget. Hopefully that is not the case. Both these men are skilled legislators who can put issues like this aside and work toward a good budget.

Budget and Taxes

Wednesday we spent 5 hours in session, mostly dealing with increased taxes and the budget.

HB 262 raised taxes on cigarettes, janitorial services, chartered flights (including hot air ballons), and other services. It passed 50-45. I voted no. There are plenty of things we can do first before we raise taxes, like repeal the prevailing wage.

Then we approved the House version of the budget. I got my copy in the morning Wednesday, and read it all morning. All 312 pages. There is a lot not to like in it. However, there is plenty to like also. Therefore I voted for it to keep the process going. The final vote will come later after the conference committee.

Budget week

Sounds like the House budget will pass through committee on Tuesday, and a vote on the House floor on Wednesday. A few thoughts:

First, I generally like to read bills before they come up for a vote. Given that the Governor's proposed budget is 120 pages, and I expect the committee substitute to be longer, it may be difficult to accomplish this. Therefore I may vote against it just based on the fact that I don't have time to read it. I assume we (by we I mean House Republicans) will get briefed on it before we have to vote on it.

Next, this is just the end of the second quarter, if you will. The Governor's proposal was the first quarter, the House budget is the second. The Senate will then produce their version, which is the third. Then a conference committee will work out the differences, the final quarter.

Lastly, Wednesday will be day 44 of a 60 day session. This means that the Senate will have 14 legislative days to put together their budget, and then have a conference committee, come to an agreement, and get it passed by both houses. Translation - don't be surprised if we get to the end of the session with no budget. Hopefully that does not happen. But given the time situation, I would not be surprised. Usually, the Senate would have had the budget by last week, from what I am told.

28 days in, 32 to go

This is my first term. So I am always asking others who have been around for a while how this session compares to other sessions. Last year everyone said that it was the "weirdest" session they had ever been a part of. The Speaker of the House was running for Governor, our Republican leader was running on a ticket against the sitting Republican Governor, a member of the Senate was running for Lt. Governor. Therefore, not much happened.

Now this year, everyone tells me they can't remember a "slower" session. We have a new Governor who just released his casino plan. There is no money to spend, so that slows up the process and eliminates many bills from consideration. The House is about to change the Governors casino plan. There is talk of increased taxes. Hopefully there will be a pension plan from the Governor this week. But this leaves about 30 days to put together a budget, decide on casinos, fix the pension system, and do any number of other things. I look forward to seeing whether or not this continues to be a slow session.

Governor's budget address

Here are some thoughts and highlights from the Governor's budget address given Tuesday night:

The Governor indicated that there would be no money taken away from the SEEK formula for K-12. That is something I can support. However, according to Mark Hebert from WHAS 11, that is not entirely true.

Regarding postsecondary education, the Governor cut higher ed about 9%. He said need based scholarship money would stay the same, but KEES money would be cut back.

On health care, said that this would have the largest amount of new funding. Also supported bonds for the Glasgow Nursing Home. I suppose this means that the state is in the nursing home business. That should not surprise me. But it does beg the question, why are we in that business. Maybe in these tight times we should examine the possiblity of getting out of it.

No cuts in Agriculture and Coal Severance programs.

He uses most of the rainy day fund.

My favorite part, he cut in half the reliance on one time money, something the state needs to get away from.

But in the end, this just a starting point. The House will now create their version, and the Senate will do the same.

Budget address

Tonight is the Governor's budget address. You can watch it on KET at 7:00.

I am looking forward to seeing what the Governor recommends regarding getting out of the deficit that is looming. Rumor is that everyone is going to get the ax.

One disappointment is that all House Republicans were supposed to get briefed on the speech at 3:00 today, but the "rank and file" have been essentially kicked out, and only our leadership will be briefed. Sad, but the way things run down here.

Why are we in this budget situation?

Generally speaking I am going to try to avoid just putting up links, but this story explains in part why we are facing the deficit we are today.

Is the budget situation a crisis or something less?

That is the question I have been trying to determine.

There are two issues, first the current Fiscal Year situation, and next years budget problem.

First, the current year. We are told that there is a $434 million shortfall for this Fiscal Year. That is broken down as follows:

$130 million less than budgeted,
$138 million in higher authorized spending
$166 million in "additional spending needs."

Now, as far as the $130 million less than budgeted, that I take at face value. However, for the entire 2 year budget, we are projected to take in $70 million more than anticipated. So for the overall budget revenue is not a problem. In fact, money remaining from the last Fiscal Year is being used to make up some of this years deficit.

My concern is with the categorization of $166 million in additional spending needs as part of a deficit. My example is, if I request $1 million dollars for something, does that push the deficit up another million? Just because something is identified as additional spending needs, doesn't make it part of a deficit. Now, the $166 million request includes $112 million for Medicaid spending and $22 million for Corrections. No one wants people to go without health care or see prisoners let out. However, requests should not just be added to a deficit automatically.

The next issue is the budget for future years. I have written about this previously, that next years projected revenue is $500 million less than this years budgeted spending. This is a problem, but can be solved in large part, if not completely, by repealing the prevailing wage law.

Monday night is the State of the Commonwealth address. I look forward to hearing the Governors plan.

How else can we solve budget problems?

Gov. Beshear has implemented a 3% across the board cut for much of state government in order to balance the budget. Something has to be done and he has had to make some difficult decisions already. Tough decisions come with the lofty position he now holds and I am glad that he has shown the backbone to make some.

But what else can be done. As I stated in an earlier post, repealing the prevailing wage law would help. Take NKU for instance. NKU has to cut $1.6 million in this budget year. This on the heels of building the Bank of Kentucky Center, a $64 million project. Because of the prevailing wage law, the project cost about $4-6 million more than it would have otherwise. That is our tax money being spent on inflated salaries.

So what could we do with $4-6 million dollars? Well, that would cover the shortfall for NKU, as well as Morehead State University, and possibly Western Kentucky University. All from one project. Imagine the money that could be saved if we eliminated prevailing wage from all public projects.

More budget bad news

In the last few days, Governor Beshear has announced that the deficit for the current fiscal year is now about $400 million. That is a big hill to climb and the Gov. is considering options that include a 3% cut across the board, with the exception of K-12 education.

Budget cuts are probably the only way out of this deficit. I have 2 other suggestions for the Governor that I hope he will consider.

1. Hiring freeze. News reports indicate that this is being considered. I applaud that. Say what you will about Governor Fletcher, but he did cut back on state employees by about 2000, resulting in large savings to the taxpayers. Furthermore, state services have not suffered. I hope we do not backslide on this.

2. Repeal the prevailing wage. I doubt the Governor can do this on his own, but if he can he should consider it. If he can't he should push for it in the legislature, even if it is temporary. This would result in hundreds of millions of dollars a year in savings on capital projects for Kentucky citizens.

The prevailing wage, in short, is a system where state government mandates that union scale wages be paid on public projects such as school buildings. This policy artificially inflates the costs of public projects by anywhere from 5-25%, depending on the project and who you talk to about the effect. This policy benefits labor unions and those who work on these projects. The taxpayers as a whole are the losers. I hope the Governor will consider it.

Budget woes

As we prepare for a new session in a few weeks, the budget situation will be at the top of the list of issues. The House Republicans had the chance to get a briefing last week on the financial situation of the State.

First of all, as has been widely reported, there is a deficit for this Fiscal Year (which ends June 30, 2008) of around $100 million. That will have to be dealt with by Governor Beshear.

The larger problem we need to tackle is the next budget. The current Fiscal Year budget has expenditures of about $9.4 billion. The revenue forecast for the next 2 Fiscal Years are $8.8 billion and $9.2 billion. So we cannot even fund a continuation budget for the next 2 years if revenue forecasts hold up.

Hopefully there will be a real effort to scale back on the unnecessary projects and focus on fiscal discipline.