Gov. Beshear Issues Line-Item Vetoes on Executive Branch Budget

Governor Beshear issued his line item vetoes today of the Executive Branch Budget passed by the General Assembly. The vetoes seemed to fall under two main categories: the additional $80 million in budget cuts from increased efficiencies and other bills that were passed that impose unfunded mandates on the administration.

You can download a copy of the veto message HERE and the press release is below.

Commonwealth of Kentucky Office of the Governor
FOR IMMEDIATE RELEASE	Contact:	Kerri Richardson 502.564.2611 502.330.6633 Terry Sebastian 502.564.2611 502.229.6130

Gov. Beshear Issues Line-Item Vetoes on Executive Branch Budget

Governor's budget proposal largely intact; line-item vetoes preserve flexibility in management

FRANKFORT, Ky.  (April 11, 2012) – Today, Governor Steve Beshear issued line-item vetoes on House Bill 265, the state's biennial budget.  Below is his statement regarding the bill and the line-item vetoes:

"This is the most difficult budget I have ever drafted, and it will also be a challenge to implement and manage over the next two years.  I appreciate that the legislature passed my budget with very few changes.  We have worked hard to make wise decisions regarding the use and investment of taxpayer dollars, and the approval of this budget indicates the legislature's support of our strategies. 

This budget funds SEEK, the primary funding formula for K-12 education, at my recommended level.  It maintains funding for Medicaid and corrections, two of the largest budget expenditures. 

Despite the budget's challenges, we are making key investments in our future.  My budget reduces social worker caseloads in the area of child abuse and neglect, funds colon cancer screenings for 4,000 uninsured Kentuckians, funds aggressive substance abuse treatment in Medicaid, and provides funding for an elder abuse registry to protect senior citizens from unscrupulous caretakers.

I remain disappointed that legislators removed funds to expand preschool to more 4-year-olds.  I am convinced that preparing our youngest children for success in school will pay enormous dividends for the future for our state, and I will continue to work to make sure all our children enter school ready to learn.

Unfortunately, the recession's aftermath forced further spending cuts of up to 8.4 percent for many state agencies.  This marks the eleventh time that we have cut programs and services since I took office, with some agencies enduring collective cuts of 30 percent. 

Legislators did make some changes in the budget that inhibit the administration's ability to successfully manage the implementation of the budget.  Lawmakers added $80 million in unspecified reductions over the biennium – on top of the 8.4 percent already mandated for many agencies.  They also passed other bills with financial impacts that are not reflected in the final numbers, which expands the budget gap.

As a result, I am vetoing several provisions of the budget which add new obligations, limit necessary flexibility, and reduce the ability to manage this budget.

Although this is a very challenging budget, this budget does allow us to continue to provide the most critical services while making strategic investments in education and health to position us for the future.

However, this legislature still has work to do.  The biennial Transportation budget and Six-Year Road Plan must be passed on the final day of the session.  By putting off these important votes, lawmakers are endangering the road and bridge maintenance and construction projects scheduled across the state.  Kentucky needs a safe, dependable road system, and that requires a Transportation budget and Road Plan.  No one wants a costly special session, and I am again calling on the legislature to come to an agreement on these bills quickly."

A copy of the veto message is attached.  The Governor has also signed the judicial and legislative branch budgets.

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Follow Governor Beshear on Twitter @Govstevebeshear, read the Governor's personal notes on his blog at http://blog.governor.ky.gov/, and view the Governor's video commentaries at http://www.youtube.com/governorbeshear.

Tax Commission & Monthly Receipts

Tax Reform Commission Meeting

The Governor's Tax Reform Commission held its second meeting today. Gov. Abramson opened the meeting by stating that a decision has not yet been made on the hiring of a consultant for the Tax Reform Commission.  He added that a decision would be made and the hiring would be announced to Commission members via email sometime before the May meeting of the Commission and that he expected the consultant would be present at that meeting. 

Greg Harkenrider began his presentation with a review of similar tax reform efforts since 1983.  He described 15 to 20 such efforts, noting that most took place during or soon after times of recession that strained state tax policy and revenues.  Among the numerous studies mentioned, Harkenrider singled out the 1995 Blueprint for Comprehensive Tax Reform as a well done review with sound policy recommendations that continue to be pertinent today.

You can download a copy of Harkenrider's presentation HERE.

Monthly Receipts Report Released

The General Fund and Road Fund have experienced solid revenue growth through the first three quarters of Fiscal Year 2012 and the March tax receipts were a large part of that. The March receipts report released yesterday by State Budget Director Mary Lassiter showed that the General Fund revenues grew 8.4% and Road Fund revenues grew 6.1% compared to March 2011. 

Three takeaways from the March receipts report:

1. Through three quarters General Fund receipts are exceeding the revenue forecast made by the Consensus Forecasting Group. The CFG had predicted 2.8% growth and actual growth is at 4.3% thus far. However, the fourth quarter of FY 2011 was a very strong period of revenue growth, so receipts will have to be very strong over the next three months to match last year's growth and book additional surplus for FY 2012.

2. Road Fund revenues are up 7.3% year to date and need to increase 0.5% over the next three months to meet the Road Fund revenue forecast of 5.5% growth for FY 2012. The Road Fund is lead by significant growth in motor fuels tax revenue increases.

Download a copy of the press release and March revenue report HERE.

Legislative Update - Day 59 - Recess

Time for Recess

The General Assembly completed Day 59 of 60 for the 2012 Regular Session on Friday night marking the beginning of the Veto Recess. The highlights for the 59th Legislative Day include final passage of the General Fund Budget and SB 3 the anti-meth lab legislation.

It has been several sessions since the General Assembly completed its work on the Executive Branch budget on-time during regular session. The legislature gave final passage to the budget bill this evening, 36-1 in the Senate and 81-7 in the House, sending the bill to the Governor for his consideration. The basic details of the budget are this:

- $19.3 billion budget cuts funding of most state agencies by 8.4 percent. Some areas received lesser cuts like universities at 6.4 percent cuts, and some areas like K-12 education and Medicaid were held at previous year levels.

- No pay raises for teachers or state workers and suspends for two years cost of living increases for state retirees.

- Adds $73 million to the rainy-day fund. Authorizes $390 million of bonded indebtedness, which is $577 million less than the Governor proposed.

The other issue that has dominated the politics of this session and past sessions is SB 3 dealing with restricting access to pseudoephedrine products that are used to manufacture methamphetamine. The final version of the bill decreases limits on purchase of pseudoephedrine products, but doesn't require a prescription. After much compromise between the House and Senate and between regional and partisan factions inside of each Chamber, Senate Bill 3 received final passage today.

Legislators will return on April 12 to finalize their work for the 2012 Session and consider any vetoes. The main items of unfinished business will be the Road Budget and House Bill 4 dealing with Pill Mills.

We will have more next week. 

Legislative Update - Budget Compromise

We Have a Deal...

Legislative Leaders reached a tentative agreement on the state budget around 3:00 a.m. last night. Details are still coming out about what the finished product includes but here are a few notes regarding the budget deal and the schedule for the rest of the 2012 General Assembly session:

- As we have been saying repeatedly over the last month the main theme of this budget would be the level of bonded indebtedness of the state. The Governor included $968 million in his budget, the House reduced that to $552 million, and the Senate version included a further cut in bonded debt to $391 million. We expect based on the conversations last night that the final compromise will be closer to the Senate number if not a few million below that.

- Not surprisingly, this is a very limited budget in terms of projects. The only big ticket items that made it through the compromise last night were: funding for the Horse Park, creation and funds for the coal county scholarship fund, Rupp Arena renovation, and limited funding for the Quality Charity Care Trust contingent on participation by the city of Louisville. 

- The big difference between the House and Senate budgets was that the Senate required the Governor to cut contracts by $100 million over the next two years. The budget compromise reportedly requires $80 million in "efficiencies" not specific to contracts. Its unclear if this would force furloughs, layoffs, or if the Governor may opt to veto that language.

More details will emerge today on the budget.

Schedule & What's Left

At the end of the committee meeting last night the Leadership agreed to meet this morning at 10:00 in the Speaker's Office to finalize 2 items:

1. Any deals needed on other bills related to the budget, like: HB 499 the appropriations/funds source bill for the budget, HB 260 that creates the coal county scholarship fund, HB 50 that deals with bonding, and any others. The Speaker made an appeal for HB 401, his false claims act, last night so it may also be in the mix.

2. The Road Budget. This nor the Road Plan, the actual project list, were part of the discussion the last three days. Once the Leadership agrees this morning on the actual Road Budget, then the conference committee led by Rep. Overly and Sen. Harris would begin to reconcile differences in the House and Senate Road Plans. 

The hope of the Leadership is to have all budgets ready to vote around 3:00 on Friday. They don't have any intention of moving around any of their three final legislative days as of 3:00 a.m. last night. So, the legislature appears to be planning to utilize Day 58 and Day 59 today and tomorrow, then recess until April 12, based on the current calendar, when they would return for the final legislative day to override any vetoes.

In order to meet the 3:00 Friday deadline they are in good shape with the General Fund and Judicial budgets, but the Road Plan and Road Fund budget would need to be done and to the printed by roughly 3:00 this afternoon as it takes 24 hours to print. A short time for the Road Plan conference committee to work. 

We will provide more details as they emerge here are the latest news articles:

CN2 Article

KY Public Radio article

Bluegrass Politics article

Tax Reform Commission To Hold First Meeting

Governor Beshear announced the first meeting of his Tax Reform Commission for next Tuesday, March 6. We are expecting the group to get a high level overview of Kentucky's current revenue picture and how the taxes that make up Kentucky's revenue have been performing. Sort of a baseline from a knowledge standpoint. 

The full press release is below:

Commonwealth of Kentucky Office of the Governor
FOR IMMEDIATE RELEASE	Contact:	Kerri Richardson 502.564.2611 502.330.6633 Terry Sebastian 502.564.2611 502.229.6130

Tax Reform Commission To Hold First Meeting

Commission's 23 members, led by Lt. Gov. Abramson,

 to develop recommendations to revitalize state's tax code

FRANKFORT, Ky.  (March 2, 2012) – Governor Steve Beshear announced today that his Blue Ribbon Commission on Tax Reform will hold its first meeting Tuesday, March 6.  The Commission, led by Lt. Gov. Jerry Abramson, will begin its work examining how best to realign Kentucky's tax code. 

The meeting will be at 12:30 p.m. in the auditorium of the Kentucky Transportation Cabinet Office Building, 200 Mero St., in Frankfort.  A series of meetings has been scheduled around the state throughout the next several months.

The Commission will work to develop recommendations to make the state's tax code more responsive to the ups and downs of the economy, as well as to make taxes more equitable for Kentuckians.  The revisions should allow for tax revenues that are adequate to address the needs of the state's citizens and businesses.

In 2011, the national Tax Foundation ranked Kentucky 19^th best in the nation both in its business tax climate and in the growth rate of new jobs over the past year.  Another recent report by the U.S. Chamber of Commerce ranked Kentucky eighth in the nation for taxes and regulations, and 12^th for job growth over the past two years.  Despite those high national rankings, Gov. Beshear said the state has room to improve its tax code in order to encourage economic growth. 

Gov. Beshear announced the commission's members on Feb. 9. A complete list of members, as well as information on the commission's goals, is available at http://migration.kentucky.gov/Newsroom/governor/20120209taxcommission.htm

The commission's recommendations are due to the Governor by Nov. 15, 2012.

Dates and host cities for the remaining Commission meetings are below, as well as locations for the April and May meetings.  Specific locations in remaining cities will be announced in advance of all meetings. All times are local.

• Tuesday, April 10, 1 p.m., Capitol Annex, 702 Capitol Ave., Room 154, Frankfort
• Tuesday, May 8, 1 p.m., Capitol Annex, 702 Capitol Ave., Room 154, Frankfort
• Tuesday, May 29, 6 p.m., Paducah
• Tuesday June 19, 6 p.m., Bowling Green
• Tuesday July 10, 6 p.m., Louisville
• Tuesday July 24, 6 p.m., Covington
• Tuesday Aug 7, 6 p.m., Prestonsburg
• Tuesday Aug 21, 6 p.m., Lexington
• Wednesday, Sept 19, 1 p.m., Frankfort
• Tuesday Oct 2, 1 p.m., Frankfort
• Thursday Nov 8, 1 p.m., Frankfort

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Follow Governor Beshear on Twitter @Govstevebeshear, read the Governor's personal notes on his blog at http://blog.governor.ky.gov/, and view the Governor's video commentaries at http://www.youtube.com/governorbeshear.