FRANKFORT -- It unfolded gradually this spring, as numbers crunchers began warning that the state might face a billion-dollar budget shortfall next fiscal year, hard on the heels of the tough cuts needed to balance this year's budget during the Legislature's off-year short session last winter.
Gov. Steve Beshear finally reckoned that projected state finances were indeed that dire -- this despite skepticism on that point by some key legislative leaders, who said the real deficit was much less if calculated properly, and did not require legislative intervention. Regardless, the governor called the Legislature into special session, beginning June 15, to put the budget back in balance.
After issuing the original session call limited to that topic, he added some other items: Economic-development incentives that would in part attempt to lure a major NASCAR race to Kentucky Speedway and The Breeders Cup to Churchill Downs, as well as a so-called megaprojects measure (commonly called the 'bridges bill') that would provide a funding and control mechanism for huge and expensive infrastructure projects like the multi-year, multi-billion dollar Ohio River bridges proposal in Louisville.
And, working without a net politically – since no consensus existed on the issue, and in fact it faced powerful resistance – the governor also added video lottery terminals (otherwise known as video slots) at Kentucky racetracks to the session call.
The putative reason for this was to save the state's troubled Thoroughbred industry, by drawing more patrons to tracks and injecting new money into race purses, thereby keeping racetracks open and horses and horsemen in the state.
An underlying rationale, though not as frequently cited in the discussion that evolved, was that slots could rake hundreds of millions of dollars in licensing fees and taxes into the chronically strapped State Treasury, at a time when the phrase 'billion-dollar budget shortfall' had entered Kentucky's public-policy lexicon for the first time.
The VLT idea has been with us for years, and it's always been controversial. The same is true this year. Advocacy groups instantly mobilized both pro and con, with TV and radio ads and demonstrations in Frankfort, and Senate leaders signaled all along that if any VLT legislation made it down the hall to them it would face severe uphill sledding in that chamber.
The House had never voted to endorse the idea in previous legislative sessions, despite multiple attempts. But as the session's first week wore on, the VLT proposal taken up by the House had morphed into a potent, politically alluring form for that chamber: A huge chunk of VLT-generated revenue would be devoted to debt service on bonds for more than $1 billion in school-building construction, both at state colleges and in school districts statewide where aging elementary and secondary buildings need replacement.
When the measure came before the full House on Friday, it was approved on a 52-45 vote. As a result, the chamber will include the school-construction provisos in the budget-balancing bill it plans to take up next week. It's not clear what form that bill will take, but the governor has proposed that most of the shortfall be made up with federal stimulus money, coupled with 2.7 percent across-the board agency cuts – with important exceptions: Basic funding for public schools and universities would be spared the axe.
Aside from the VLT drama, last week saw legislative action on economic development measures and legislation to support transportation mega-projects. After receiving bills on these topics from the House, the Senate added a state budget-balancing plan to one measure while rolling together plans for economic development incentives, transportation megaprojects and aid for the horse industry into the other.
The Senate budget plan largely mirrors the governor’s budget reduction proposal, including cuts to most state agencies but eliminating unpaid holidays for state employees.
Under the Senate’s approach to helping the state’s horse industry, lottery tickets would include a 10 percent surcharge, while tracks and off-track betting centers would pay a 1.5 surcharge for their simulcasting signals from Kentucky horse racing tracks. The money raised — projected at more than $85 million — would benefit purses at Kentucky racing tracks, horse breeders, local horse shows, and the state’s KEES scholarship programs.
Efforts to iron out differences between House and Senate approaches to the issues of the current session are sure to be underway when lawmakers return to Frankfort next week. In the meantime, lawmakers are seeking feedback from their constituents. Citizens can find contact information on lawmakers – as well as a wealth of resources pertaining to the current legislative session -- on the Legislative Research Commission Web site at www.lrc.ky.gov or can call the General Assembly's toll-free Message Line at 1-800-372-7181, to leave a message for their legislators.
--Kentucky Legislative Research Commission Public Information Office; courtesy of Senators Denise Harper Angel, Tim Shaughnessy and Gerald Neal
