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Kentucky spending plan seeks to create jobs

FRANKFORT, Ky. (AP) - Kentucky House leaders wrapped up work
Friday on a state budget blueprint for the next two years that
proposes funding a flurry of construction projects aimed at
creating thousands of jobs to help ease the state's high
unemployment rate.
The approximately $17.5 billion spending plan relies on budget
cuts, revenue enhancements and other steps to plug a shortfall
exceeding $1 billion for the two years beginning July 1.
"I think the tone of this budget is one of fiscal
responsibility ... of creating jobs and of moving us forward in a
tough time in a fair manner," House Speaker Greg Stumbo said.
The plan includes about $1 billion in bonding for school
construction, water and sewer projects and road building, House
leaders told reporters. About $500 million of that amount would go
toward construction in school districts and on community and
technical college campuses, said Rep. Rick Rand, chairman of the
House Appropriations and Revenue Committee.
"We think this will touch communities and will create more jobs
and will create more economic activity," said Rand, D-Bedford.
Stumbo, a Prestonsburg Democrat, said the goal was to create
about 25,000 jobs.
Rand said he was not concerned about the state taking on too
much additional debt to fund the projects. He called it an ideal
time to do the projects because of historically low borrowing rates
and a trend in which project bids are coming in well under
estimates. Also, some of the bonding will be absorbed by other
revenue sources.
State officials announced Thursday that Kentucky's annual
unemployment rate for 2009 jumped to a 26-year high of 10.5
percent.
House leaders are hoping for a timetable that gets the spending
plan through the budget committee Tuesday, followed by action the
next day in the Democratic-led House.
The Republican-controlled Senate will then get its crack at the
budget.
Senate President David Williams withheld judgment on the
proposed projects, saying he wanted to see the details. But if the
chambers can't agree on a revenue package, he said, that "casts
some doubts on our ability to do very much capital construction in
this session."
The House leadership spending plan calls for a 1½ percent
spending cut for public universities and colleges in the first year
and a 1 percent reduction in the second year. Higher education had
faced deeper cuts in early drafts of the spending plan.
The proposal would not cut the state's basic funding formula for
elementary and secondary education. But it calls for trimming two
instructional days in public schools, a move projected to save
about $34 million each year.
State workers would go without pay raises under the plan.
The blueprint also projects about $30 million in savings from
spending on corrections, partly from the expectation of stepped up
paroles of some nonviolent prisoners.
Stumbo pointed to an existing policy requiring the Parole Board
to review the cases of nonviolent offenders sentenced to 1 to 5
years once they become parole eligible.
The savings in corrections also reflect projections of slower
growth in the state's prison population - by about 1,500 inmates -
based on current trends, House leaders said.
Other savings would come from cuts in government contracts and a
reduction in nonmerit political appointees across state government.
Rand said the plan closely mirrors Gov. Steve Beshear's proposed
spending for human services. Beshear's budget plan estimated
general fund savings of $75 million in the first year and $33
million in the second year through efficiencies in Medicaid, the
state-federal health insurance program for the poor and disabled.
The program covers about 790,000 Kentuckians.
Some agencies hard hit by past budget cuts would actually get
additional money under the plan, Rand said. Kentucky Educational
Television would get about $1.1 million more each year.
A key component of the spending plan is a revenue package that
was passed by the House on Thursday. That proposal is aimed at
raising more than $300 million in two years to help fill the
shortfall. The plan would not raise tax rates, and relies on such
steps as suspending a business tax break, speeding up sales tax
collections and capping some tax credits.
The measure cleared the House with the support of just one
Republican.
Williams, R-Burkesville, said he needed time to review the
revenue package. But he said he worried about the signal the tax
plan would send to businesses looking at Kentucky.
The proposed tax change drawing the most concern from business
interests would temporarily suspend tax write-offs for businesses
reporting losses. The proposal would generate an estimated $72
million in the first year of the next budget and $90 million in the
second year.
Affected businesses would still be able to eventually claim
those losses for tax purposes.
The write-off suspension is meant to last two years, but top
House Democrats said the tax benefit could be restored in the
second year if state revenue collections improve.
Beshear's budget assumed about $780 million in new revenue from
an expansion of gambling in Kentucky. However, lawmakers have shown
no willingness to allow video slot machines at race tracks.

(Copyright 2010 by The Associated Press. All Rights Reserved.)


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