Beshear, House Democrats At Odds Over Budget

FRANKFORT, Ky. (AP) - Gov. Steve Beshear and his fellow
Democrats in the House are at odds over how to close a projected
$900 million revenue shortfall facing Kentucky over the next two
fiscal years.
House Democrats emerged from a private meeting in the Supreme
Court chambers at the Capitol Friday and said they were rejecting
Beshear's proposal to raise the state's cigarette tax by 70 cents
as part of a plan to finance hundreds of millions in money aimed at
steering the state through its tough financial times.
Instead, Democrats have their own proposal that includes a
25-cent increase in the cigarette tax, along with a series of new
taxes on selected services.
"Our budget is responsible and the governor's is
irresponsible," House Appropriations and Revenue Chairman Harry
Moberly told reporters. "His proposal would put us in a hole that
we would never climb out of."
The disagreement between House leaders and the new governor
marks the latest point of contention between them in the General
Assembly's 2008 session. Beshear has also been pushing a proposal
to amend Kentucky's constitution and allow casino gambling, which
he says can bring the state $500 million in upfront license fees
and $600 million per year in new revenue.
House lawmakers have not agreed on the proposal, and Beshear has
acknowledged its fate is uncertain.
Beshear has said he opposes raising taxes to offset sagging
state revenue that economic forecasters say leaves Kentucky facing
a revenue shortfall of about $900 million. But after meeting with
Democratic leaders Thursday night, Beshear announced he would now
support a cigarette tax hike to avoid making drastic funding cuts
to public universities and numerous government agencies.
Beshear said he would use proceeds from the 70-cent tax increase
to finance bonds and raise about $800 million in money to cover the
next two fiscal years. Beshear said the state could perhaps pay off
the 20-year bonds in 12 years by dedicating money from the
cigarette tax to pay down the debt.
Moberly said he felt Beshear had "ambushed" House lawmakers
with his proposal.
Beshear, however, said that as Democrats he and members of the
majority House caucus need unity.
"All politics is the art of compromise," Beshear said. "And,
I'm sure that somewhere down the line, we will end up together. And
if we don't, we won't have a budget."
The House plan contains provisions that would generate some $762
million over the next two years. One of those provisions calls for
refinancing general fund debts at lower interest rates, which would
save about $300 million over two years.
The proposal calls for raising taxes on air charters, armored
car services, security services, commercial janitorial services and
linen services, which would generate about $62 million over the
two-year budget cycle.
Raising the cigarette tax by 25 cents a pack would generate
nearly $200 million over two years. Taxing other tobacco products
would generate nearly $33 million.
Moberly said the House plan also calls for downsizing state
government by not filling job vacancies when employees retire.
--
Associated Press Writer Roger Alford contributed to this report.

(Copyright 2008 by The Associated Press. All Rights Reserved.)


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