The Kentucky legislature agreed Thursday to borrow more money, wrapping up a legislative session that ensures the cash-strapped state will have at least $108 million less per year to spend in the coming decades.
Lawmakers approved a plan to borrow $50 million to fix up the state park system and another $25 million to bolster its efforts to woo companies to come to Kentucky.
Including interest, taxpayers will likely pay double those amounts over the next few decades as they pay off the bonds. Payments in the first year will cost about $3.1 million. The Senate approved the bill by a vote of 36-0 on Thursday afternoon. The House approved it by a vote of 76-20. The bill now heads to Gov. Matt Bevin's desk. He has 10 days — excluding Sundays — to sign it, veto it or let it become law without his signature.
The new spending comes after lawmakers in the Republican-dominated legislature agreed Wednesday to lower revenue by $105 million a year so they could give a tax break to banks, exempt some nonprofits from sales taxes and give money back to some lower-income earners who were left out of last year's income tax cut.
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Also Thursday, House lawmakers rejected allowing some entities to leave the state's pension system while paying less than what they owe, setting up a conflict with the Senate. It's a move that could cost one of the nation's worst-funded public pension systems another $1 billion but would help keep solvent local health departments and rape crisis centers that say they can't afford the skyrocketing retirement contributions for their employees.
All of that new spending and revenue changes comes during a legislative session when lawmakers are not supposed to spend money. The state legislature passes a state spending plan every two years. House budget chairman Stephen Rudy noted most of the money would be covered by the state's reserve fund, which is forecasted to have $307 million in it by June 30, 2020.
"The balance sheet is still well intact," Rudy said. "All these things are critical and needed to operate for the remainder of this biennium."
The Bevin administration had asked lawmakers for permission to borrow $50 million for various maintenance projects in the state's sprawling state park system, which includes 17 resort parks, 22 recreational parks and 10 historic sites. Resort parks include hotels, restaurants and recreation such as golf courses and boating. The system averages 431,000 overnight guests each year, plus 560,000 campers and 170,000 golfers.
Bevin is running for re-election this year. The House agreed to the spending, but the Senate — which includes Ralph Alvarado, Bevin's 2019 running mate — rejected it. Lawmakers appeared to be gridlocked until Republican Sen. Stan Humphries, whose district includes the popular Lake Barkley State Resort Park, agreed to vote with the House majority.
"We have a long known the parks have been probably underfunded and have been in a state of disrepair for a number of years," Humphries said. "We probably need to try to find ways to keep the parks relevant."
GOP Senate leaders reluctantly agreed to the borrowing, but warned it could start a trend of people asking for money in non-budget years.
"Trust me, they will do it," Republican Sen. David Givens said.
Looming in the background of Thursday's spending discussion is a public pension plan for roughly 35,000 state employees that is at least $13 billion short of the money it needs to pay benefits over the next three decades. The plan, among the worst-funded in the country, could be even worse funded if lawmakers approve House bill 358.
It would let 118 quasi-governmental entities — including public universities and local health departments — leave the struggling system while paying less than what they owe. Lawmakers are struggling with the decision because they want to help the quasi-governmental agencies that provide vital services, but they don't want to worsen the system's already dangerous financial position.
The state Senate approved the bill Wednesday night by a vote of 25-12. House speaker David Osborne had said earlier in the week it would pass the House. But Thursday, the House rejected the bill, sending it back to the Senate.
The Senate did not act on the bill on Thursday. Senate Majority Floor Leader Damon Thayer said lawmakers will try to work something out when they come back on March 28 for what is expected to be the final day of the legislative session. He said he would be "extremely disappointed" if lawmakers don't do something to help the universities and other entities.
"But I would say with the failure of that bill tonight, that possibility certainly exists," he said.