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LEGISLATIVE
ANALYSIS - April
2000 Feature Article by Richard Adkins
Kentucky’s
2000 General Assembly As Kentucky’s first re-elected governor in nearly two centuries, Governor Paul Patton proved eager to spend some of his unprecedented accumulation of political capital when he initially laid out an expansive and progressive agenda for the first legislative session of his second term, which began January 4, 2000. "We are trying to approach this term as a true new term," Patton said before the first gavel of the General Assembly ever fell in Frankfort. "We go into this session with the most experienced team in modern times. If we don’t know it now, we will never learn it." It wasn’t long after that statement was made that the governor and his team began a long and bitter learning process about two-party legislative politics in earnest. Patton and his aides have learned the hard way that you don’t always get what you want on your legislative wish list. This proved especially true in light of the sea-change in traditional Kentucky state government politics that occurred just prior to this meeting of the General Assembly, with Republicans taking a 20-18 seat majority in the state senate. "If there’s any concern that I have for the ... coming session, it would be that the governor takes on too many issues, any one of which would take more focus than even he’s able to give," said then Senate President-designate David Williams, R-Burkesville. In his second inaugural address in early December 1999, Patton touched on a range of issues his second administration would give priority to, including education from early childhood to post-secondary institutions, healthcare, the environment, criminal justice, the economy, and changing the state’s tax code to make it more fair and ease its burden on the working poor. He also indicated that he planned to unveil an economic and infrastructure development plan that would offer at least one substantial project for each of the state’s 120 counties. There was just one minor problem – where would the money come from to fund such an ambitious, albeit visionary and progressive, agenda? Patton’s big-ticket goals for the 2000 General Assembly ran headlong into this major obstacle from the very beginning. The state’s financial picture this year is far different from two years ago, when Patton and legislators went into the session expecting a $110 million surplus. By the end of June 1998, the General Fund actually posted a $366.4 million surplus, allowing legislators to spend that money on hundreds of pork-barrel building projects all over the state. The expected money crunch for fiscal year 2000 forced the ambitious Patton administration and re-election-minded legislators (half the Senate seats and all of the House seats are up for grabs in the November 2000 elections) to consider politically sensitive issues such as raising taxes and possibly expanding legalized gambling in the Commonwealth to make up for the projected revenue shortfalls. Preliminary projections from the governor’s budget office show that state expenses are expected to be $131 million higher than anticipated revenue next year. Although the state’s economy mirrors the strong overall national economy, state revenue forecasters say recent tax cuts are taking their toll on the budget. State lawmakers started cutting the inheritance tax in 1996, but the last of the phased-in reductions take place this year. Receipts for the inheritance tax now are estimated to be $17.6 million for this fiscal year, compared with the $50 million predicted in May 1998. Major tax changes in Kentucky traditionally have been tied to a specific event, said Williams, such as the large tax increase adopted in 1990 as a result of the Supreme Court ruling that declared Kentucky’s school system unconstitutional. "I haven’t seen that precedent set yet and that’s what the governor’s going to have to do," Williams said.
The following day he unveiled a plan that sought to explain how he would raise more than $144 million a year in what he called a "revenue recovery" plan to change state taxes to help pay for his budget programs. That plan would have, in effect, raised taxes in a variety of new and previously untaxed sectors of the Kentucky economy, including putting the state’s six percent sales tax on selected services such as car, television and computer repairs; taxing out-of-state phone calls; and making sure taxes on catalog and Internet sales are fully collected. At the same time, his plan sought to remove 200,000 poor Kentuckians from the income tax rolls and to completely do away with the state property tax on cars and trucks over a three-year period. Some of the more controversial features of Patton’s failed first budget proposal called for a gas tax increase of seven cents a gallon to boost the road fund and to pay for an ambitious infrastructure development program he called "Roads to the 21st Century." Legislators generally don’t question the need for a gas tax to pay for roads and road improvements, but such an increase was largely felt to be harder to swallow because of the recent surge in gas prices at the pump. If legislators did not approve the gasoline-tax hike, the governor said, road projects would have to be cut. He also warned legislators that Kentucky’s six-year road plan already had $500 million more in projects than money to pay for them. A survey by the National Federation of Independent Business/Kentucky verified that the gasoline-tax plan faced much opposition around the state. The group, made up of independent small-business owners and operators, sent out 1,200 questionnaires to its members. Of 274 who responded, 90 percent said they would not support the increase. Patton’s first FY 2000 budget proposal also outlined an aggressive list of other building projects worth $935 million, including $423 million for services such as water and sewer initiatives. As promised, the budget proposal included at least $250,000 in capital investments, from water lines to golf courses, for every county in the state. The proposal called Louisville "the economic engine that drives our economy" and stated that as such, said the city should get more than $49 million for projects. That amount included $12.5 million for the Louisville waterfront, $3 million for the African-American History Museum, $5 million for the Louisville Medical Center, $10 million for the Muhammad Ali Center and $4 million to begin preliminary work on a $50 million expansion of the Kentucky Fair and Exposition Center. But Patton made it clear that not all of the proposed projects would get the money they needed if the new "revenue recovery" plans in his tax proposal didn’t make it through the legislature as well. The governor later told the House budget committee that the state’s revenue problem will be worse in two years if it is not addressed in this year’s General Assembly. Faced with an obvious lack of support for his initial proposal, Patton submitted a revised budget and tax proposal to legislators on February 24 that significantly scaled back his earlier tax and spending requests. But, he vowed to return later in his administration to some of his original proposals, such as raising the gasoline tax. University of Kentucky economics professor Dr. Charles Haywood said that Kentucky’s fiscal history tells us that whenever a governor proposes an increase in taxes, several conditions have to be present in order for the proposal to be approved by the General Assembly: "Number one, there has to be wide agreement in the General Assembly and in the public at large that there is a clear and cogent need for the increased government spending for which the increased taxes will be used," offered Haywood. "Number two… the proposed tax increase should not significantly shift the relative tax burdens of the various income and occupational groups. "And third, the proposal should be developed in a consultative way that results in key members of the General Assembly and other influential persons endorsing the proposal when it is made public," said Haywood. "Governor Patton’s FY2001-2002 proposals have failed all three of these tests," he concluded. "I believe that the best alternative for Governor Patton is to agree to a "continuation budget" for FY 2001-2002, appoint a task force of legislators, businessmen, and academicians to study the state’s fiscal policies and procedures – both on the spending side and the tax revenues side – and look toward a special session in January 2001 to consider any changes the task force might recommend." Editor’s Note: At press time, the GOP budget proposal had slashed most building projects, and rancorous debate accompanied the rift toward its eventual final resolution in committee.
Richard Adkins is a staff writer for The Lane Report.
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THE
2000 Biennial Session of the Kentucky General Assembly may well go down
in the history books as the session when the Commonwealth of Kentucky
began conducting its legislative affairs under a two-party system of
shared government for the first time since the Civil War and Reconstruction
eras.
Throughout
his first term, Patton was indeed highly focused and rather successful
in pushing his priorities through the legislature, including major changes
in the state’s workers’ compensation system and in higher
education reform. While the governor enjoyed politically cozy relationships
with many of the legislature’s GOP leaders, Patton’s initially-proposed
2000 budget and tax plans seemed to indicate a desire to rid himself
of his "Republicrat" moniker. They also seemed to hint at
his return to such core Democratic party beliefs as the expansion of
government and public works programs and the necessary tax increases
that inevitably follow to pay for such policies.
On
January 25, Patton offered his first stab at a fiscal year 2000 budget
proposal, which included a $14.4 billion two-year state spending plan
calling for massive infusions of new money into education, healthcare,
state salaries and a myriad of brick-and-mortar projects around the
state, as promised in his inaugural address.