As noted below, the budget that just passed the House is, once again, the most indebted in the commonwealth's history.

Recently it seems that the budget discussion in Frankfort is simply a comedy of repetition. The Governor proclaims billion-dollar shortfalls, suggests 'all options are on the table', then proceeds to ignore one of the simplest solutions: repealing the prevailing wage requirement. As we've said before:

Eliminating this artificial wage requirement would mean more jobs building more projects for the same money.

It means our tax dollars go further:

In a 2004 Memorandum developed by the Kentucky Department of Education's Facilities Management Division, it was reported that from 1999 to 2004, Kentucky's prevailing wage requirement unnecessarily inflated the cost of school construction by more than $480 million. The amount of unmet need for schools in the most deplorable condition is around $500 million. It is conceivable that if SB 145 was currently the law, nearly every child in Kentucky would be attending an adequate school. In addition, these returns can be realized without one additional dollar being invested!

If legislators were truly serious about stretching our tax dollars and truly focused on creating jobs in Kentucky, this would be the first place to look.

At least one legislator is serious.

For the last two days, Representative Comer has led an effort to exempt the projects in this budget from prevailing wage requirements.

Given the historic level of debt-financed spending in this budget, the impact of this legislative change has never been greater.

Various analysis have shown that reverting to the pre-Patton rule that prevailing wages are not applicable to public construction would save the state 17-25%.

For the record, 17% of $2.2 billion is $374 million, which happens to be twice as much as the revenue expected from the tax hike on struggling businesses.

Thanks to Representative Comer for standing up and championing real proposals for reducing spending and creating jobs in Kentucky.

Here's a quick look at the overall numbers for this budget, and a comparison to the last two:

Overall spending:

2007-2008 $18.1 billion
2009-2010 $17.55 billion
2011-2012 $17.5 billion

Total bonded indebtedness:

2007-2008 $2.01 billion
2009-2010 $1.51 billion
2011-2012 $2.2 billion

Appropriated debt service as a percent of revenues:

2007-2008 4.7%
2009-2010 4.3%
2011-2012 over 7%*
*overheard yesterday on the coverage of the House debate. Unsure of the real number

Legislative Day 46

House

Energy Price Hike Mandates
Likely KEY VOTE: HB 3 will be heard in the House Committee on Natural Resources and the Environment. The Kentucky House must think President Obama and Nancy Pelosi are doing things right. Yesterday, they created a debt-based stimulus program for Kentucky. Today, they're creating energy portfolio mandates and their own sort of Cap and Trade program. This is a convoluted bill, full of new energy bureaucracy that will increase energy prices for all Kentuckians.

Kentucky's Own Housing Bubble Generator
The House Committee on Economic Development will seek to put taxpayers on the hook to pay back banks if construction loans fail in HB 553. Imagine what would have happened to the state if this program had been in place before the financial crisis hit!

Unionizing State Employees
KEY VOTE: The House Committee on Labor and Labor will hear HB 493 allowing state employees to enter collective bargaining. This idea will only serve to make it more difficult to set more realistic benefits for state employees, and generally violates the principle that the government should be responsible to the taxpayers.

"It's our responsibility to do something about it," said Moberly about the problem of joblessness.

What's his proposal to help jobs? To raise taxes on struggling small businesses, and creating a Kentucky "Stimulus" by issuing debt to spend on pork projects.

Legislators are laughing at him on the screen.

We are very glad that Mr. Moberly is retiring.

UPDATE: He's not hurting anyone, just those corporations that have multiple entities employing people. He really said that.

"That debt ratio and that percentage is only part of what they use to establish debt ratings," he pleads.

4:54 - Representative Stewart is now congratulating himself of voting for overspending and record debt with the majority party.

5:02 - Representative Upchurch gets it. Makes a good speech about the fallacy of the idea of government-created jobs.

5:09 - Rep. Burch rallies against free trade

5:14 - Rep. Hall, a favorite at PageOneKy, says ironically that he "didn't come to Frankfort to do nothing." We wonder if the'll be in Frankfort tomorrow. Also wrong: "Any economist will tell you that in hard times the government must step forward."

5:30 - Also wrong: Rep. Thompson thinks tea parties are occurring because government isn't "investing" enough in our communities.

5:38 - "You can't spend your way out of debt" does not apply to a modern economy, says Rep. Stacy.

House

Another New Spending Program
Likely KEY VOTE: The House Agriculture Committee will take up HB 594, a new tax and subsidy program for dairy farmers.Not only is this a new tax designed to increase the price of (and therefore reduce the demand for) milk, it puts a new burden on retailers to apply and collect the tax.

New Eminent Domain Powers for State-Run Sequestration Service
KEY VOTE: The House Committee on Resources and the Environment will hear HB 491, making all sequestration in Kentucky a state-run endeavor. The bill grants the state condemnation rights based on geologic features favorable to carbon sequestration, establishes a board which has the authority to charge a fee for "carbon storage" in the confiscated property. This government takeover of an emerging private enterprise is, well, the antithesis of the free market.

Corporate Organization Bills
The House Committee on Judiciary will hear SB 150, SB 151 and SB 152, all which change the rules of business organization in Kentucky.

Zoning Fee Increase
The House Committee on Local Government will consider HB 431 which allows local governments to raise fees for planning and zoning violations.

Senate

Anatomical Gifts
The Senate Committee on Health and Welfare will consider SB 4, a bill creating procedures for individuals to bequeath body parts.

Personal Care Homes
The Senate Committee on Health and Welfare will also consider SB 143, creating a regulatory structure to certify 'personal care homes' and explore the ability to include such facilities in Medicaid.

$1,000,000 Public Health Accreditation
HB 258 will be discussed in Senate Health and Welfare, which creates a new public health accreditation program that apparently costs $1,000,000.

House

Forcing Tax Hikes
Potential KEY VOTE: The House Education Committee discusses HB 168, a bill that punishes Kentucky School Districts that do not force the maximum tax hike on the district's taxpayers each year.

Creating New Spending Programs
Potential KEY VOTE: The House Education Committee also discusses HB 513, a bill to create a new spending program. This a bad idea for two reasons. First, because the state is grappling with cutting back to reasonable levels after years of overspending, this is hardly the right time for new spending programs. Not only that, but this is an enhancement program. The problem with just about any enhancement program in education it that it gets considered "education spending" but inevitably draws education funds out of the classroom. This bill exemplifies the problem in Frankfort. It is feel-good legislation with no consideration for the longer-term consequences or how the spending fits in to the overall priorities of the state.

Senate

Tax Bill:

Potential KEY VOTE: The Senate Appropriations and Revenue Committee takes up HB 530, a bill of assorted new taxes and tax hikes and administrative reforms to help avoid necessary spending cuts. The bill does recognize that maybe now is not a good time for taxpayers to be subsidizing Hollywood producers millions of dollars a year, but ironically (or maybe typically) the bill simply limits the subsidy to $5 million this year and $7.5 million the next. Aren't you glad to know what our legislators' priorities are?

Wonder how the Club for Growth, Blueballs Institute and the rest of the teabaggers feel about their main man using his position to score pork projects for his employer?

He's referring to a source alleging that 2007 Defender of Economic Freedom Jim DeCesare is using his position as a legislator to unethically pressure firms into entering contracts with his employer. This is a serious allegation.

Before discussing the allegation, let's examine a few parts of the story. First is Jake's contention that school construction is pork spending. He references a project of replacing a category five school, which is the lowest rating a school can receive and means the building is a top priority for replacement. The only thing unreasonable about this project is the ridiculous prevailing wage requirement that inflates the construction cost by as much as 20%. For the record, Jim DeCesare is one of the few in the House willing to take a stand in favor of repealing the prevailing wage requirement for school construction.

Second, the consequence of a having a part-time legislature in Kentucky is that it creates an abundance of conflicts-of-interest between lawmaking and the legislators' day jobs. All legislators must be very careful about conducting their daily business in a way that does not attempt to leverage their elected position for personal gain.

The Code of Ethics states it much more clearly than we just did:

The Code states that the proper operation of democratic government requires that:

A public official be independent and impartial;

A public official not use public office to obtain private benefits;

A public official avoid any action which creates the appearance that he/she is using public office to obtain a private benefit;

Government policy and decisions be made through the established processes of government; and

The public have confidence in the integrity of its government and its public officials. (KRS 6.606)

This is a challenge for those who must make a living, because everyone knows you're a legislator. No matter what a legislator does, people are influenced by that fact.

The story Jake presents actually stops short of accusing Rep. DeCesare of attempting to leverage his elected position, only alleging that someone who does not like him found the inherent conflict-of-interest irritating. If the Representative actually did attempt to obtain business by using his elected position, it would be serious misuse of influence. To do so would be not only out-of-bounds but foolish. After all, how much influence does a fiscal conservative have in the Kentucky House anyway? (not enough).

Day 42

On the House Floor:

New Entertainment Tax

KEY VOTE: HB 206 gives county fiscal courts the ability to levy a new 3% tax on events at private facilities.

Recidivsm Reduction:
HB 340 would create a "Prison Industries Enhancement Program" that will allow prisons to enter in cooperative agreements with private enterprises. Similar programs in other states have been promoted as recidivism reduction because prisoners gain work experience that better prepares them to reenter the workforce once time is served. Provisions of the bill attempt to prevent unfair competition from the not-quite-forced labor by requiring some demonstration that adequate resources are not otherwise available in the state.

Dueling Allowed:

HB 36 would remove the language swearing public officials have not participated in a duel.

Eliminating a Non-existant Board:

Well, it's a start.

New Health Care Mandate:

SB 18 would mandate coverage of experimental cancer treatments. All new mandates increase health costs for us all.

Transparency:

HB 492 would require the legislative and judicial branch to post their finances online

This is a guarantee not typically available anywhere else in the workplace.

While the bill makes some paltry commitment to increasing the amount of funding for the program from participants, the real cost recovery is borne by requiring Kentucky taxpayers to support its funding solvency.

There are good ideas in the bill. It attempts to prevent the legislature from borrowing from the fund, and it requires more reasonable contributions from participants. But the cost of a permanent guaranteed cadillac heath benefit is too great.

Health costs are rising, and likely to rise much faster if Nancy Pelosi is successful in cramming health entitlement expansion through Congress. The current $6.2 billion unfunded liability will expand and taxpayers will be on the hook to pay for benefits they themselves don't have, and (as Caleb Brown points out) that go to people who are no longer contributing to the state.

Call and email your representative today to prevent tax hikes in the future!

This is likely to be scored as a Key Vote on the KyCFG's 2010 scorecard.

When you bore down into the numbers, you find that, of the 3,635 non-merit employees the administration cites as being on the personnel roles as of Jan. 31, 1,222 were employed by elected officials other than the governor -- commonwealth attorneys, county attorneys and the other statewide constitutional officers.

Another 672 were teachers in career and technical schools or the state schools for the blind and deaf. And 346 more were employed by agencies that, by law, operate their own personnel systems -- Kentucky Educational Television, the Council on Postsecondary Education and the Kentucky Historical Society, to name just three.

Like the teachers, the staffs of these agencies are career professionals whose tenure spans multiple administrations, both Democratic and Republican. They are about as far from being political appointees as you can get in government.

When you bore all the way to the bottom line, you find that Gov. Beshear appointed just 826 of the 3,635 non-merit employees in the executive branch on Jan. 31.

This number is actually 26 higher than the previous administration, or 3.25%, so there's room to cut, as there may be in the agencies listed above. But demanding a reduction of 125 appointees entirely from the Governor's appointees, over 16% of the total, will likely harm his ability to run his government. The number should be reduced -- everyone is tightening belts -- but the Governor should also be afforded the ability to implement his policy directives, and these appointees are often (too often, unfortunately) the only staff that have the willingness and ability to do that.

On Friday, a House committee passed a bill to eliminate a defunct state board that's one of hundreds of state boards and commissions. House Bill 309 is sponsored by Rep. Adam Koenig, R-Erlanger:

The provisions in House Bill 309, sponsored by State Representative Adam Koenig (R-Erlanger), would abolish the Kentucky Wood Products Competitiveness Corporation, one of the state's numerous boards, and vest their responsibilities within the Kentucky Economic Development Cabinet.

During his testimony before the committee, Representative Koenig stated that, while this commission was established with the admirable goal of promoting the secondary wood industry, this board was investigated by the FBI in 2003, has not met since 2004 and currently has no members.

Now if only Rep. Koenig and the rest would stop creating so many new ones...

In all seriousness, this state has many problems that -- if attacked through the oath of office -- could be solved.

For instance, with a new oath, politicians could be forced to "further solemnly swear that since the adoption of the present Constitution, I, being a citizen of this State, have not accepted money or campaign contributions in exchange for a vote, nor have I upon accepting such a gift replied, 'Bless your heart,' so help me God."

Or how about requiring them to "further solemnly swear that since the adoption of the present Constitution, I, being a citizen of this State, have not slept with a person I appointed to a state board or commission, so help me God."

Maybe they could "further solemnly swear that since the adoption of the present Constitution, I, being a citizen of this State, have not allowed a state merit employee to be hired, fired or transferred because of political reasons, so help me God."

While Gerth seems to concentrate on real and alleged scandal in the Governor's office, there are much more useful things that could be pledged. Like vowing to make state expenditures match tax revenues, and not the other way around. Or vowing to put state spending online and having the budget publicly available for 24 hours before voting on it.

What would you have our legislators pledge? Email us!

From Tom Loftus:

House Speaker Greg Stumbo said Sunday he is more hopeful the House can reduce or eliminate proposed cuts to state funding of higher education in the 2010-12 budget.

So if spending won't be cut, how's he going to balance the budget?

Stumbo repeated Sunday that the House will close what he called "some loopholes" in the state tax code.

"Closing loopholes" is almost always code for raising taxes...

A proposal he first mentioned last week was to suspend for two years a corporation's ability to carry forward past losses to offset current-year income for tax purposes. That remains in the House plan, he said. Stumbo has said this move would generate an anticipated $182 million over the upcoming budget period.

As we pointed out in our newsletter, the $184 million expected from businesses is not only a tax hike, but because it is a postponement of the ability to write off losses, it is targeted directly at small businesses that are struggling!

The Kentucky Chamber agrees:

The Kentucky Chamber of Commerce sent Stumbo a letter on Friday opposing the move, saying it would "have a negative impact on Kentucky companies at a time when some are just starting to turn the corner."

What is it in the water in Frankfort, that always pulls the Kentucky House down the road to tax hikes?

Additionally, the shortfall will be met with a fantastic effort of wishful thinking and accounting trickery:

"We may shift some money around, but that's not a cut. There are better ways to do some things than what the governor has proposed with the same dollars," he said.

The magical speaker can spend the same amount of money on more things! Usually, this is a skill of someone who writes the contracts but doesn't write the checks...

The shortfalls discussed in Frankfort are not the result of some great fluctuation in revenues. While revenues have declined over the last two years, revenues over the last five years have stayed within 2.5 percent of an $8.45 billion average.

The "billion dollar shortfall" is only a result of chronic overspending. Over the same five years, spending has averaged just under $8.8 billion -- a discrepancy that averages out to $350 million (4 percent) annually.

Here, we made it into a graph (vertical axis in billions of dollars)

Last Friday, Greg Stumbo explained why he felt this action was possible:

But Stumbo said he has received complaints about some non-merit employees having few job responsibilities. House leaders could provide testimony from witnesses to prove their point, he said.

Many have bragged "that they have nothing to do," Stumbo said Friday.