The 1st meeting of the Interim Joint Committee on Appropriations and Revenue was held on Wednesday, June 8, 2005, at 12:00 PM, in the Business, Education and Psychology Building at Northern Kentucky University. Senator Charlie Borders, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Charlie Borders, Co-Chair; Representative Harry Moberly Jr, Co-Chair; Senators David E Boswell, Tom Buford, Carroll Gibson, Denise Harper Angel, Ernie Harris, Dan Kelly, Robert J (Bob) Leeper, Gary Tapp, Elizabeth Tori, and Jack Westwood; Representatives Royce W Adams, Joe Barrows, Dwight D Butler, Larry Clark, James R Comer Jr, Jesse Crenshaw, Bob M DeWeese, Jon Draud, Danny R Ford, Joni L Jenkins, Jimmie Lee, Mary Lou Marzian, Lonnie Napier, Fred Nesler, Stephen R Nunn, Charles L Siler, Arnold Simpson, John Will Stacy, Tommy Turner, John Vincent, and Jim Wayne.
Guests: Donald P. Cetrulo, Paul Salamanca, Dr. Jim Votruba, Northern Kentucky University, Mr. G. Edward Hughes, Gateway Community College, Dr. Larry Lynch, Consensus Forecasting Group, and Mr. Gene Zaparanick-Brown, Office of the State Budget Director.
LRC Staff: Pam Thomas, Charlotte Quarles, John Scott, Nicole Anderson, and Sheri Mahan.
Senator Borders welcomed the members and asked for a motion for approval of the minutes from the previous meeting. Senator Boswell moved to approve the minutes. Second by Representative Clark. Motion carried by voice vote.
Mr. Donald Cetrulo and Mr. Paul Salamanca discussed the Kentucky Supreme Court decision in Fletcher v. Stumbo. Mr. Cetrulo stated it was the Attorney General's position that the Governor could not suspend statutes. Mr. Cetrulo discussed whether the governor has the authority to spend general fund money without specific appropriations. He stated that the Fletcher decision limits the ability of the courts and governor to spend funds absent legislative appropriations. He commented that the retroactive suspension of statutes by the General Assembly may now be suspect because of the decision.
Mr. Salamanca stated that the Fletcher v. Stumbo decision is a significant victory for the General Assembly. He stated that it confirms that the power of the General Assembly over the appropriation of state funds is virtually exclusive. It also rejected the idea of executive branch emergency powers to spend state monies. He also said that the decision affirms that the General Assembly alone has the power to suspend statutes.
Representative Nunn thanked both attorneys and also thanked Phil Shepherd and Walter Baker for their involvement in the case. He stated that he hoped the General Assembly has reached a point where similar matters in the future will be more easily resolved.
Representative Barrows thanked both attorneys for their efforts. He said that he believes that the decision is strong enough that it will encourage cooperation in the budget process in the future.
Senator Kelly asked if either attorney thinks that a bill or resolution could be passed that would allow a continuation of a present budget in case of another budget deadlock.
Next, Dr. Jim Vortruba of Northern Kentucky University and Mr. Edward Hughes of Gateway Community College welcomed the committee to Northern Kentucky University (NKU). Mr. Hughes briefly discussed the role of the community college in Kentucky. He highlighted the importance of workforce development and providing access to post secondary education to all Kentuckians. He discussed the partnership between Gateway Community College and NKU, and the need for additional funding to provide better services to the community.
Dr. Vortruba discussed the importance of regional colleges in regional economic development. He stated that communities require much from their regional university. Regional stewardship is becoming increasingly important to communities. They desire their local university to be full partners in helping strengthen primary and secondary education, expand economic development, enhance local government effectiveness, nurture a non-profit sector, expand the arts and contribute to regional planning and economic development. He said that these goals could not be fully accomplished without significant funding streams at the state or federal level. If the state will make the investment in regional stewardship, local communities will be better prepared to reach their full potential, benefiting the whole Commonwealth. The challenge it so harness the full capacity of our universities to support Kentucky's economic and social progress.
Representative Moberly thanked Dr. Votruba for his presentation and stated that he feels regional stewardship is an integral part of regional social and economic development.
Finally, Dr. Larry Lynch of the Consensus Forecasting Group and Mr. Gene Zaparanick-Brown of the Office of the State Budget Director gave a report on state revenue receipts and revenue forecast. Dr. Lynch provided a general economic and revenue update. He stated that the actual Kentucky revenue growth from April 04 to April 05 has been 8.7%, which is an increase from the forecasted 6.8% growth. He said that Kentucky's job growth has fallen behind the U.S., but that Kentucky's manufacturing jobs are increasing well ahead of the U.S. average. Kentucky's unemployment rate has been rising and is now above the U.S. rate. Dr. Lynch stated that the major General Fund taxes year to date are on the increase, and that revenue growth may be the best indicator of Kentucky's economy.
Dr. Lynch stated that the Governor's Office of Economic Analysis has estimated a General Fund surplus of $96 million for fiscal year 2005. The Consensus Forecasting Group has estimated modest economic growth, falling oil prices and additional General Fund revenues of $232 million for fiscal year 2006. The group will meet during the summer to consider the effects of HB 272 and will revisit the fiscal year 2006 estimate at that time.
Mr. Gene Zaparanick-Brown of the Office of the State Budget Director gave a report on state revenue receipts for April 2005. He stated that the General Fund total for April 2004 was $743.4 million. The total for April 2005 is $828.0 million, which is an increase of $11.4 million over last year. He stated that the Road Fund total for April 2004 was $98.2 million. The total for April 2005 is $99.1 million, which is an increase of $0.9 million over last year.
Next, he provided details of the General Fund percent growth based on the April 2005 receipts and the January Consensus Forecasting Group estimates including the impact of HB 272. He stated that the percentage growth based on the forecast was 6.8%, while the year to date growth was an actual 8.7%. The growth needed for the rest of the year would be a negative 3.1%. He provided the same information concerning the Road Fund, stating that the percentage growth based on the forecast was 0.3%, while the year to date growth was an actual 0.0%. The growth needed for the rest of the year would be 1.5%.
Senator Borders thanked all the presenters for their testimony. There being no further business, the meeting was adjourned at 1:25 p.m.
A copy of all meeting materials is available in the Legislative Research Commission Library.