Call to Order and Roll Call
The 4th meeting of the Interim Joint Committee on Appropriations and Revenue was held on Thursday, September 25, 2014, at 1:00 PM, in Paducah, Kentucky. Senator Bob Leeper, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Bob Leeper, Co-Chair; Representative Rick Rand, Co-Chair; Senators Tom Buford, Denise Harper Angel, Ernie Harris, and Stan Humphries; Representatives Dwight D. Butler, John Carney, Myron Dossett, Kelly Flood, Martha Jane King, Steven Rudy, Arnold Simpson, Jim Stewart III, and Jill York.
Guests: Ms. Sandra Wilson, President, Paducah Chamber of Commerce; Dr. Barbara Veazey, President of West Kentucky Community and Technical College; Mayor Gayle Kaler, City of Paducah; Mr. Charles Martin, Senior Vice President of Paducah Economic Development; Ms. Jane C. Driskell, State Budget Director; Mr. John Hicks, Deputy State Budget Director, Office for Policy and Management; and Greg Harkenrider, Deputy Executive Director for Financial Analysis.
LRC Staff: Pam Thomas, John Scott, and Spring Emerson.
Welcome to Paducah
Ms. Sandra Wilson, President of the Paducah Chamber of Commerce, Dr. Barbara Veazey, President of West Kentucky Community and Technical College, Mayor Gayle Kaler of the City of Paducah, and Mr. Charles Martin, Senior Vice President of Paducah Economic Development welcomed the committee to Paducah. Mayor Kaler discussed several successful projects in the city, including a hotel, a boat launch and several road projects. Dr. Veazey discussed several recent accomplishments and awards received by West Kentucky Community and Technical College. She discussed the Community Scholarship program, the Community College Excellence program, and the Paducah School of Art and Design. Mr. Martin discussed the closing of the Paducah Gaseous Diffusion Plant. He reviewed the plant’s history, and economic impact to the region. The US Department of Energy owns the plant and it is currently in the clean up phase of closure. He discussed coal and natural gas electricity generation as compared to nuclear electricity generation, and the importance of zero carbon emission generation.
In response to questions from Senator Harris, Dr. Veasey said that the college has over 400 programs that allow a student to get certification or an eventual degree. The allied health programs are the most popular degrees offered by the college.
Chairman Rand thanked Chairman Leeper for his years of service in the General Assembly.
FY 2013 – 2014 year-end summary
Ms. Jane C. Driskell, State Budget Director, Mr. John Hicks, Deputy State Budget Director of the Office for Policy and Management, and Greg Harkenrider, Deputy Executive Director for Financial Analysis discussed the FY 2013 – 2014 yearend financial report for the General Fund and Road Fund. They provided an outlook for FY 2015. Ms. Driskell stated that there was a $90.8 million revenue shortfall for FY 2014, with individual income tax receipts $63 million under the estimate and Corporate/LLET tax receipts $17.7 less than estimated. Property tax receipts were down $6.5 million, and coal severance and cigarette taxes were both $3.1 million below the estimate. Sales tax collections were $31.8 million more than the estimate.
Ms. Driskell discussed the economy during FY 2014 stating that the difficult winter slowed growth during the first half of 2014. Overall state personal income tax collections fell 7.1 percent in third quarter as taxpayers shifted income from tax year 2013 to tax year 2012 to minimize their expected federal tax liability. Ms. Driskell provided further details of General Fund receipts, comparing growth rates for the past three fiscal years, and comparing actual receipts to the official estimate.
Ms. Driskell discussed the General Fund budget reduction plan requirements, detailing how the notification process works and outlining the steps taken in implementing a reduction plan. Some savings were already included in the enacted budget and there was very little flexibility because of the timing of the shortfall. The actions taken to address the shortfall included $50 million in transfers of excess unappropriated restricted funds, $4.8 million in General Fund reductions, $11.9 million General Fund lapses, $3 million in authorized fund transfers in excess of those budgeted, and a $21.2 million transfer from the Budget Reserve Trust Fund. She provided further details regarding the transfers from unappropriated excess restricted funds.
Ms. Driskell discussed FY 2014 Road Fund receipts, stating that the receipts were 1.4 percent below the official estimate, which was a $22 million shortfall. The shortfall was addressed through the Road Fund budget reduction plan. Actions taken to address the shortfall included a dedicated fuels tax adjustment, Road Fund appropriation reductions, authorized fund transfers in excess of those budgeted, and capturing Road Fund lapses.
Ms. Driskell addressed the outlook for future General Fund receipts, which needs to grow by 3.9 percent to meet the official estimate for the fiscal year. She discussed the economic difficulties faces by states nationwide. The impact of cumulative cuts to the executive budget has been $1.6 billion over the past seven years. Many agencies have experienced cuts of 41 percent since FY 2008, with an impact of service delays, more employee attritions, and loss of federal funds. She addressed the outlook for future Road Fund receipts, forecasting a decline in FY 2015 due to the implementation of the new car trade-in credit, a decline in taxable gallons of fuels, and motor fuel and vehicle usage decline.
In response to a question from Senator Leeper, Ms. Driskell said that in general, west Kentucky coal in currently performing better than east Kentucky coal. Mr. Harkenrider said that receipts show a slight decrease, with demand and prices stabilizing for west Kentucky coal, which is preferred in scrubbed electricity generation.
Chairman Leeper thanked everyone for visiting Paducah. There being no further business, the meeting was adjourned at 2:20 p.m.