Happy Holiday's from your friends here at Government Strategies.  Our present to you is a preview of the 2009 Session. Enjoy! 

This could end up being the most important matter of the session, as it may have an impact on every bill and issue that comes before the General Assembly for this session and for years to come.

 

As is always the case the House and Senate will elect leadership the first week of the legislative calendar in what is known as the Organizational Session. In most cases, leadership is stable with perhaps some change due to retirement or other turnover.  The situation is very different in the Kentucky House this year. 

 

Four of the five House Majority Leadership posts are being contested; the only one without public opposition is Majority Floor Leader Rocky Adkins. Here is a list of the posts and the names that have been mentioned in the newspapers that are interested in running:

 

Speaker of the House – Current Speaker Jody Richards is being challenged by Rep. Greg Stumbo, the former AG and Majority Floor Leader.

 

Speaker Pro Tem- Current Speaker Pro Tem Larry Clark has opposition from Rep. Joni Jenkins.

 

Majority Floor Leader – Rocky Adkins unopposed, at this time.

 

Majority Whip – This office is vacant, because of the retirement of Rep. Rob Wilkey. Rep. Tommy Thompson and Rep. John Will Stacy are openly campaigning for the spot, and there may be others interested.

 

Majority Caucus Chair – Rep. Charlie Hoffman currently holds the post, but is facing a challenge from Rep. Bob Damron, who Hoffman unseated in 2007.

 

The issue for the session over and above who will occupy the top leadership offices is how the changes at the top will reverberate through the committee system. Regardless who wins there will likely be changes in committee chairs, changes in the makeup of key committees, and changes in how the House functions.  It is for this reason that all House members are studying the tea leaves to try to figure out these races.

No prediction, no way.  We’re not that fearless.

Regardless of who wins it is important that there are at least three members of House Democrat leadership that can stick together and make the process work. We believe that will happen.

The Commonwealth is facing a nearly $500 million shortfall in the first year of this biennium. This is on top of a 500 million structural in-balance in the current budget that is 12 % less than the previous budget cycle for most state agencies.  If the economy continues to sag it is possible that the second fiscal year of this biennium ending June 30, 2010 could be even worse.

 

Governor Beshear has put forth his plan to try and reduce the deficit, which basically makes $140 million in cuts to the Executive Branch, patches the hole with $220 million from rainy day and restricted fund monies, and askes the legislature to pass a 70 cent increase on cigarettes and double the taxes on other tobacco products to raise $80 million for the next six months.

 

So the real question facing the 2009 session is what does the legislature do about money?

 

The Governor has asked them to raise taxes on tobacco, but can the General Assembly find enough votes for any tax much less 70 cents on cigarettes? What if the second year of this biennium looks as bad or worse as this year, will a cigarette tax increase be enough to fill the gap?

It is difficult to see the legislature passing a 70 cent tax increase on cigarettes. Maybe a lower number like 25 cents may be more palatable. With the economy slumping it is unlikely that it will produce enough revenue long term. Look for some discussion and possible consideration of a major tax proposal that will solve the problem long term, like possibly an increase in the sales tax. 

The Governor has publicly discussed the possibility of a special session in January. In private meetings with business leaders he has been more aggressive in saying that we have to have a special session to raise revenue.

 

Even though the legislature will be in regular session in February, the Governor wants to avoid the possible restrictions of odd-year sessions that require a super majority in each chamber on revenue matters.

 

To be successful, the Governor needs to have the Democratic House Leadership in his corner on the revenue issue. Unfortunately, he will have to wait until after the first week of the session to see how the leadership races turn out to see who he will be dealing with.

The Governor really wants a Special Session and we believe there is a possibility he will call one for mid-January. The tough part isn’t calling it, but getting a consensus bill that all sides can agree on. The Senate Republicans are currently in a position of no new taxes. The House Leadership is a question mark until after the leadership races are decided and then right after a tough leadership fight will be thrown into a special session to raise taxes. Tough situation for all involved.

What happened to gaming? This was THE issue in the 2008 Session and a center plank in Governor Beshear’s 2007 gubernatorial election victory. The issue never got out of the gates in 2008, and since then other issues and events like the House Leadership races, the 2008 elections, and the Special Session on State Employee Pensions filled the vacuum. Now the state’s financial crisis has center stage and until that is addressed in some way it is likely to hold on.

 

 However, it is likely that there will be a push for some form of expanded gaming in the 2009 Session. There are even a few legislators who would prefer to see gaming as the answer to our revenue troubles before we pass new taxes. Rep. Tom Burch has pre-filed a bill to allow video lottery terminals at racetracks, a similar concept that has been touted by Rep. Greg Stumbo.

This issue is definitely not dead, but there are so many hurdles that it has to run in 2009 it is difficult to see it passing although it is possible to make some significant progress. In addition, it could not be implemented in time to plug the current hole in the budget; however it could help in the 2010 cycle.   

Kentucky’s road fund is also broke and the transportation plan is a billion plus over funded not taking into account the four mega projects that are being planned; the Ohio River Bridges in Louisville, the Henderson Bridge and I-69, the Brent Spence Bridge in Northern Kentucky and I-66.  None of the four can be funded with traditional funds.  They will take tolls combined with possible out of the box thinking like design/build/finance or other public private partnership type mechanisms.  Legislation has been pre-filed that will allow for the creation of funding authorities to explore alternative funding mechanisms.

Legislation will pass allowing for public funding authorities.  The legislation will provide for state and local authorities.  Tolling will be included along with design build.  The legislation will prohibit the sell of assets.

We have passed energy legislation the last three sessions including a special session.  Governor Beshear has released a comprehensive energy plan that dedicates a lot of attention, but few resources to coal to gas projects.  They do not address the carbon sequestration problem nor do they appropriate any money.

The energy proposal needs funding and the funding is not there unless a major new tax increase is sought.  This one will need more federal funds.  The state cannot manage on its own.