Beshear pushes for major investments in schools and new jobs

FILE - Kentucky Gov. Andy Beshear delivered the State of The Commonwealth address, on Jan. 5, 2022, at the Capitol in Frankfort, Ky. Beshear pitched sweeping budget proposals Thursday, Jan. 13, 2022, as “bold investments” to bolster the state's competitiveness, calling for more spending on economic development, social services and his plan for state-backed universal preschool.

FRANKFORT, Ky. (AP) — Kentucky's Democratic governor pitched sweeping budget proposals Thursday evening as “bold investments” to bolster the state's competitiveness, calling for more spending on economic development, social services and his plan for state-backed universal preschool.

With robust state tax collections fueling massive revenue surpluses, Gov. Andy Beshear said Kentucky should seize the opportunity to add nearly $2 billion for education spending from pre-kindergarten through 12th grade, raise state workers' pay, prepare more industrial development sites to create more jobs and offer preschool for every 4-year-old.

The governor said his proposed budget balances fiscal responsibility with affordable investments that would “forever change the trajectory” of Kentucky.

“It is a values statement, a chance to seize opportunity, a chance to meet this historic moment," he said in his budget speech to lawmakers and a statewide TV audience. "A chance not just to tread water but to lead. My budget is titled ‘Our Future is Now’ because now is when we must make the bold investments. Now is our chance to move this state forward -- not right, not left but forward.”

But the governor's ambitious proposals could clash with Republican plans to capitalize on excess revenues by revamping the state tax code. GOP lawmakers have House and Senate supermajorities and will have the final say on tax-and-spend matters.

House Republicans filed their own budget bill last week that calls for less state spending than Beshear proposed. And House Speaker David Osborne said this week that Kentucky has a “once-in-a-lifetime opportunity” to modernize its tax system though he didn't offer any details. In an appearance on Kentucky Educational Television, Osborne said the House plans to accelerate budget work to allow time to tackle the complexities of tax legislation during the 60-day session.

The governor said Thursday that a tax code overhaul is unnecessary and could be disruptive.

“When people throw out something like tax reform, what they always say is it’s our business climate that we need to improve.” Beshear told reporters ahead of his budget speech. "We just came off the best year of economic development ever in our history.”

Last year, the Bluegrass State posted unprecedented highs for business investments and jobs created. Strong corporate income tax receipts in Kentucky show companies are prospering with the current tax code, Beshear said.

“Most of the time when you’re winning and you’re winning and you’re winning, you don’t change your offense," Beshear said.

Osborne on Thursday called it a clear “philosophical difference.” He said the governor was committed to a “brand of tax and spend politics,” while House Republicans want to update tax laws to propel more growth by letting Kentuckians “keep more of their hard-earned money.”

Republican Senate President Robert Stivers also raised the prospect of tax cuts.

“With all this tax money that we’re sitting here holding, why are we not thinking about giving everybody a pay raise by giving them a tax cut?” Stivers said on KET after the governor's speech.

A governor's budget speech traditionally starts budget work in a legislative session. This time, Beshear's speech came after House Republicans broke with tradition to introduce their own state budget legislation without waiting for the governor's recommendations.

Caught off guard by the maneuver, Beshear responded by rolling out his spending plan throughout the week. Osborne has said lawmakers will “fully consider” the governor’s proposals.

A cornerstone of Beshear’s plan is to guarantee pre-kindergarten learning for every 4-year-old in Kentucky, with the state fully funding the initiative. The cost — $172 million in each year of the next biennium — would amount to a fraction of the state’s revenue surplus, he said.

Beshear’s plan calls for a bigger increase than the House bill for the base per-pupil funding under SEEK, the state’s main K-12 education funding formula. The governor has said his two-year budget would raise the amount to $4,300 in the first year and to $4,500 in the second year. Under the House GOP plan, the amount would go to $4,100 in the first year and $4,200 in the second. The current amount is $4,000.

To promote economic development, the governor said, his budget plan calls for using $250 million to develop a Site Identification and Development program. The goal is to enable state business recruiters to tout more “shovel ready” sites for industrial prospects. Kentucky hit the jackpot with one such mega site last year, when Ford and a partner selected tiny Glendale, Kentucky, to build twin plants to produce batteries to power electric vehicles.

Along with his spending requests, Beshear said his proposed budget would add $250 million to state budget reserves.

The governor conceded he preferred the House Republican plan on at least one issue.

Beshear said Thursday he backed the size of the House GOP's proposed pay raise for state employees. The governor said his budget plan, developed before the GOP bill, called for a 5% increase. The Republican spending plan proposes a 6% raise.

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