Session sets stage for economic recovery

As my colleagues and I began the second week of the 2009 Extraordinary Session, we were still uncertain as to if we would be able to accomplish our foremost mission, addressing our almost $1 billion budget shortfall. With the Senate approving one version of the budget and the House approving vastly a different one, many were unsure about the bill’s fate.  Yet, after only one day, the conference committee emerged from negotiations with two bills geared towards economic recovery and fiscal discipline.

 In an effort to spur economic development and provide a launch pad for mega-transportation projects, the revamped House Bill 3 was approved by an 86-10 vote.   This final version of the legislation includes many provisions of the original proposal, such as incentives aimed at attracting a Breeders’ Cup Challenge race to Louisville, tax-free renovation expenses at the Kentucky Speedway to prepare for a NASCAR Sprint Cup Race, $75 million added to existing incentives to encourage the expansion of Kentucky based small businesses and tax credits for the Commonwealth’s film industry.

Conferees on the conference committee added a provision that will provide a tax credit of up to $5,000 for individuals who purchase new homes in the hopes this would aid job creation.  This credit is only applicable for one year and will be capped at $25 million. I am hopeful the one year new home purchase tax credit will assist my constituents in Boyle and Washington County, help improve the housing market and ease some of the burden for those involved in the construction industry.

Further additions include an income tax exemption for active duty military members.  This exemption will greatly help to level the playing field between Kentucky and Tennessee as a potential place of residence for the soldiers stationed at Fort Campbell, with a majority currently choosing to reside in Tennessee which has no state income tax.  I was greatly honored to vote for legislation that will extend a tax exemption to the brave men and women who defend this state and this country.

Also included is a tax credit to stimulate the lagging car industry. Individuals who trade in a used car to purchase another used car or new car will pay sales taxes based solely on the difference of the value between the two automobiles. Similar to the home-buyers tax credit, this practice will be in effect for one year and limited to $25 million.

The largest, and most contentious, addition to House Bill 3 recreates the bridges bill, which will establish both a funding mechanism and authority for high dollar transportation projects, such as the $4.1 billion Ohio River Bridges project.  Dissent came from most members of the Northern Kentucky Caucus who are adamantly opposed to any legislation which opens the possibility of tolls being imposed on the overly congested Brent Spence Bridge.

Ironically enough, the last day of this Extraordinary Session afforded us the opportunity to vote on the very legislation we were originally called to address, the restructuring of our state’s budget.  In total, the House Bill 4 compromise, approved 97-0, utilizes approximately $740 million federal stimulus dollars while reducing previously appropriated project funding by $200 million to mend our shortfall.

Each branch of state government will also take a hit, with most executive branch agencies being cut by 2.6 percent.  The judicial branch will see $22.6 million erased from their budget while the legislative branch will give back more than $2.6 million.  By doing so, state employees will not be forced to take unpaid holidays as the Governor had requested, the woefully underfunded budgets for prosecutors and public defenders would experience a financial transfusion and County PVA’s budgets will not be touched. Moreover, K-12 SEEK funding, colleges and universities, local jail funding and Medicaid will remain fully funded and protected.

Two provisions which were part of the original language to House Bill 3 were transplanted to the budget bill.  These include granting the University of Kentucky permission to use private money to build new baseball and football facilities on campus, as well as allowing the Commonwealth to lease land to construct a cell-battery plant in Hardin County.

Although this Extraordinary Legislative Session began shrouded in controversy, our eight days in Frankfort produced viable solutions that will allow our Commonwealth to continue treading through these turbulent times.  While we have not found a permanent solution to our economic woes, I believe we have taken the first important steps towards laying the groundwork that will enable us to regain our financial footing.

Over the next few months, my colleagues and I will resume interim committee meetings, with our work undoubtedly focused on legislation for the 2010 Regular Session.  The schedule for these meeting can be found on the LRC website at www.lrc.ky.gov, or by calling 1-800-633-9650.  In the meantime, I invite you to stay contacted with me.  I am always available at home at, you may leave a message for me by calling 1-800-372-7181 or you may reach me via e-mail at mike.harmon@lrc.ky.gov.

Mike Harmon (R-Junction City) is a state representative in the 54th District.