Kentucky's long-term cost to balance budget: At least $66.3 million
07/12/2010 04:23 PM
The Kentucky government will pay an extra $66. 3 million over the next decade to skip making debt payments this year and free up about $220 million in cash, state finance records show.
The General Assembly approved a $17.3 billion two-year spending bill during the May special session that included the refinancing moves as a tool to balance the budget.
But lawmakers told cn|2 Politics they didn’t know what the long-term price tag for the move would be until the bond debt was refinanced on Wall Street.
“This is the first I’ve heard that it’s that much,” said Rep. Rick Rand, a Bedford Democrat and chairman of the House appropriations committee. “But it’s my understanding that the savings they’re going to book is more than what they allowed for in the budget.”
About $80 million of road bonds, which are funded largely by the gas tax, were supposed to be paid off July 1 and will now come due between 2013 and 2017. And a series of construction project bonds — covered by the state’s general fund — were expected to cost about $140 million over the next seven months. The final payments for those bonds have been pushed back to between 2019 and 2021.
To delay those payments Kentucky will pay an extra $56.65 million on the general fund construction bonds and another $9.63 million more than on road bonds, according to data cn|2 Politics requested from the state Finance and Administration Cabinet.
“It’s a cash flow savings measure to help bridge us to better economic times,” said Brett Antle, deputy executive director of the state’s office of financial management.
Legislators allowed Gov. Steve Beshear’s administration to make a similar move as part of the 2008-2010 budget.
Rep. Bill Farmer, a Lexington Republican, said it is dangerous for the state to rely on pushing back paying its bills, which only increases the financial burden on future budgets.
“I didn’t realize I was in Greece,” Farmer said.
Rand said the state’s revenue shortfall has forced lawmakers to take such steps.
“I wouldn’t think it’s something we want to do on a regular basis,” he said. “It’s something we did in the ’08 budget and this one. But it’s not a good long-term strategy.”
Already one Wall Street rating agency downgraded Kentucky’s grade this summer citing its reliance on certain budgeting moves, including the pushing back its debt.
The refinancing, along with other key measures to free up money in the budget, will be main topics at a July 22 House appropriations and revenue committee meeting, Rand said.
- Ryan Alessi
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