TheTimesTribune.com, Corbin, KY

January 23, 2014

Budget calls for $1.9 billion in capital projects


TheTimesTribune.com, Corbin, KY

CORBIN — By Ronnie Ellis

CNHI News Service

By Ronnie Ellis

CNHI News Service

Despite “harmful cuts” to many programs in order to boost funding for K-12 schools, including cutting higher education by 2.5 percent, Gov. Steve Beshear’s proposed budget for the 2014-2016 biennium contains $1.9 billion in bonding for capital projects.

That’s already drawn attention from Republicans, including Senate President Robert Stivers and Senate Majority Damon Thayer, both of whom questioned the level of debt.

Traditionally, lawmakers have used a “rule of thumb” that bonding shouldn’t exceed 6 percent of total General Fund revenues, although they’ve exceeded that limit in the past, including the current budget which expires June 30. Beshear said the $1.9 billion represents about 7.05 percent, but he says that’s a bit misleading too.

Beshear said the calculation includes bonds which haven’t yet been issued when in fact the percentage of revenues represented by any outstanding bonds at any given time has hovered around 5 percent for years.

Many of the projects are for universities and community colleges, one way to soften the blow of yet another round of state funding cuts to higher education.

Dr. Wayne Andrews of Morehead State University said he appreciates the bonding and said MSU badly needs to replace some aging facilities. But at the same time, Andrews said, it is hard for his university to continue providing services to students without raising tuition beyond what students can pay.

He said Morehead State received $49 million in 2008 and this year receives only $41 million “and that continues to fall.” The difference represents a tax on students and their parents in Andrews’ view. He said lawmakers have to come up with more revenues — whether through tax reform or expanded gambling — or universities will have to reduce what they can offer students.

Beshear’s proposed budget contains $984 million in General Fund, taxpayer supported bonds; another $974 million in “agency bonds” — bonds issued by universities and paid off through revenues they generate; those include no taxpayer support. Finally, the proposal calls for $5 million in road bonds.

The General Fund bonds contain three major projects: $56 million for the Kentucky International Convention Center in Louisville; $65 million for the “reinvention” of Rupp Arena and Lexington Convention Center; and $35 million for a new University of Kentucky Law School. (UK will pay off another $35 million in agency bonds for the law school.)

Nearly half — $520.3 million — of the General Fund bonds go for infrastructure improvements at the universities and community colleges. Those include:

-$66.3 million to construct a science building at Eastern Kentucky University;

-$49.6 million to renovate and expand the Student Services Facility at Morehead;

-$48 million to renovate the science campus at Western Kentucky University;

-$10.4 million for Kentucky State University — boiler replacement and distribution lines repair;

-$64.2 for Murray State University — Breathitt Veterinary Center, new science complex;

-$97 million for Northern Kentucky University — renovation of science building and a new health innovation project;

-$45 million for the University of Kentucky (in addition to the $35 million for the law school) – renovate Academic Learning Center;

- $80.5 million for the University of Louisville — new Belknap Campus classroom and academic building;

- $24 million for the Kentucky Community and Technical College System to construct an “advanced manufacturing facility” in Georgetown to help train Toyota employees for an expanded production line.

The budget also authorizes $704 million in agency bonds by the universities for 21 projects (no taxpayer funding):

-EKU, $27 million;

- KSU, $6 million;

-Morehead State, $49 million

-Murray State, $29 million;

-NKU, $15 million;

-UK, $385 million;

-U of L, $162 million;

-WKU, $31 million.

Universities have been allowed to finance projects through their own bonds before but KCTCS was never afforded that authority — until now. Beshear said the $145.5 million in bonds represents “the single largest investment in KCTCS since its formation.”

He said KCTCS came up with the idea and a funding formula in which the individual community and technical colleges would raise 25 percent of needed financing from their own individual communities. The total amount covers one project at each of the 16 KCTCS campuses.

Among those are $7.5 million to renovate the main building on Ashland CTC’s College Drive campus; $21 million for a Maysville CTC/Morehead State University postsecondary center of excellence in Rowan County; and $1.5 million for planning, design and construction of Arts and Humanities Building at Somerset CTC.

The budget could be amended by either chamber of the legislature before its final passage so the list of projects could change.



RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.

That’s already drawn attention from Republicans, including Senate President Robert Stivers and Senate Majority Damon Thayer, both of whom questioned the level of debt.

Traditionally, lawmakers have used a “rule of thumb” that bonding shouldn’t exceed 6 percent of total General Fund revenues, although they’ve exceeded that limit in the past, including the current budget which expires June 30. Beshear said the $1.9 billion represents about 7.05 percent, but he says that’s a bit misleading too.

Beshear said the calculation includes bonds which haven’t yet been issued when in fact the percentage of revenues represented by any outstanding bonds at any given time has hovered around 5 percent for years.

Many of the projects are for universities and community colleges, one way to soften the blow of yet another round of state funding cuts to higher education.

Dr. Wayne Andrews of Morehead State University said he appreciates the bonding and said MSU badly needs to replace some aging facilities. But at the same time, Andrews said, it is hard for his university to continue providing services to students without raising tuition beyond what students can pay.

He said Morehead State received $49 million in 2008 and this year receives only $41 million “and that continues to fall.” The difference represents a tax on students and their parents in Andrews’ view. He said lawmakers have to come up with more revenues — whether through tax reform or expanded gambling — or universities will have to reduce what they can offer students.

Beshear’s proposed budget contains $984 million in General Fund, taxpayer supported bonds; another $974 million in “agency bonds” — bonds issued by universities and paid off through revenues they generate; those include no taxpayer support. Finally, the proposal calls for $5 million in road bonds.

The General Fund bonds contain three major projects: $56 million for the Kentucky International Convention Center in Louisville; $65 million for the “reinvention” of Rupp Arena and Lexington Convention Center; and $35 million for a new University of Kentucky Law School. (UK will pay off another $35 million in agency bonds for the law school.)

Nearly half — $520.3 million — of the General Fund bonds go for infrastructure improvements at the universities and community colleges. Those include:

-$66.3 million to construct a science building at Eastern Kentucky University;

-$49.6 million to renovate and expand the Student Services Facility at Morehead;

-$48 million to renovate the science campus at Western Kentucky University;

-$10.4 million for Kentucky State University — boiler replacement and distribution lines repair;

-$64.2 for Murray State University — Breathitt Veterinary Center, new science complex;

-$97 million for Northern Kentucky University — renovation of science building and a new health innovation project;

-$45 million for the University of Kentucky (in addition to the $35 million for the law school) – renovate Academic Learning Center;

- $80.5 million for the University of Louisville — new Belknap Campus classroom and academic building;

- $24 million for the Kentucky Community and Technical College System to construct an “advanced manufacturing facility” in Georgetown to help train Toyota employees for an expanded production line.

The budget also authorizes $704 million in agency bonds by the universities for 21 projects (no taxpayer funding):

-EKU, $27 million;

- KSU, $6 million;

-Morehead State, $49 million

-Murray State, $29 million;

-NKU, $15 million;

-UK, $385 million;

-U of L, $162 million;

-WKU, $31 million.

Universities have been allowed to finance projects through their own bonds before but KCTCS was never afforded that authority — until now. Beshear said the $145.5 million in bonds represents “the single largest investment in KCTCS since its formation.”

He said KCTCS came up with the idea and a funding formula in which the individual community and technical colleges would raise 25 percent of needed financing from their own individual communities. The total amount covers one project at each of the 16 KCTCS campuses.

Among those are $7.5 million to renovate the main building on Ashland CTC’s College Drive campus; $21 million for a Maysville CTC/Morehead State University postsecondary center of excellence in Rowan County; and $1.5 million for planning, design and construction of Arts and Humanities Building at Somerset CTC.

The budget could be amended by either chamber of the legislature before its final passage so the list of projects could change.



RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.