By Joe Biesk
The Associated Press

FRANKFORT - State lawmakers began heated budget negotiations Wednesday as budgeters argued over whether to deal with Gov. Ernie Fletcher's tax proposal separately or within the budget legislation.

House and Senate budget conferees spent most of the day in budget talks, but finished the day no closer to a compromise than when they had started. Conferees spent most of the day at an impasse over what to do about Fletcher's tax plan.

House Democrats on the committee said they wanted to negotiate a spending plan before moving on to deal with the issue of overhauling the tax code.

But Senate Republicans wanted conferees to decide on the revenue plan first. They want "tax modernization" in the form of the governor's proposed tax plan to be part of any budget negotiations.

While House Democrats maintained that resolving those issues was not necessary before negotiating a budget, Senate Republicans disagreed.

"It's irresponsible not to talk about the revenue that is available," Senate President David Williams told reporters.

Still, House Democrats said they want to separate the matters into two bills: one for the budget and one for a tax plan. They said they want to deal first with the budget - minus any talk of the governor's tax plan - and discuss taxes later.

"The House position is we either do two separate issues or we're not going to proceed," House Speaker Pro Tem Larry Clark, D-Louisville, said at the negotiating table. "It's that simple."

House Democrats were posturing, Williams said.

"They're playing the worst sort of gamesmanship with the future of Kentucky," Williams said. "They're more interested in the next election than they are the next generation."

But House Speaker Jody Richards said Republicans were being unreasonable.

"This is ludicrous that we've sat here all day and haven't been able to move forward," he said. "... We're wasting time."

Senate Republicans passed a state budget that includes Fletcher's proposed tax plan. They maintain the budget bill that passed the House would not be balanced without an agreement to change the tax code.

Fletcher's proposal, which combines a series of tax cuts and increases, is supposed to be a "revenue neutral" plan. The governor says his plan would stimulate the economy and create jobs.

Among other things, the governor's plan would reduce the income tax on low-income people. It would also cut the taxes that individual corporations pay, but more corporations would have to pay taxes.

The governor's plan would also raise taxes on tobacco and alcohol and boost taxes on some telecommunications services, including satellite television.

The state also has to deal with two court rulings that could change the amount of revenue available to spend, Senate Republicans said.

A recent Franklin County Circuit Court ruling said satellite TV users must pay the same taxes on their service as cable subscribers. Another court decision - which came from a case brought by Illinois Tool Works - struck down a tax credit available to Kentucky-based corporations but not to those with out-of-state headquarters.

Sen. Richie Sanders, R-Franklin, said he hoped the committee could agree on a plan by tonight to avoid working on Good Friday. Talks were scheduled to resume this morning.