No pay raises. Kentucky lawmakers pass a one-year state budget with no new spending.
With Kentucky’s economy thrown into chaos by the novel coronavirus and the shutdown of normal life, the General Assembly on Wednesday approved a quickly written one-year state budget that will maintain most government spending at current levels while allowing for cuts as necessary.
Gone are the pay raises Democratic Gov. Andy Beshear originally wanted for school teachers and state employees, the latter of whom have not seen their wages improved for most of the last decade. Also lost are small funding increases that had been proposed for K-12 schools and the state’s universities.
Additionally, the budget includes language allowing certain state contributions to the teacher pension system to be reduced as necessary should state revenue fall more than 5 percent short of projections.
“The uncertainty swirling our society both in the public health and economic sectors is simply unparalleled to what anyone in this chamber and, by and large, in society has ever dealt with,” Senate budget chairman Chris McDaniel, R-Taylor Mill, said in a floor speech. “And it’s driven decisions that we otherwise would not even have contemplated making, but were forced to as a result.”
In ordinary times, the legislature would have written a two-year state budget to take Kentucky to June 30, 2022. But thousands of businesses have closed and tens of thousands of Kentuckians are suddenly jobless. Lawmakers say nobody realistically can forecast how much tax money the state government will collect over the next three months, much less a year from now.
Lawmakers have not shown much interest this year in seeking new sources of revenue other than a slimmed-down vaping tax that could raise an estimated $25 million over the next two years. Beshear’s recommendations for legalized sports betting and a broader tobacco tax did not win sufficient support.
Senate Minority Leader Morgan McGarvey, D-Louisville, said he understood why this budget bill is painfully tight. But McGarvey protested that the General Assembly has squandered opportunities over the past decade to enact tax reform, approve expanded gambling and take other steps that would raise more state revenue, better preparing Kentucky for the pandemic crisis.
“Since 2008, when the economy collapsed the last time, the cupboard has been bare and we haven’t restocked it,” McGarvey told his Senate colleagues.
The budget bill now goes to Beshear, who can sign the entire measure into law, veto individual sections or veto the whole bill. Lawmakers have until April 15 to return to the Capitol and override vetoes.
Among other things, the $11.3 million General Fund budget:
▪ Provides a base of $4,000 per pupil in the state’s SEEK funding formula for K-12 schools, about the same as at present. Kentucky already has fallen behind most other states in its support for its public school districts since the last recession in inflation-adjusted dollars. Beshear, the House and the Senate originally proposed more for schools in their own separate budget bills.
Kentucky had been on track to provide “an unprecedented level of funding” for its schools, Senate Majority Leader Damon Thayer, R-Georgetown, said Wednesday. “But then the bottom fell out. And we had to turn on a dime.”
▪ Does not include money for textbooks or other instructional materials at K-12 schools, and it does not increase funding to help school districts pay for preschool or transportation costs. Those items were covered to some degree in most earlier versions of the budget.
▪ Holds funding flat for higher education and keeps in place the controversial “performance-based” system in which the universities compete against each other for dollars based on a set of measurement criteria. Former Republican Gov. Matt Bevin championed this system, but Beshear opposes it.
▪ Provides pension assistance for “quasi-governmental” agencies that work with state government, such as local health departments, regional universities and mental health nonprofits. The budget has funds to help these agencies with their pension contributions and it caps contribution levels at 49 percent of payroll for another year rather than let rates rise to 93 percent, as previously was expected.
▪ Fully funds public pension contributions for state employees at the Kentucky Retirement Systems and school teachers at the Teachers’ Retirement System of Kentucky.
But the $1.2 billion in teacher pension system funding comes with a catch if revenue falls short. Less than half of the money is required by law to help school districts pay their pension contributions as employers. That sum is guaranteed. Most of the rest is meant to help TRS pay down its unfunded pension liability. That sum can be reduced as necessary “in the event of a revenue shortfall of five percent or less,” the budget bill states.
That latter amount is not statutorily required to be paid to TRS, McDaniel said, so it can serve as “a shock absorber of money for the governor to work with” if budget cuts are needed.
“It doesn’t short-fund anything,” McDaniel said.
▪ Provides no state aid for public libraries, a move expected to hit small rural libraries especially hard.
▪ Provides no money to hire additional social workers at the Cabinet for Health and Family Services. In January, Beshear proposed hiring 350 social workers to help Kentucky with its epidemic of child abuse and neglect, and the House and Senate originally included sufficient funds in their budgets to hire smaller numbers. But this item did not make the final cut.
▪ Provides no money to create additional waiver slots in two state programs that offer community-based care for individuals with disabilities, known as the Michelle P. and the Supports for Community Living. There are thousands of Kentuckians on waiting lists to enter those programs. Beshear proposed adding 600 new slots in those programs.
▪ Puts some limits on the federal COVID-19 relief money that Beshear is expected to get from Washington in coming days. The state could not create any new jobs or programs with the money that could not be entirely sustained by federal funds going forward, the budget bill states. This would prohibit the creation of a new agency that state revenue might have to support later.
▪ Relies on $130 million in fund transfers, or shifting money from other public accounts. That’s nearly half as much as Beshear did in his own budget proposal.
Unlike Beshear’s plan, McDaniel said, the final budget bill does not touch the accounts held by professional and occupational boards and commissions. Lawmakers worried that those professions and occupations — including nurses, hairdressers, real estate agents and others — already are stressed by the health crisis and economic shutdown, and they don’t need to worry about a possible hike in their state licensing fees because of money lost to fund transfers, he said.
▪ Includes $45 million in additional General Fund spending for the current fiscal year that ends June 30. That includes extra money for state prisons; state payments to local jails; state parks; the Nurse Call System at the Department of Veterans Affairs; and the Kentucky Poison Control Center, which is running the COVID-19 Hotline.
By John Cheves and Daniel Desrochers