Gov. Bevin lays out his first budget proposal, protecting some areas while asking for 9 percent cuts in others

01/26/2016 07:06 PM

FRANKFORT — Paying down Kentucky’s pension liabilities provided “the heartbeat of this entire budget,” Gov. Matt Bevin said in his budget address Tuesday.

While the state’s underfunded pension systems for state workers and teachers see considerable funding increases under Bevin’s proposed budget, other agencies face 4.5 percent cuts in the current fiscal year and a 9 percent reduction in fiscal years 2017 and 2018.

But Bevin followed through on his promise to present an austere two-year spending plan, pumping an additional $220 million into the Kentucky Employees Retirement System for most state workers in the biennium in covering more than amounts required by actuaries, plus up to $67.4 million more over the next two years if tax receipts outpace estimates. That fund has less than 18 percent of the money needed to cover its liabilities.

The Kentucky Teachers’ Retirement System is in better shape with a 55.3 percent funded status, but officials there have requested more than $1 billion in the biennium to remain actuarially sound. Bevin’s $21.8 billion budget proposal calls for an additional $659 million for KTRS over the next two years, with up to $67.4 million more if revenues exceed estimates.

“Everything else we care about, including things that I want, things I campaign on, things I’d like to see, things that many of you in this room and in this body would like to see, we cannot afford until we get our financial house in order,” Bevin told a joint session of the General Assembly.

“And until we figure out based on audits and based on agreed upon plans what that looks like, we’re going to not just wait, we’re going to start addressing the problem now.”

Bevin’s speech at points drew lawmakers into standing ovations, at times more Republican than Democrat. GOP legislators stood and applauded Bevin after he indirectly criticized House Speaker Greg Stumbo’s plan to place KTRS on sound financial footing through the sale of $3.3 billion in pension obligation bonds.

“Let me reiterate something we said earlier: we cannot borrow our way out of debt, nor will we try,” Bevin said.

The governor’s budget proposal also includes $39 million more in SEEK funding with more students expected in Kentucky classrooms; raises for state police, corrections and social workers; $4.5 million to alleviate the backlog of untested rape kits at the state crime lab; a $900 increase in police and firefighter incentive pay with state-certified officers like state park rangers and attorney general investigators newly eligible; and funding for 44 new public defenders to help alleviate overwhelming caseloads.

Bevin said his budget proposal does not rely on sweeping excess dollars from various agencies funds, and it includes a $100 million bonding pool for the Education and Workforce Development Cabinet in order to promote growth in high-skill jobs.

Progress on Bevin’s plan to transition health insurance consumers from kynect, the state’s insurance exchange created under the Affordable Care Act, to the federal exchange is shown in his budget proposal, with the Health Benefit Exchange’s spending cut from $24.4 million to $4.8 million in fiscal year 2018.

Bevin said part of the 1 percent assessment on insurers currently supporting kynect will be used to shutter it.

“I want to also dissuade any and all of you from the idea that it’s going to cost $23 million,” he said. “It’s a number people keep repeating as gospel. It’s not true. It will not cost $23 million to get out of this. It will cost a small fraction of that.”

Bevin’s proposal now lies in the hands of the General Assembly, with the House set to make its tweaks to the budget before passing it on to the Senate.

Legislative leaders said they had not pored over details of the proposed biennial spending plan and capital projects budget.

Stumbo, D-Prestonsburg, said much of Bevin’s budget proposal could pass the legislature. The governor told reporters earlier Tuesday that he wouldn’t sign a biennial budget plan that was vastly different from his original request.

“We only move around 2 to 3 percent of what the governor recommends because most of the money we spend in Kentucky is on education and human services,” Stumbo said after the budget address.

“That’s the big chunk of the budget, and then things like corrections. There’s really not a lot of discretionary money that is moved around, so if things work as they historically do, it’s likely that 97 percent or so of the governor’s budget would be accepted.”

Senate President Robert Stivers said he agreed with Bevin’s “overall broad, arching concepts,” but still had questions on specifics, particularly on how the Administrative Office of the Courts will be treated in the budget given Bevin’s pledge to protect prosecutors from cuts and add more public defenders.

“I don’t want to sound parochial in the sense that I practice there and that’s my other job, but it is a real concern that I have,” the Manchester attorney said.

Rep. Brent Yonts, chairman of the House State Government Committee, said he agreed with Bevin’s goals in contributing more General Fund dollars into the state’s pension systems and raising wages for KSP officers.

But he’s among those in the Democrat-led House who see bonding as a way to resolve funding issues at KTRS. He said he wants to see the actual spending plan to see which agencies would be impacted by the cuts, which Bevin said amounted to $650 million in baseline-spending reductions.

“There’s not enough money left in the current budget to pay the full ARC and do all the things that the current budget calls for,” said Yonts, D-Greenville. “… There’s just not enough money. The question is how you create it. He’s given us an outline of how he sees to create it, but I’m not sure you can create it that fast.”

Auditor Mike Harmon, who backed performance audits for Kentucky’s pension programs during his campaign, supported Bevin’s appropriation to conduct external performance audits on the state’s pensions.

“We obviously indicated initially that we wanted to look at doing it,” he said. “We don’t need to duplicate the services, but we are very excited the governor wants to pursue it.”

Pure Politics Managing Editor Nick Storm contributed to this report.


Subscribe to email updates.

Subscribe and get the latest political intelligence delivered to your inbox.