House spares education, other agencies from cuts while paying full pension contributions as its version of budget passes committee

03/15/2016 11:10 PM

FRANKFORT — The House Appropriations and Revenue Committee passed the lower chamber’s $21.7 billion biennial spending proposal on Tuesday, a day before a crucial floor vote on the 49th day of the 60-day budget session.

The most recent iteration of House Bill 303 would spare areas of K-12 and higher education from cuts along with a handful of state agencies, including those operated by constitutional officers.

The Democrat-led House kept in place Gov. Matt Bevin’s call for contributions to the severely underfunded Kentucky Employees Retirement System above those required to remain actuarially sound, appropriating an extra $89.3 million to the pension that’s less than 18 percent funded.

But budget writers scrapped the first-year governor’s $500 million “permanent” fund for future pension payments, instead diverting the $500 million from the state employees’ Health Insurance Trust Fund to make actuarially required contributions to the Kentucky Teachers’ Retirement System totaling more than $1 billion.

Bevin’s proposed $100 million bond pool for workforce development projects were also cut from the House’s budget. Democrats allocated $33 million in the biennium for the Work Ready Kentucky Scholarship Program, a proposal that would provide free tuition for many Kentucky Community and Technical College System students enrolling straight out of in-state high schools.

“When we started down this road, it was my hope if we could accomplish a few goals with the House budget, and those goals I believe this budget will meet,” said Rep. Rick Rand, a Bedford Democrat who chairs the budget committee.

Lawmakers of both parties praised the version of HB 303 that cleared the budget committee, although only one Republican, Rep. Jim Stewart of Flat Lick, joined 20 Democrats in approving the legislation 21-0. Thirteen Republicans voted “pass,” with most citing a lack of time to thoroughly review the amended document.

Rand noted that the amended two-year spending plan includes a number of provisions recommended by Bevin, such as money for pay increases for Kentucky State Police, social workers and corrections officers, funding to hire more public defenders, and additional funds to help mental health boards make higher pension contributions.

HB 303 also includes language to expand preschool eligibility to 200 percent of the federal poverty level and $7.5 million in each year of the biennium to promote public-private partnerships for all-day childcare programs through a Cabinet for Health and Family Services grant program.

Rand added that HB 303 has less debt than Bevin’s original proposal with $548.6 million in total debt, a 5.82 percent debt ratio, compared to $624.6 million in debt, a 5.88 percent debt ratio, and the proposal is projected to lead to a $283 rainy day fund. Bevin’s spending plan estimated a $523.8 budget reserve trust by the end of the biennium, and either amount would be the most since 2001.

The legislation does not include Bevin’s calls for complete performance-based funding for postsecondary institutions and to eliminate the state’s prevailing wage law.

Other agencies that would be saved from 4.5 percent cuts in the current fiscal year and 9 percent over the biennium in the House’s budget include the Executive Branch Ethics Commission, the Commission on Human Rights, the Kentucky Registry of Election Finance and Kentucky Educational Television.

While HB 303 calls for $2.5 million less in transfers from the Kentucky Heritage Land Conservation Fund and shields receipts from the sale of nature license plates from that raid, it also includes fund transfers totaling about $27 million more than those in Bevin’s version of the budget. Nearly $10 million of that, from the Commonwealth Office of Technology’s computer services fund, will restore proposed cuts for the Department of Revenue and property valuation administrators.

The House’s budget bill also projects higher tax receipts than the conservative outlook in Bevin’s spending plan and transitions coal severance funds to coal-producing counties over a four-year period.

Jessica Ditto, Bevin’s spokeswoman, said in a statement that the administration is glad to see movement on the budget in the last weeks of the session as Bevin “looks forward to working with the House and Senate as the process moves forward, to ensure the ultimate enactment of a fiscally responsible budget.”

“We are pleased to see that they clearly got the message from the people of Kentucky who are fed up with mortgaging their children’s future through bonding billions of new debt,” Ditto said.

“And yet, their proposed budget once again continues the bad habit of spending one-time funds for recurring expenses. With little regard for the future, it also strips away the permanent fund dedicated for pensions and unforeseen emergencies.”

House Speaker Greg Stumbo, D-Prestonsburg, predicted that voting against HB 303 on Wednesday will be “pretty hard” for Republicans on Wednesday.

“I don’t know why one would not want to vote for it,” he said. “We restored the cuts to education. We kept kind of the premise of what the governor had proposed. I’ve always said he did a good job, I think, on trying to address the pension situation, and so we built on that.”

Republicans on the budget committee commended Rand and other Democrats’ work on the budget, with some suggesting that they could vote for HB 303 on the floor once they examine the proposal.

“I appreciate the effort of the majority to stay within the parameters and the vision of the governor, but at this time until I can get my arms fully around all the differences and see what’s in it — I may change my mind tomorrow, but as of today I’m going to pass,” said Rep. Steven Rudy, a Paducah Republican who presented the minority caucus’s budget recommendations on Tuesday.

The House Appropriations and Revenue Committee also passed the legislative and judicial branch budgets, the biennial revenue bill and House Bill 1.

HB 1, sponsored by Stumbo, originally called for the sale of $3.3 billion in bonds for KTRS to give the state time to develop a plan for full pension contributions to the system.

The Republican-led Senate balked at the same and lesser proposals last year, and the budget committee amended this year’s legislation to simply call for complete actuarially required payments to KTRS.

Stumbo said the amended version of HB 1 wasn’t the result of Bevin’s opposition to bonding, but rather $500 million available in the state employees’ insurance fund to cover KTRS in the upcoming biennium.

“The only reason that we looked at bonding was so that we could fully fund the ARC, but when the dollars were there to fully fund the ARC, quite frankly you didn’t see me move that bill,” he said. “And the reason was that we’d always planned on using those monies to fully fund the ARC, and House Bill 1 in its amended version will simply state that that should be the requirement of every General Assembly moving forward.”

Newly elected representatives formally took office on Tuesday, giving Democrats a 53-47 majority in the chamber. Budget bills need 51 votes to pass in the House.

Kevin Wheatley

Kevin Wheatley is a reporter for Pure Politics. He joined cn|2 in September 2014 after five years at The State Journal in Frankfort, where he covered Kentucky government and politics. You can reach him at kevin.wheatley@charter.com or 502-792-1135 and follow him on Twitter at @KWheatley_cn2.

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