State budget talks break down over education, pension funding

Negotiations over a two-year, $21 billion state spending plan broke off Thursday after House and Senate leaders couldn’t come to an agreement over cuts to higher education and how much money should go for pension payments.

RELATED: Bevin orders college, university budgets cut by 4.5 percent immediately

The impasse put in jeopardy a compromise on the budget before this year’s legislative session has to end by midnight April 15.

Republican Gov. Matt Bevin, in his first year in office, said there was still time for the two chambers to reach a compromise.

“We still have two weeks to get a budget done,” Bevin said. “I am confident we have the intellect, the ability and the motivations to get a budget accomplished. It’s certainly what we were sent here to do.”

House Speaker Greg Stumbo, D-Prestonsburg, said Thursday morning that the House and Senate couldn’t agree about cuts to higher education. Thursday’s impasse came after several days of negotiations.

Bevin and the Republican-led Senate included 9 percent cuts for each of the next two fiscal years in their respective budgets and additional money for the state’s ballooning pension payments. The Democrat-led House did not cut higher education in its budget.

The Senate offered Thursday to cut higher education each year by 4.5 percent, but the House balked.

“The House sees no reason to cut public education given the fact that we are fully funding the pension situations, as requested, and even going beyond that and leaving a more-than-adequate budget reserve trust fund and a fund that the governor has indicated that he would use to shore up the pension system ,” Stumbo said. “We see no reason to cut public education. No one has ever told us why.”

He said cuts in higher education probably would result in a tuition increases for students.

But Senate President Robert Stivers, R-Manchester, argued that adding more money to the pension systems would help universities with their budgets. The pension systems for retired teachers and state workers have an unfunded liability of more than $38 billion.

He said the pensions’ problems “affect every facet of government and delivery of education, and we were willing to work to exempt certain portions of government from cuts but that everybody else would have to participate in trying to solve that problem.”

Stivers said the Senate was willing to protect elementary and secondary education from cuts but not higher education.

Senate budget chairman Christian McDaniel, R-Latonia, said the Senate was willing to compromise with the House.

He noted that the Senate moved from $1.44 billion for state pension contributions to $1.282 billion, up from the House’s $1.12 billion.

For the budget reserve trust fund, the Senate sought $250 million after the chamber initially proposed $373 million versus the House’s $283 million.

House budget chairman Rick Rand, D-Bedford, said the House agreed to set aside $250 million for the state’s rainy day fund and $250 million for a fund for future pension payments. “It’s more than we have had in modern history,” he said.

Asked whether there was a possibility that budget talks wouldn’t resume, Stumbo said he would continue to speak with Stivers, but he called on Bevin to soften his stance on higher education cuts.

“I think the next step would be for the governor to call the Senate and give them some direction,” Stumbo said. “I think if the governor wants to have a budget, I think he should intervene with the Senate.

“I don’t think the chances are great, but it is still possible,” he said of the likelihood of the two sides reaching agreement.

“We plan to continue to have dialogue with the House,” said Stivers. “Hopefully, there will be some resolution.”

The General Assembly will return at noon Friday, the 59th day of the legislative session. The two sides needed to have an agreement on the budget in place by Thursday for both chambers to vote on it Friday and still have time to override any gubernatorial vetoes when it returns April 12. That would be the 60th and final day of the session. The Constitution says the session must end by midnight April 15.

Several legislative sessions have ended without a budget, but special sessions were held soon afterward to produce a spending document.

Both sides were hesitant to rule out agreeing on a budget this legislative session. They also spoke against a costly special legislative session. Only the governor may call a special session, which would cost taxpayers about $70,000 a day.

If there is no budget by July 1, there would be a partial shutdown of state government. The governor could spend money only on constitutionally required services, such as public protection and elementary and secondary education, and federal mandates such as Medicaid.

A $60 million state bond issue to expand the Lexington convention center also looked doubtful Thursday. Bevin and the House had included money for the project, but the Senate took the funding out.

Stumbo said Thursday that he has been told House Bill 441, a bill that would allow Lexington to raise its hotel and motel tax to repay the state and to pay off $171 million in bonds for the $250 million overhaul, does not have enough votes to pass the Senate. The Senate had not taken up the bill, but the House passed it earlier this session.

Stivers later echoed Stumbo’s comments at a news conference.

Bill Owen, president and CEO of Lexington Center Corp., which oversees the convention center, Rupp Arena and Lexington Opera House, said: “We are optimistic that our legislative leaders will come together before April 15 and craft a budget agreement, and that we will be a part of that agreement. We’ve talked to nearly every member of the Senate and believe there is strong support for expanding the convention center because of the economic impact this type of project will have on the region.”

Funding for the state’s court systems also remains up in the air.

McDaniel said the Senate was willing to restore all the money the system needed. Stumbo also said Thursday that the House was open to passing a bill that would supplement the judicial branch’s budget, which already has been approved by the House and Senate.

Kentucky Supreme Court Chief Justice John Minton is seeking an additional $60 million to avoid layoffs and cuts in family courts and pretrial detention services.

Democrats also blasted Bevin and his staff Thursday for not allowing House Majority Whip Johnny Bell, a Democrat from Glasgow, into a news conference earlier Thursday in the Capitol regarding problems with a state-run benefits system.

Bell said he was told that only credentialed media were allowed into the news conference. When Bell told Bevin’s staff he was an elected official, they still denied him access, he said.

Stumbo said Bevin should apologize to Bell.

“I think that’s an atrocity and I think the governor owes Rep. Bell an apology,” Stumbo said. He said it was possible that Bevin might not know Bell was denied entry into the news conference.

Bevin spokeswoman Jessica Ditto released the following statement: “We apologize for any misunderstanding. Several individuals attempted to gain entry to a press briefing for credentialed press only. Rep. Bell was not singled out. The governor’s staff is available to discuss this or any other issue with Rep. Bell and any other legislators.”

This story was originally published March 31, 2016 at 12:15 PM with the headline "State budget talks break down over education, pension funding."