Matt Bevin orders 1.3 percent spending cuts for most state agencies

Facing a projected budget shortfall of $156 million, Gov. Matt Bevin ordered all three branches of state government Thursday to cut their budgets by 1.3 percent in the current fiscal year, which ends June 30.

A group of economists known as the Consensus Forecasting Group released their official revenue estimate for this fiscal year on Dec. 15, projecting the state will collect $156 million less than previously thought. In response, State Budget Director John Chilton issued a news release late Thursday afternoon that said Bevin’s order will chop spending by $158 million.

Spokespeople for Chilton and Bevin were not immediately available for comment. The news release did not include a copy of Bevin’s budget reduction order.

The 1.3 percent cut will not apply to several agencies that have been protected from severe cuts in recent years, including the main funding formula for K-12 education, prisons, commonwealth and county attorneys, the Kentucky Retirement Systems and Teachers Retirement Systems, Cabinet for Economic Development, Kentucky Higher Education Assistance Authority, Executive Branch Ethics Commission and others.

Bevin’s official cuts are significantly less than the 17.4 percent cuts Bevin asked constitutional officers and cabinet secretaries to prepare for in September.

Chilton said the cuts are smaller because they won’t generate an extra $150 million to replenish the state’s rainy day fund, as Bevin had previously proposed, and will apply to more government agencies.

The legislative branch and judicial branch will determine how to cut their budgets, as will the state’s constitutional officers, such as attorney general and state auditor, Chilton said.

For example, Attorney General Andy Beshear will be expected to slash $141,000 in spending while Agriculture Commissioner Ryan Quarles must cut $217,800.

Chilton also repeated his warning that lawmakers will likely have to cut $1 billion in spending as they craft a two-year budget for the state this spring.

Economists have predicted state revenue will increase by about 2.6 percent over the next biennium, but those gains will be more than offset by rising costs in the state’s ailing pension systems, Medicaid program and prison system. Also, the state must replenish its rainy day fund or risk having its debt downgraded by credit agencies.

Unless new revenue is found, it’s likely that K-12 education and other core government functions will face cuts next year, he warned.

“Protecting those categories from reductions in the next biennium will be difficult, if not impossible — there is just not enough revenue to satisfy all of the funding needs,” Chilton said in the news release.

House Minority Floor Leader Rocky Adkins said the budget cut was not surprising, but “underscores just how difficult it will be for state leaders to write the next budget in the upcoming legislative session.”

“However, I am pleased to see us take this route rather than the 17 percent cuts that the governor originally proposed back in September,” Adkins said.

This story was originally published December 28, 2017 at 6:10 PM with the headline "Matt Bevin orders 1.3 percent spending cuts for most state agencies."