State budget could fall nearly $300 million short because of pandemic shutdown
Damaged by the pandemic shutdown, Kentucky’s next two-year state budget could fall nearly $300 million short of the revenue forecast that was made in December, which would mean no pay raises for school teachers or state employees and no additional money for K-12 schools or state universities.
In short, the optimistic state budget that Democratic Gov. Andy Beshear proposed in January seems doomed. Look for another austerity budget instead.
“As much as it pains me to say this, we have to have some very difficult conversations in coming hours and coming days,” House budget chairman Steven Rudy, R-Paducah, on Wednesday told his colleagues on the conference committee negotiating differences between the House and Senate versions of the state budget.
Dropping the priciest items on Beshear’s wish list — the pay raises, the boost in education funding — probably would not come close to covering the budget shortfall, lawmakers said.
“Doing some of those that are the bigger ticket items only gets us halfway there,” said Senate President Robert Stivers, R-Manchester.
There is no way to know how much Kentucky’s state government will lose in tax revenue because of the businesses being closed to curb the spread of the virus, with many thousands of people losing their jobs, Rudy said. Kentucky also does not yet know how much money it will receive in federal coronavirus assistance, he added.
For now, lawmakers can use the most pessimistic numbers offered in December by the Consensus Forecasting Group, a panel of economists who predict the state’s revenue for budgeting purposes, Rudy said. Lawmakers might have to revisit this budget, either in a special session or in next winter’s regular session, when more accurate revenue data comes in, he said.
Those most pessimistic numbers would be $115.7 million less than the current House budget bill in the first year and $174.7 million less in the second year, he said.
House Speaker David Osborne, R-Prospect, said full state funding for the pension systems of state workers and teachers “has got to remain paramount,” regardless of other budget problems.
However, teacher pensions remains an area to be decided. The Senate version of the budget would withhold $1.13 billion in teacher pension funding unless “structural changes” are made to cut retirement benefits for newly hired teachers. That idea drew criticism from House Minority Leader Joni Jenkins, D-Shively.
“I don’t think it was meant this way, but to put the language in there about structural changes seems to me and seems to many of the teachers out there tantamount to blackmail, that if you don’t do this we’re gonna take your money,” Jenkins told her colleagues. “I certainly hope that’s not the intent, but I think that’s the message that many folks out there got.”
There has been scant discussion of raising new revenue since the legislature received Beshear’s budget proposal.
In January, Beshear recommended $1.53 billion in new revenue from sources including state-regulated sports betting and taxes on tobacco and vaping. Lawmakers dismissed most of those ideas. The one new revenue source that seems likely to pass is a slimmed-down vaping tax estimated to raise about $25 million over the next two years.
The full General Assembly resumes its 2020 legislative session Thursday at a locked-down state Capitol.
It’s expected to pass legislation and continue negotiating the state’s two-year, roughly $22 billion spending plan that would begin with the new fiscal year July 1. Lawmakers must finish their business and adjourn by April 15.
There is pressure on lawmakers, from Beshear and others, to quickly pass a budget and go home, rather than risk spreading the novel coronavirus among themselves and legislative staff, or push controversial measures when a distracted public cannot be present inside the Capitol.
In a statement, the Kentucky League of Women Voters on Wednesday said lawmakers should limit their work to a budget and a state response to the coronavirus.
“Non-essential and controversial legislation unrelated to these items should be avoided during this time when the public is barred from participating in deliberations,” the group said.
“Citizens are unable to visit the Capitol to talk with legislators, testify before committees, participate in rallies and make their voices fully heard,” the group said. “Many citizens are also too consumed with daily survival to focus on what is happening in Frankfort. This is not how democracy is supposed to work.”
