Beshear’s budget would boost education funding, give raises to teachers, public workers
Gov. Andy Beshear presented his plan for Kentucky’s roughly $12 billion state budget to the General Assembly in a virtual address Thursday night.
“With this budget, we have an unprecedented opportunity to provide real relief and jump ahead of other states,” Beshear told the assembled lawmakers in a televised message that he had previously recorded in the Governor’s Mansion to promote social distancing.
However, some items on the Democratic governor’s wish list — including a small boost in education funding and pay raises for school employees and state workers — might not win approval from the Republican legislative super-majorities.
GOP leaders on KET Thursday night said they hope to find areas of common ground with Beshear. But they might have a hard time approving pay raises for public employees with tens of thousands of Kentuckians out of work. And they are uncomfortable with how much federal debt is propping up Kentucky’s budget at present, with measures like the CARES Act pumping hundreds of millions of one-time dollars into the state.
“It is disconcerting,” said House Speaker David Osborne, R-Prospect.
“I think that everybody acknowledges that we’re in a better spot than I thought we’d be financially with the revenues that we’ve taken in so far,” Osborne said. “But that doesn’t make me any less nervous about where we may end up. And I think you will see us take a very, very conservative approach and we’ll still have a very lean budget going forward.”
The House budget committee is expected to hear testimony on the governor’s plan Friday morning.
Among the budget highlights: Beshear wants $47.5 million to replace the state’s unemployment insurance technology that dates back to the 1970s, plus $8.4 million to restore 90 state workers who previously were posted to regional offices to help Kentuckians apply for jobless benefits.
Although Kentucky has paid more than $5 billion in unemployment insurance since last March, when COVID-19 forced much of Kentucky’s economy to close, the chronic backlog of claims has been a source of embarrassment and frustration to Beshear.
Apart from the budget, Beshear said he will send lawmakers a $340 million COVID-19 relief bill to give direct aid to small businesses and nonprofits struggling with the pandemic-soured economy and to repay a portion of Kentucky’s federal unemployment insurance loan, which has grown to $505.7 million so far.
In a separate move, drawing on CARES Act funds, Beshear said he will use his executive authority to provide $48 million in direct aid to thousands of unemployed Kentuckians with no fraud or identity issues who have waited at least two months for their jobless benefits to begin, and also some who made too little to qualify for the federal Lost Wages Assistance Program.
Additionally, Beshear will use $152 million in CARES Act funds to further repay the federal unemployment insurance loan, enough to spare the state’s employers a higher surcharge they otherwise would face.
Beshear said his budget does not rely on new taxes or other recurring revenue sources, such as expanded gambling, and it would not cut state services. Kentucky has cut more than $2.3 billion in state spending since the last recession in 2008.
Instead, in order to balance his budget and meet costly obligations like public pension contributions, Beshear said he’s relying on $613 million in one-time funds. This includes some unexpected revenue gains from the current fiscal year and state money freed up by an infusion of federal CARES Act and Medicaid funding.
The budget would cover Fiscal Year 2022, which begins July 1.
Ordinarily, the legislature would have passed a two-year state budget last winter. However, as the coronavirus pandemic struck Kentucky in March, lawmakers swiftly enacted what was essentially a one-year continuation spending plan and then cut short their session.
Apart from one-time funds, Beshear did not have much additional money to play with. The state’s Consensus Forecasting Group, a panel of economists, has projected a mere $53.2 million gain in revenue for the next year.
Because Republicans hold overwhelming majorities in the House and Senate, Beshear’s budget proposal is simply that — a plan offered by the Democratic governor that lawmakers can take into account or ignore as they craft their own budget deal between now and March 30, when they are scheduled to adjourn.
Among the items in Beshear’s budget:
▪ 1 percent pay raises for state workers ($11 million), most of whom have seen few, if any, salary increases for the past decade. A state employee making $30,000 in 2010 is making nearly 20 percent less today in inflation-adjusted dollars, according to the state budget office.
▪ $1,000 pay raises for K-12 school teachers ($48.8 million) and classified school employees ($60.6 million), such as bus drivers, cafeteria workers and maintenance crews.
▪ a 1 percent increase in the state’s SEEK funding formula for K-12 schools ($31.9 million), raising the base per-pupil amount up by $40 to $4,040. Compared to 2008 state funding levels, Kentucky’s public schools are now getting 16 percent less per student, accounting for inflation, according to the Kentucky Center for Economic Policy in Berea.
▪ $11 million to restore money for K-12 school textbooks that was eliminated in the previous state budget.
The Kentucky Education Association issued a statement Thursday night praising Beshear for focusing so much attention on public education in his budget.
“The last nine months have laid bare the inequities created by chronically underfunding public schools,” KEA President Eddie Campbell said. “Making these investments today will build a great foundation for Kentucky and will pay dividends for all citizens far into the future.”
▪ a 2 percent increase in funding for the state’s public universities ($17.3 million), half of which would go to their base budgets and the other half of which would be distributed through the performance-based fund.
▪ $50 million in state-supported bond funds for public universities, which they would have to match 50 cents to the dollar from their own funds, for major capital projects, such as deferred maintenance on their campuses.
▪ $100 million for the state’s “rainy day” budget reserve fund, taking it to $565 million, or 4.7 percent of estimated General Fund revenue. That’s a record high for the fund, according to the state budget office.
▪ Full annual required contributions — according to the state budget office — for the state’s two major public pension systems, the Kentucky Retirement Systems, covering state and local government workers, and the Teachers’ Retirement System of Kentucky. The systems face billions of dollars in unfunded liabilities due largely to two decades of neglect by state leaders. But in the last five years, they’ve received better funding.
Beshear’s budget also has $72 million to continue to subsidize pension contribution rates for regional universities and “quasi-government” employers, such as local health departments and community mental health centers.
But Beshear said he supports a bill in the legislature that would switch these public employers to a new pension liability model based on their proportionate share of the pension fund’s liability, rather than continuing to charge everyone the same flat rate based on a percentage of their payroll.
The new pension model would create winners and losers. The Lexington-Fayette County Health Department, for example, would owe $321,619 more per year, while Eastern Kentucky University in Richmond would owe $2.4 million more, according to an actuarial analysis included with a version of the bill filed last year.
▪ $50 million to expand broadband internet service to under-served communities.
▪ $100 million for public school building renovation or replacement. Beshear said this spending will let school districts replace outdated buildings while also creating thousands of good-paying construction jobs around the state.
“Too many of Kentucky’s schools are crumbling and in dire need of repair,” he told the legislature. “Some date from as far back as the 1930s.”
▪ Full funding for the state’s Medicaid program, including expanded Medicaid, which provides health coverage for the working poor. After the economy tanked last year, Kentucky’s Medicaid population jumped from about 1.3 million to nearly 1.6 million. The state already was spending $2 billion on Medicaid annually, but the federal government has increased its share of program coverage during the pandemic, reducing the state’s cost.
▪ $12 million more for the daily operations of local health departments, which would double the current level of state support. The departments have played a critical role during the pandemic.
▪ $7 million to hire 76 new child-protective social workers, taking the state up to 1,401 social workers, and $1 million for workforce retention. Kentucky long has ranked among the worst states for child abuse and neglect.
▪ $40 million less for what the Corrections Department spends on state inmate beds at local jails and other community facilities because state prisons are full. This would be Kentucky’s first drop in incarceration spending in recent memory, made possible by an estimated decline of 5,200 state inmates during the pandemic so far.
This story was originally published January 7, 2021 at 7:22 PM.
