Raises, pensions, full-day kindergarten, more: Breakdown of what made it in KY’s budget
Kentucky’s next two-year state budget includes big pay raises for state workers; full funding for public pensions, plus extra cash to help pay down the pension systems’ unfunded liabilities; and enough money to provide full-day kindergarten at local school districts, lawmakers said Wednesday as they approved it.
House and Senate budget negotiators reached a deal on a $13 billion annual General Fund that would leave $1.75 billion in the state’s “rainy day” budget reserve trust fund. There also would be about $1 billion left unspent before proposed changes to the state’s tax code. A separate tax bill would take that sum down to about $11 million.
The job was made easier this year by a relatively strong Kentucky economy and billions of dollars in federal aid that have flowed into the state since the start of the COVID-19 pandemic in 2020. Lawmakers crafted fairly conservative budgets during the pandemic that left a growing pile of surplus funds available.
“This is my sixth budget, and this is the first time we’ve had a budget where we’ve not had to cut just based on pensions and Medicaid. We were able to have a real conversation — we probably had 60, 70, maybe 100 hours — about what’s a good policy to move Kentucky forward,” said Senate budget chairman Chris McDaniel, R-Ryland Heights.
Leaders in the Republican-majority General Assembly said they are proud of their efforts to promote Kentucky to the outside world as a place to visit. The budget has $75 million for tourism-related grants, using federal American Rescue Plan Act funds, and $150 million for a renovation of the state parks system.
“One of our greatest and best assets is the natural beauty of the state,” said Senate President Robert Stivers, R-Manchester. “We made some serious investments to bring people back to this state.”
Members of the Democratic minority said they appreciate many items in the budget, but they are disappointed by some omissions, such as failure to provide full funding for local school districts’ transportation costs or teacher pay raises and no cost-of-living adjustment for state government retirees receiving pensions.
“With the once-in-a-generation opportunity that is this state budget, I think what we all want to see is a budget that we’re proud of 20 or 25 years from now. A budget that makes significant investments in our people. Not short-term election-year politics or policies that make people happy immediately,” said Senate Minority Leader Morgan McGarvey, D-Louisville.
The Senate and House approved the compromise measure on Wednesday before adjourning for their two-week veto break.
Democratic Gov. Andy Beshear could veto parts of the budget, or all of it, but the legislature will return to the Capitol for the session’s final two days on April 13 and 14 to consider any vetoes. With super-majorities, the GOP seldom has difficulty overriding Beshear’s vetoes.
Among the budget items that lawmakers say are included in the budget:
Pay raises
State workers will get an 8% raise the first year. In the second year, the budget provides enough money for workers to get a 12% raise, but the actual amount each worker receives will be determined by a pay study to be conducted by the Personnel Cabinet that examines regional cost of living, job duties and other factors.
Certain state workers in particularly challenging positions will get additional money on top of those pay raises, including social workers, Kentucky State Police and public defenders. There also is $24 million to hire 200 more social workers over the next two years.
K-12 schools
The budget will increase the guaranteed per-pupil SEEK funding for school districts, from $4,000 this year to $4,100 in Fiscal Year 2023 and $4,200 in Fiscal Year 2024. The budget provides only 70% of the cost of transportation for school districts, but it has $7.8 million for more mental health professionals for schools.
Money is included for full-day kindergarten, a proposal that Beshear and the House wanted but the Senate initially rejected. By contrast, Beshear’s request for state-funded pre-kindergarten for 4 year olds never made it very far into the legislative budget process.
Kentucky State University
The historically Black college in Frankfort gets the $23 million bailout it requested, plus $15 million more to be administered by the Council on Post-secondary Education, intended to help it avoid dramatic budget cuts and tuition increases over the next few years.
KSU has been struggling since last year, when its president abruptly resigned amid a series of disclosures about its dire financial situation. In a separate bill, lawmakers have instructed Beshear to replace KSU’s governing board.
Kentucky Wired
Beshear and the House wanted $40 million a year to continue the state’s contractual payments to Kentucky Wired, a public-private partnership to provide statewide broadband access. The Senate, which has taken issue with the project, did not include this in its initial budget plan. But the final budget has the payments, without which both Kentucky Wired and the state itself could have taken hits to their credit ratings.
Legislator projects fund
The House wanted $10 million a year to create a fund that lawmakers could individually tap to pay for small projects back home in their districts, outside of the state budget process. The Senate opposed this, and in the final budget, there is no such fund.
Public pensions
The budget has several billion dollars for the full actuarial required contributions for state workers and educators enrolled in in the Kentucky Employees Retirement System. the State Police Retirement System and the Teachers’ Retirement System of Kentucky.
Additionally, there is $250 million for KERS, $215 million for SPRS and $1.275 billion for TRS to pay down unfunded liabilities more quickly — the systems face a combined shortfall of $26 billion — and $479 million for TRS to clear the obligations it owes to retiring educators for their sick leave and cost-of-living adjustments.
Transportation projects
The General Fund would transfer $250 million to the Road Fund to help pay for three long-planned, high-price projects: a companion span to the Brent Spence Bridge between Covington and Cincinnati; the continued expansion of Eastern Kentucky’s Mountain Parkway; and a new Interstate 69 bridge between Henderson and Evansville, Indiana.
State parks
The Kentucky State Parks would get $150 million for renovations, but with a catch. Parks could apply for money with proposals that include recommendations for private sector and/or local government partnerships, with a 50 percent funding match from the partners, and detailed financial information regarding a return on the state’s investment.
Speaking on the budget Wednesday, Sen. Robin Webb, D-Grayson, said she worried this language was a step toward privatization of some state parks.
This story was originally published March 29, 2022 at 2:44 PM.
