FRANKFORT — Ignoring the protests of some Kentucky educators, the Senate passed a measure late Wednesday that would cut spending across state government to shore up the state's Medicaid budget.
The state Senate voted 24-12 to approve its own version of House Bill 305 after a more than hour-long debate. The move sets the stage for a high-stakes standoff between the Republican-led Senate and the Democratic-led House during the waning days of the legislative session.
The Senate version of the bill includes a 0.525 percent spending cut in the first year and 2.26 percent cuts in the second year of the budget, which begins July 1. Postsecondary and K-12 education would not be cut in the first year but would face reductions in the second year. That cut would be about 1.3 percent for K-12 education.
The proposal would bring a $6.7 million cut to the University of Kentucky's budget next year, the equivalent of an additional 3.5 percent tuition increase, said President Lee T. Todd Jr.
"Cutting education, in my judgment, is not the path to prosperity or even real savings," Todd said in a statement. "It would represent a step backward. We need to be moving forward as a state together."
Sen. Walter Blevins, D-West Liberty, said he had heard from several school superintendents who told him they would probably have to lay off staff to deal with the cuts called for in the Senate plan.
School districts would be given the flexibility to spend funds not generally used for operating expenses to help offset the cuts, but Blevins said one school superintendent told him he has already used one-time money for operating expenses, leaving little to cut besides staff.
"We're going to see people lose their jobs," Blevins said.
Calling the Senate plan a more responsible way to deal with a hole in the Medicaid budget, Senate President David Williams warned that spending cuts would be even deeper next fiscal year if lawmakers agreed to Gov. Steve Beshear's plan, which calls for moving money within the state Medicaid budget.
"The truth is we're sent up here to do a responsible budget," Williams said during debate on the bill. "It's a responsible budget."
Now the House and Senate must hammer out an agreement on the budget fix with only five working days left in the legislative session. Speaking before the Senate vote, House Speaker Greg Stumbo said there were several problems with the Senate plan but room for negotiations still exists.
The two proposals are far apart in philosophy.
Beshear's plan includes moving about $166 million from next fiscal year's budget to the current fiscal year. To fill the resulting gap next year, Beshear proposes relying on a series of managed-care initiatives to cut costs. The House passed Beshear's proposal last month.
Williams, who wants Beshear's job, has said he does not believe Beshear's plan would generate the savings he has promised.
The Cabinet for Health and Family Services has acknowledged that managed-care contracts probably won't be signed until this summer at the earliest.
Currently, medical providers are paid for the individual services they provide Medicaid patients. One potential managed-care model would pay networks of health providers a set fee for each Medicaid patient served.
Sen. Julie Denton, who chairs the Senate Health and Welfare Committee, said she doesn't believe the cabinet can move quickly enough to stave off budget cuts next fiscal year.
She also said the Beshear administration's managed-care program doesn't adequately coordinate care for Medicaid patients, which will reduce potential savings.
But Stumbo said there are several problems with the Senate's proposal.
To plug the hole in Medicaid's budget, the Senate plan would use approximately $22.4 million from a projected surplus for this fiscal year that has not yet materialized. The surplus projection was made by Beshear's Office of State Budget, but lawmakers are required to rely on revenue projections from the Consensus Forecasting Group, a group of independent economists.
Williams had asked that lawmakers call the Consensus Forecasting Group to Frankfort for an updated revenue estimate, but Stumbo turned him down, saying it was not needed.
Some Democratic senators also expressed concerns that the Senate's plan was not properly vetted by lawmakers or the public. Sen. Tim Shaughnessy, D-Louisville, said the Senate's version of the bill was not available in the public bill room in the bottom of the state capitol Wednesday afternoon before the Senate's vote. The Senate's changes also were not available on the Legislative Research Commission's Web site as of 9 p.m. Wednesday night.
Meanwhile, education officials said they were concerned about the effects of a potential $38 million cut to the state's main funding formula for schools in the upcoming fiscal year. That funding formula has already been reduced by $28.7 million this year.
"Whenever you decrease funding, you decrease a child's opportunity to learn," said Sharron Oxendine, the president of the Kentucky Education Association, which represents about 40,000 teachers.
Brad Hughes, a spokesman for the Kentucky School Board Association, said even cuts to the state Department of Education could have dramatic and disastrous effects on the implementation of a state testing overhaul that lawmakers approved two years ago.
"Our folks as well as anyone know that times are horrendously tough," Hughes said. "But I don't know of any other state that is launching a major education and teaching initiative at the same time that you are cutting millions of dollars from school spending."
Others across state government also are worried about the potential cuts. The state has gone through eight rounds of budget cuts over the past three years. Some agencies have seen a more than 20 percent cut.
Chris Cohron, a commonwealth's attorney in Warren County and legislative liaison for the state commonwealth's attorneys association, said further cuts would probably result in layoffs of prosecutors.
"If those level of cuts go through, we're talking about significant job losses," Cohron said. "Catastrophic would be the word."