House and Senate budget negotiators couldn’t find common ground Monday on a $21 billion spending plan for the next two years, likely forfeiting their ability to eventually override any line-item vetoes by Gov. Matt Bevin.
After haggling behind closed doors for about an hour, top lawmakers emerged around 10 p.m. to say they had failed to reach a compromise. They had been expected to work through the night trying to resolve their differences between protecting education from further cuts and addressing the financially strapped Kentucky Teachers’ Retirement System and Kentucky Retirement System.
“I think we’re getting farther and farther apart,” House Speaker Greg Stumbo said Monday night. “We just don’t believe that if you have the money, that you should shortchange education.”
They plan to resume negotiations at 10 a.m. Tuesday. Stumbo, D-Prestonsburg, warned that it’s possible the legislature might adjourn its 60-day session with no budget. Monday was the 57th day. Under the state Constitution, the session cannot run more than 60 working days and must be finished by midnight April 15.
The schedule still calls for all legislators to meet Tuesday and Wednesday and then return April 12 for the final day of the 2016 General Assembly. Stumbo raised the idea of postponing the 59th legislative day until Thursday or Friday, thus preserving their ability to override any vetoes by Bevin on April 12, but Senate President Robert Stivers, R-Manchester, dismissed that idea.
The Senate stands firmly behind the idea of putting the lion’s share of money in the budget into the pension funds, Stivers said.
“This is at a time when we have a $38 billion pension liability. And we think it is time to make sure that we put every dollar in that pension, into either KTRS or KERS, to work toward solving that unfunded liability. That will help every facet of government,” Stivers said.
Bevin, who visited the conference committee room as lawmakers parted for the night, said he was gratified to see lawmakers talking about how much extra money to put into the pension systems. “When was the last time you saw that?” he asked.
If the legislature fails to pass a budget, the governor may spend money only on constitutionally required services, such as public protection and elementary and secondary education, and federal mandates, such as Medicaid, Stumbo said.
The Senate budget would provide $1.19 billion over the next two years in additional pension contributions to the Kentucky Retirement Systems and the Kentucky Teachers’ Retirement Systems. The House set aside $1.12 billion.
The Senate also approved Bevin’s request for a “permanent fund” from various sources to eventually help pay down the pension systems’ unfunded liability.
Bevin wanted $500 million in the fund. The Senate provided $250 million, and the House rejected it.
Stumbo said the House cannot go along with the Republican-controlled Senate’s plan to put that much money into a “permanent fund” for future pension problems.
He called it a “slush fund” for Bevin to use for whatever purposes he desired.
Bevin met privately with Senate Republicans late in the afternoon to discuss the budget negotiations.
As he left, Bevin was asked if was willing to negotiate on his special fund for pensions.
“We’re willing to negotiate with anybody who is willing to sit down at the table. Unfortunately Greg Stumbo is not such a person,” he said.
Stivers said the Senate would “gladly” put restrictions on the money for the pension plans so that it could not be spent for anything else.
He said labeling the proposed plan a “slush fund” was “a political spin.”
Stumbo and Stivers agreed that the state pension systems should be audited, but Stivers said it was necessary to provide more money to them now.
“Our solution is to audit them and then see what they need,” said Stumbo, adding that he doesn’t mind putting some extra money in the budget’s emergency fund for pensions.
The Senate budget set aside $372.5 million for the Budget Reserve Trust Fund, commonly called the “rainy day” fund, which is the second-highest amount in the state’s history.
“We need a budget reserve trust fund,” said Stivers.
“Yes, but not to an extravagant level,” said Stumbo.
Another major budget issue left up in the air is Bevin’s proposed spending cuts, particularly to education.
Bevin proposed 4.5 percent cuts this fiscal year and 9 percent cuts in the next two years in most state agencies, including higher education. The House restored that money to higher education and proposed free tuition for Kentucky community college students. The Senate accepted Bevin’s proposed cuts and required universities to compete for a portion of their funding.
Stumbo said a possible agreement might be to study free tuition and performance-based funding over the next two years. Democrats remain opposed to cutting university spending.
Another point of contention left unresolved is a a $60 million bond issue to expand Lexington Convention Center. Bevin and the House backed the bond issue for the expansion, but the Senate took it out.
Also unresolved is the judicial budget. Kentucky Supreme Court Chief Justice John Minton has said the courts need more money to prevent the dismissal of about 600 employees, the closing of drug courts that divert addicts into treatment, and the end of pretrial services that allow thousands of criminal defendants to be on supervised release from jail.
The Senate last week gave final passage to the House’s judicial budget bill without making any of the changes sought by Minton.
House budget chairman Rick Rand, D-Bedford, told the House-Senate budget conferees Monday that Minton had told him the judicial budget needed an additional $60 million.
Stivers noted that any additional money would have to come from the state General Fund, which pays for most state programs.
The budget negotiators met publicly for about two hours Thursday and more than three hours Friday before breaking for the Easter weekend.
Negotiators include all the House and Senate leaders plus Rand, Senate budget chairman Chris McDaniel, R-Latonia, and Sen. Robin Webb, D-Grayson.