House and Senate each make state budget counter-offers

House and Senate budget negotiators tossed new state government spending proposals on the table Tuesday, but neither side would yield to the other.

In a nutshell, the Democratic House wants to shield higher education from Republican Gov. Matt Bevin’s proposed budget cuts, which means several hundred million dollars less in funding for the state’s two ailing pension systems. The Republican Senate wants to plow nearly every available dollar into the pensions, arguing that it does little good to protect education funding if Kentucky’s school teachers and college professors don’t have secure retirements.

The conference committee of leading lawmakers that’s trying to hammer out a deal on the $21 billion, two-year budget is scheduled to meet again Wednesday morning.

“We implore you to revisit our proposal,” House Speaker Greg Stumbo, D-Prestonsburg, told the Senate members.

“I think likewise, the same thing with you all,” replied Senate President Robert Stivers, R-Manchester.

Although the conference committee is supposed to work during the rest of the week, the legislature won’t formally meet again at the Capitol until Friday, for the 59th day of the 60-day session.

After that, if there is a budget agreement ready for a vote, the House wants to delay the session’s last day until April 15. That would leave lawmakers enough time to override any possible vetoes by Bevin, who gets 10 days to decide whether he wants to strike any portion of the bill. If there is not a budget agreement Friday, House leaders say the last day can stay at its original date, April 12. Senate leaders were reluctant Tuesday evening to agree to changing the last day.

A few budget items appear settled for now. Bevin in January asked for a $500 million “permanent fund” to begin saving money to deal with the state’s $36 billion pension shortfall, above and beyond making the recommended annual contributions in this budget. The House and Senate seem ready to provide $250 million for such a fund, with statutory language making it clear that it’s meant for pensions and lawmakers control any appropriations.

Also, lawmakers seem ready to spare state assistance for educational programs at K-12 schools from Bevin’s proposed cuts. This includes preschools, gifted and talented programs, family resource centers, teacher training and other services that are paid for separately from the basic state per-pupil funding formula for schools, known as SEEK. Bevin and both chambers already agreed to shield SEEK from cuts.

Lastly, the judicial branch budget is poised to receive $37 million from the executive branch budget to help it compensate for spending reductions proposed by Bevin and already approved by lawmakers. In order to get the $60 million court officials said they need to avoid mass layoffs and program closures, Bevin would need to veto items in the judicial budget to free up cash, such as a mandatory pay raise for circuit court clerks.

But the House and Senate remain far apart in other areas.

House budget chairman Rick Rand, D-Bedford, offered Senate members a compromise that would eliminate Bevin’s proposed cuts to higher education and state constitutional offices and set aside $301 million for the state’s “rainy day” reserve fund. As with most state agencies, Bevin has asked to cut higher education by 4.5 percent this fiscal year, ending June 30, and then by 9 percent over the next two years.

Stumbo said the House still wants to provide free tuition for new high school graduates going to Kentucky community and technical colleges — what the House calls its “Work Ready” plan. In exchange, the House would accept the Senate’s plan to implement a new performance-based funding model for higher education, with some modifications.

Rand said the House would change the standards for the Work Ready plan, requiring students to take 15, instead of 12, credit hours each semester and to maintain a 2.5 grade point average.

Stumbo said he does not think the Senate will drop its opposition to a $60 million bond issue the city of Lexington wants to expand its convention center. Republican Senate leaders have criticized the plan because it would require increasing the hotel tax in Lexington to help finance the $250 million project. Bevin and the House both included the convention center in their original budget plans.

In their counter-offer, senators said they would agree to the House’s request to protect K-12 school funding from cuts, and they would halve the budget cuts for the state’s constitutional officers, such as the attorney general and the state auditor. The Senate would lower by $75 million the $1.19 billion in additional pension contributions it originally planned to make to the Kentucky Retirement Systems for state workers and the Kentucky Teachers’ Retirement System for school teachers.

Instead of ending Fiscal Year 2018 with $371 million in the state’s rainy day fund, as the Senate originally proposed, the new Senate plan would leave it with $298 million, said Senate budget Chairman Chris McDaniel, R-Taylor Mill.

The Senate counter-offer would leave $19 million in the budget “for the House to appropriate and work with as they see fit,” McDaniel told reporters. House members can give that $19 million to colleges and universities to help offset cuts to their state appropriations, he said.

However, $19 million would be a small fraction of what higher education otherwise is losing to the budget cuts. The University of Kentucky alone predicts more than $60 million in lost revenue over the next three years under the cuts Bevin proposed.

Stumbo said the House cannot consider further reductions in state support for higher education unless someone can show him a list of what the corresponding college tuition increases will look like across Kentucky.

“I want to know what the impact of this has on college tuition, because that is in effect a tuition increase on every Kentuckian sending their children to college,” Stumbo said. “And we don’t have those numbers.”

This story was originally published March 29, 2016 at 11:49 AM with the headline "House and Senate each make state budget counter-offers."