Pensions, education cuts hold up budget deal; talks resume Thursday

House and Senate budget negotiators plan to return Thursday morning to resume budget negotiations and hope to finalize a $21 billion, two-year spending plan for Kentucky in time for a Friday vote.

House and Senate leaders met privately throughout the day Wednesday.

Senate budget chairman Chris McDaniel, R-Latonia, said about 7:15 p.m. that the two sides had established “some tentative frameworks,” and “I think everyone will keep working hard toward a final product.”

McDaniel said Gov. Matt Bevin also met with Democrats and Republicans during Wednesday’s discussions. McDaniel said he was not aware if Bevin requested the meetings or was invited.

McDaniel said the hope is to have an agreement in time for a Friday vote by the full legislature. If there is no budget agreement Friday, lawmakers would adjourn until April 12 and legislators could not act on any gubernatorial vetoes. If a budget is approved Friday, the House wants to delay the last day of the legislative session until April 15. That would give lawmakers the opportunity to override any vetoes by Bevin, who has 10 days to take action.

Major points of contention remaining include the Senate’s desire to put more money into the state’s financially strapped pension systems and the House’s desire to block proposed funding cuts to higher education.

The Democratic House wants to shield higher education from Bevin’s proposed budget cuts, which might mean 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 it does little good to protect education funding if Kentucky’s schoolteachers and college professors don’t have secure retirements.

A few budget items appear settled. Bevin in January asked for a $500 million “permanent fund” to begin saving money to deal with the state’s $36 billion pension shortfall. The money would be above and beyond 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 that 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. To get the $60 million that 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.

Senate President Robert Stivers, R-Manchester, said a Wednesday morning session in the Capitol Annex that lasted about 90 minutes featured “a very interesting discussion about several issues. It’s been very candid and very open.”

“Because we have thrown certain concepts out, we are retreating to crunch numbers and talk about theories and ideas,” Stivers said. “It’s probably been one of the most productive hours I’ve seen.”

Stivers would not offer any specifics or speculate when a compromise budget might be reached.

This story was originally published March 30, 2016 at 11:58 AM with the headline "Pensions, education cuts hold up budget deal; talks resume Thursday."