The General Assembly approved a two-year, $21 billion spending plan for Kentucky about two hours before the 2016 law-making session officially ended Friday night.
The Senate approved the compromise bill unanimously and the House voted for it 98-1. House Bill 303 now goes to Gov. Matt Bevin for possible line-item vetoes, which lawmakers will not have the opportunity to override.
“I look forward to reviewing the details of the final bill over the coming days and signing a fiscally responsible budget into law,” Bevin said in a statement.
The budget cuts spending across much of state government, including colleges and universities, to provide more than $1.2 billion to pay down a cumulative $36 billion shortfall in the public pension systems for school teachers and state workers, said Senate budget chairman Chris McDaniel, R-Latonia. Of that total, $973 million will go to the Kentucky Teachers’ Retirement System and $186 million will go to the Kentucky Retirement Systems.
Separately, $125 million will be taken from the state employees’ health insurance fund surplus in Fiscal Year 2018 and put into a newly created “Permanent Pension Fund” that Gov. Matt Bevin requested to help stabilize the pension systems in coming years. The budget includes language allowing other money, such as excess revenue and court awards, also to be added to this fund. By the end of 2018, the fund conceivably could have close to $500 million in it, said House Speaker Greg Stumbo, D-Prestonsburg.
The budget also calls for a $175 million “rainy day” reserve fund.
Kentucky Government Retirees, a pension advocacy group, said it appreciates efforts made in the budget, noting that the primary state worker pension fund at KRS is rapidly losing assets. Last summer, it held only 17 percent of the money it’s expected to need to meet its future liabilities.
“The negotiated budget allocation is a first step in the long journey toward stability,” said Jim Carroll, a state parks retiree and co-founder of Kentucky Government Retirees. “If the market improves significantly over the next two years, the additional funds may slow or stop the alarming, on-going asset decline.”
The lone lawmaker voting against the budget was state Rep. Jim Wayne, D-Louisville. He called the budget “inadequate and structurally unsound.”
State social service offices already are overworked and understaffed, Wayne said, and now they will see their funding cut again, this time by 9 percent.
“The services are already reduced. People are already being turned away,” Wayne said. “Ladies and gentlemen, this is not right.”
Most state agencies will be chopped by 9 percent over the next two years; state appropriations for colleges and universities will drop by 4.5 percent. However, several areas were exempted from cuts, including K-12 schools, the Medicaid program and Kentucky Educational Television. The offices of constitutional officers, such as attorney general and state auditor, were cut 3.375 percent.
There is no money for pay raises for school teachers or most state workers, with a few exceptions, such as Kentucky State Police officers. The budget also includes larger training stipends for police officers and firefighters.
Another $5 million was appropriated for “life-safety projects” at state parks, to make repairs that could cause injury or death if not fixed.
The judicial branch will get an extra $34.2 million in supplemental funding from the state budget. That money, combined with $24.3 million freed up for the judiciary by two of Bevin’s recent vetoes, will allow the courts to avoid the mass layoffs and program closures warned of by Chief Justice John Minton in the face of 9 percent budget cuts.
“I’m pleased to announce that our funding is sufficient to continue court operations at nearly current levels and allow us to avoid the mass layoffs and programs cuts that would have occurred,” Minton said in a statement late Friday.
From a policy standpoint, the budget contains language reducing the frequency by which the state must inspect coal mines every year, from six to four. It also authorizes the state justice secretary to move state prison inmates from overcrowded jails to three private prisons in Wheelwright, St. Mary’s and Beattyville. Kentucky stopped using private prisons years ago because of various problems.
The bill also expands eligibility for public preschool to families making less than 200 percent of the federal poverty level.
Lawmakers balanced the budget by “sweeping” or transferring funds from various restricted agency accounts to the tune of $258 million in fiscal year 2017 and $252 million in 2018. State accounts raided by lawmakers range from the Malt Beverage Education Fund to the Commission for Children With Special Health Care Needs.
The Heritage Land Conservation Fund, which is funded in part by those who purchase specialty nature license plates, lost $5 million to the General Fund, but that was only half of the $10 million recommended by Bevin.
After both chambers approved the budget, lawmakers realized they had made a few errors in it. So the House and Senate quickly passed a follow-up measure, an amended House Bill 10, to clean up their mistakes. HB 10 also carried several more appropriations, including $12 million for state parks emergencies, $10 million for rural airport maintenance and $1 million for a boat dock at Rough River State Resort Park in Western Kentucky.