Kentucky budget

Kentucky lawmakers have advanced a continuation budget as they head into a three-week long break during this year’s legislative session, though the spending plan will likely change.

The budget bill continues state spending at current levels, but legislators say it’s a “placeholder” and ultimately the final budget will be hammered out in the coming months.

Sen. Chris McDaniel, a Republican from Latonia and chair of the budget committee, said the unusual process is due to the shorter-than-usual legislative session.

“This is merely a continuation, but with the time constraints upon us, it’s important to go ahead and work ourselves to what we believe to be a free conference committee,” McDaniel said.

The Kentucky House of Representatives quickly advanced budget bills on Monday that continue state spending at current levels.  The bills do not include Gov. Andy Beshear’s initiatives like state employee raises and relief during the coronavirus pandemic.

The move is intended to speed up the budget writing process. Once the bills pass each chamber, the Republican-led House and Senate will begin a conference committee where they can hammer out the final budget in a small group.

Rep. Jason Petrie, a Republican from Elkton and chair of the House Appropriations and Revenue Committee, said the budget bills that moved forward are largely the same as the ones that passed last year, with only small adjustments like debt service.

Gov. Andy Beshear unveiled his proposal for how the state should spend its money over the next year, calling on lawmakers to slightly increase education funding, overhaul the state’s unemployment system and provide direct payments to businesses and people struggling during the pandemic.

Beshear’s budget would also give $1,000 raises to teachers and 1% raises to other state employees.

Beshear proposed paying for the new spending by using more than $600 million in one-time funds, largely from federal CARES Act money.

But ultimately the final budget will be decided by Republicans in the legislature, who command veto-proof majorities in both the state House and Senate.

Beshear called on lawmakers to “put aside squabbling and petty partisanship.”

Gov. Andy Beshear’s administration says federal assistance led to higher-than expected tax revenues during the coronavirus pandemic and that the state hopefully won’t need to make budget cuts this year.

Still, officials predict that Kentucky will have a $99 million shortfall for the current fiscal year, which ends in June 2021. And the year after that will depend on the state and nation’s ability to recover from the coronavirus pandemic.

Revenue from sales and income taxes has been higher than expected, but has dropped off since the expiration of federal stimulus programs, said John Hicks, Kentucky’s state budget director.

Kentucky’s top budget official says the state’s financial future is uncertain as federal programs like the $600 supplement to unemployment benefits and the Paycheck Protection Program expire during the pandemic.

Part of why Kentucky has been able to weather the financial storm is federal assistance, according to John Hicks, the state budget director in Gov. Andy Beshear’s administration.

“We’ve got many strong signals that fiscal [year] 21 will be a significant budget challenge and will have lower revenues than in fiscal 20,” Hicks said during a legislative hearing on Wednesday.

Kentucky Gov. Andy Beshear said he’s optimistic the state will end the fiscal year without the originally projected $457 million budget shortfall. 

During a COVID-19 media briefing Wednesday, Beshear said they “don’t have all the numbers in” yet, but the state made cuts and had more revenue come in than expected. That means he’s hopeful that they won’t have to make any cuts “to education, health, public safety, or the judicial or legislative branch in the budget that we just ended,” he said. “We would have been paying for that going forward. We also expect to increase our Rainy Day Fund.”

The Kentucky House Appropriations and Revenue Committee presented its vision for the biennial budget on Thursday.

The committee presented bills for funding plans for the executive and legislative branch as well as the committee’s revenue proposal. There was no mention of major spending cuts that have characterized budgets over the past 14 years. 

Committee chairman Steven Rudy, a Republican representative from Paducah, noted that his committee’s budget proposal kept the same debt ratio of 5.3% as the governor’s, but contains some key differences. While both proposals included a 1% raise for all state employees, the governor’s budget proposed a higher raise for teachers that Republicans didn’t include.

Lawmakers are returning to Kentucky's Capitol to start a 60-day session that will be dominated by work on a new state budget. The House and Senate will convene at midday Tuesday.

This year's session will stretch into mid-April. Republicans hold supermajorities in both chambers, but there's a new political dynamic with Democrat Andy Beshear now in the governor's office.

In their budget work, Beshear and lawmakers will confront spending pressures amid projections for only modest revenue growth in coming years. Rising costs for pensions, health care and corrections will complicate their work.

The president of Western Kentucky University unveiled phase two of the school’s budget cuts on Thursday. WKU President Timothy Caboni says this second round of cuts will result in $14 million in savings. The two rounds of budget cuts amount to $27 million.

The second round of cuts includes 10 filled staff positions and the elimination of 20 vacant positions. Of those 20, 12 are faculty and eight are staff.  The specific positions will be announced in about week, after employees are notified.

This year’s Kentucky General Assembly was book-ended by turmoil, but over the course of nearly four months the Republican-led legislature was still able to wrangle the votes to approve politically volatile policies like changing pension benefits for public workers and overhauling Kentucky’s tax code amid intense protests from public workers, especially teachers.

The legislature also passed a variety of conservative measures like new abortion restrictions, an expansion of the state’s gang penalties and an overhaul of Kentucky’s workers compensation system.

The opening of charter schools in Kentucky could be delayed if a two-year budget passed this week by the General Assembly is signed by Governor Bevin.

The spending plan contains no funding for charters, which operate with greater independence than traditional schools and with a different level of accountability. 

Lawmakers approved the creation of charter schools in last year’s legislative session.  The state then began accepting applications with a goal of having some of the alternative public schools operating by this fall.

Kentucky’s Republican-led legislature has passed a new two-year state budget that cuts much of state government in order to put more money into the state’s ailing pension systems.

But lawmakers also approved about $680 million in new revenue by expanding the sales tax to 17 services ranging from auto repair to country club memberships and raising the tax on cigarettes.

Update: The Kentucky Senate has approved a $480 million tax increase by voting to expand the state sales tax to a variety of services.

The Senate voted 20-18 to send the bill to the House of Representatives, which also plans to vote on the measure Monday.

Senate Democrats objected because they said they were shut out of the process and did not have time to read the bill. Republicans said the bill had to pass Monday to preserve their right to overturn any vetoes from Republican Gov. Matt Bevin.

As this year’s legislative session winds down, Kentucky lawmakers still have to make hard decisions on how the state will spend and make money over the next two years.

Republicans are solely in charge of writing the $22 billion two-year budget for the first time in state history, but leaders of the state House and Senate still disagree on the thorniest spending issues.

Many of the disagreements center on whether the state should try to generate new revenue in order to put more money into public education.