How deep will Matt Bevin's budget cuts be? Here's what we know
By Tom Loftus
Louisville Courier Journal
FRANKFORT, Ky. -- Gov. Matt Bevin is set to deliver his state budget proposal to the Kentucky General Assembly on Tuesday night, and lawmakers expect it will include deep spending cuts, even to public education.
To be sure, the budget will touch the lives of every Kentuckian, from public school teachers to state troopers to college students to people dealing with drug addiction. It also is being crafted as legislators wrestle with pension reform, which will siphon large amounts of state money away from other key areas.
Cuts are needed -- probably very deep ones -- because Bevin Budget Director John Chilton has said Kentucky is $1 billion short of funding all current state functions while addressing the soaring cost of pensions and Medicaid and restoring a healthy balance to the budget's Rainy Day Fund.
The governor has given several clues, but few details, as to what he will propose. On Monday he said in an interview with KET that funding for the core public school funding program known as SEEK (Support Education Excellence in Kentucky) "is not in jeopardy."
Here are some basic questions and answers about the state budget and expectations surrounding Bevin's proposal.
What is the budget?
It is a law that directs how state government will spend your tax money for the two-year period between July 1, 2018, and June 30, 2020.
Why is it so important?
As we've said, it will affect virtually everybody.
How many public school teachers do we need and how much should they be paid? How many state troopers do we need to keep us safe? How many child-protection cases should a social worker be handling at the same time? Which highway projects need to be built, and which can wait? Shouldn't we expand drug abuse treatment opportunities to fight the opioid abuse crisis? Is tuition too high at public universities and community colleges?
The answers to these questions, and so many more, are rooted in the state budget and its accompanying documents. The budget tells - to the dollar - exactly how much money those in power in Frankfort believe needs to be spent on public schools, state universities, public safety, highways, prisons, courts, programs for the needy, and much more.
How much money does it spend?
The key part of the budget is how it will spend $11 billion in 2018-19 and $11.3 billion in 2019-20 from the General Fund. That's the main state fund, and the money comes from revenues generated by most state taxes, including sales, income and property taxes. A second state fund is the Road Fund, which totals $1.5 billion a year. That money, which comes mostly from the gas tax and sales tax on vehicles, is spent on highway construction and maintenance and also for part of the state police budget.
The budget also outlines how billions in federal dollars are spent, but most of that is tied to how the budget appropriates General Fund and Road Fund dollars. And the budget includes how revenues from numerous fees and university tuition is spent, but that fee revenue is generally retained by the agency or university that charges them.
Who writes the budget?
The General Assembly. It has exclusive power under the Kentucky Constitution to write the budget. But the governor is required to propose a budget for the legislature's consideration. This is crucial because the General Assembly historically has accepted most of a governor's proposal in the final budget it passes.
I hear the budget is going to be tight. How tight, and why?
Apparently, it will be extremely tight with big funding cuts to many programs.
Bevin told Kentucky Today, an online publication of the Kentucky Baptist Convention that is friendly to the administration, that the public should expect "a very truthful, realistic budget that will be sobering for many people. It will also focus where there is the greatest need."
Bevin emphasized in his KET interview that his priorities will be "education, infrastructure, law enforcement and taking care of the most vulnerable among us."
And he said that to adequately fund those priorities, programs and agencies not essential to those vital responsibilities of state government are likely to be eliminated.
The squeeze is because tax revenue growth is expected to be weak while costs of certain big-ticket items like Medicaid, prisons and pensions grow. And the need for more pension funding appears to be -- by far - the main reason for spending cuts elsewhere.
Chilton, the budget director, has said up to $700 million more per year from the General Fund is needed to put the retirement systems on a solid path to paying down their whopping $43.8 billion in debt. That increase could be reduced depending on how much a pension reform bill cuts current pension benefits.
A $700 million increase per year for pensions? How much of the General Fund budget is consumed by appropriations for just pensions?
Chilton has said pensions cost $1.5 billion in General Fund spending this year, or 13 percent of the fund. An increase of $700 million would make that $2.2 billion, or 20 percent of General Fund spending, in 2018-19.
What happens Tuesday?
The governor will formally release his budget proposal, and he will talk about it in a State of the Commonwealth and Budget Address to a joint meeting of the House and Senate at the Capitol beginning at 7 p.m. The speech, which is likely to be long, will be broadcast live on KET.
What happens after Tuesday?
The budget goes to the House Appropriations and Revenue Committee, which will work on it for weeks, make changes and approve it. Then it goes to the House floor for a vote. This process will be repeated on the Senate side, where more changes will be made. A conference committee appointed by House and Senate leaders will then meet (in private) to resolve differences between the House and Senate versions and produce the final budget, which must finally be passed in each chamber. This final vote will not come before very late in the session, which is scheduled to end April 13.
Instead of cutting education and other needed programs, could lawmakers instead raise taxes to address the state's needs?
It is doubtful that they will during this regular session. Painful spending cuts would generate some momentum for more revenue. And health advocates are pushing to raise Kentucky's low cigarette tax (60 cents per pack). Even the Kentucky Chamber of Commerce supports that.
But tax increases are always difficult to pass. It should be noted that for the first time in Kentucky history, Republicans - with the governorship and big majorities in the House and Senate - are in absolute control of writing a state budget. And this is an election year.
Bevin has said tax reform is a priority -- top on his agenda after a pension reform bill and the budget bill get moving. Last fall he even suggested he may propose two budgets -- "one with tax reform in it, and one without to give people the option."
Bevin has said that if he can't get a tax reform plan through this session, the issue will be addressed at a special session later in 2018.
A year ago in his last State of the Commonwealth address, the governor warned that his tax reform plan would be a tough vote. "This is not going to be a tax-neutral plan," he said. "It's not. We can't afford it to be."