More budget cuts seem likely

Ronnie Ellis CNHI News Service

January 7, 2014

Kentucky lawmakers face a simple question for the biennial budget session. They have to find more money or make more cuts.

“It’s not rocket science,” said Rep. Rick Rand, D-Bedford, the chairman of the House Appropriations and Revenue Committee. But he doesn’t see much chance of tax reform or raising any significant amount of new state funds.

“We’ll likely see something like we did in the last session when we did pension reform,” Rand continued. “Identify a need we all agree on and then find some way to do that.”

Revenue forecasts by an independent group of economists anticipate $246 million in new revenue growth for year and another $252 million in the second year. But the Kentucky Center for Economic Policy, based in Berea, says the state needs in excess of $500 million a year just to keep pace with current, basic needs.

“There’s really not a way to do it (without more revenue),” said KCEP Director Jason Bailey. But he isn’t optimistic lawmakers will do that in an election year.

“I think there’ll just be more cuts and a bunch of flat-line funding which will amount to eight years of budget cuts,” he said.

Senate budget chairman Bob Leeper, I-Paducah, echoed Rand’s predictions: he believes Gov. Steve Beshear will base his budget request on existing revenue sources.

“Obviously, someone’s going to be cut, but at this point I’m being told they’re going to come to us with realistic numbers,” Leeper said.

Since 2008, Kentucky’s state budget has been cut in some form 13 times for a total of $1.6 billion. Constitutional offices like those of the Attorney General and Secretary of State have been cut 32 percent; the Kentucky State Police 26 percent; Environmental Protection 25 percent; and vocational education funding has been reduced 25 percent.

During the same period, the basic funding formula for public schools called SEEK, from pre-school through high school, has been frozen at 2009 levels while enrollment has grown. Just to match 2009 funding levels for the larger enrollment, the Kentucky Department of Education needs another $60 million next year.

That still doesn’t make up for cuts to other education funds such as after school programs (cut 61 percent); teacher development (cut 65 percent), safe school programs (cut 64 percent) or textbook funding which was cut to zero.

The Kentucky Department of Education is asking for $152 million more next year to fully fund SEEK and restore cuts to after-school, textbook and other school programs, according to KDE Associate Commissioner Hiren Desai.

Beshear wants to put more money into education as well, but while he supports tax reform and expanded gambling, the governor said he won’t include any revenues from those areas in his budget. That means to bump education funding, other agencies will have to be cut even more.

For years, lawmakers have put off some costs such as funding state pensions and swept fund balances from restricted funds to get by, but KCEP’s Bailey said those options aren’t available this time because those reserves have been spent.

Meanwhile, the pension reform bill passed last year requires lawmakers to fully fund the annually required payment into the state employee pension fund, an amount estimated to be between $100 million and $120 million.

The Kentucky Teachers Retirement System, which was not affected by the 2013 pension reform, needs an additional $390 million to remain solvent.

Bailey said the current budget also has $157 million in one-time funds which must be replaced.

College tuition has doubled since 2000. In 1999, the state provided 68 percent of the cost of a college education in Kentucky while students and parents paid 32 percent in tuition. Those percentages were reversed in 2013: 38 percent from the state and 62 percent from tuition.

Funding for public health has been cut $16.9 million to a level about one-third what it was in 2008. Christie Green, public information officer for the Madison County Health Department, said that has resulted in layoffs of school nurses it provided. On top of that, she said, the pension reform bill will require the department to pay even more into employee benefits at a time of state and federal funding cuts.

The state has frozen funding for Child Care Assistance Programs which helps low-income working parents stay employed. As more children are denied assistance, some parents leave the workforce and stop paying taxes while drawing unemployment benefits or public assistance

“With the current revenues we have, it’s probably not going to be realistic” to restore those cuts in the upcoming budget, said House Speaker Greg Stumbo.

At the same time lawmakers can’t find enough money in its $9.5 billion General Fund budget, they have given away $15.7 billion in tax credits, exemptions or incentives to various interests.

Rand, the House budget chairman, said that’s an area lawmakers might look at as they search for ways to craft a budget. Many of the “tax expenditures” were created to help businesses create jobs but the state doesn’t review the effectiveness of such programs.

Bailey said avoiding raising revenue isn’t really free. If lawmakers can’t summon the will to generate more funding for education and other human services, Kentucky will have experienced “a lost decade in terms of any progress in the things we should care about: investing in our kids and strengthening our economic system.”

Ronnie Ellis writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.