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General Assembly Approves Two-Year Kentucky Budget

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Anne Kitzman
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The state legislature approved a two-year, $21.5 billion budget that delivers deep cuts to state programs while putting more than $1.2 billion in savings into the pension systems. The spending bill now heads to Gov. Matt Bevin’s desk. He’ll have until April 27 to veto all or parts of the budget.

“This budget sends a strong signal to the financial and business communities that we take our financial obligations seriously,” Bevin said in a statement. “I look forward to reviewing the details of the final bill over the coming days and signing a fiscally responsible budget into law.”

The legislature will not be able to override any vetoes because they ran out the clock on the legislative session. They normally have two legislative days to override.

The budget puts $973 million into the Kentucky Teachers’ Retirement System, which is only 45 percent funded, and $186 million into the Kentucky Retirement Systems, a segment of which is only 17 percent funded.

It also sets aside $125 million in Bevin’s newly devised “pension reserve fund,” with plans to put surplus money and other windfalls into the fund.

Jim Carroll, a spokesman for an advocacy group called Kentucky Government Retirees, said the hefty contributions to the retirement systems are a good “first step.”

“If the market improves significantly over the next two years, the additional funds may slow or stop the alarming, ongoing asset decline in the KERS non-hazardous fund,” he wrote in a statement.

The KERS non-hazardous fund has only 17 percent of the funds it needs to make future payments. Advocates worried the plan would soon be “pay as you go,” meaning the state would pay out benefit checks straight from its coffers instead of the retirement fund.

Higher education will be cut by 4.5 percent under the plan, and performance-based funding will be imposed on state colleges and universities. Starting in the 2018 fiscal year, higher education institutions will compete for 5 percent of state funding; that grows to 25 percent in 2020.

The budget also sets aside $25 million for a “Work Ready” free tuition program for high school graduates who enroll in two-year degree programs in Kentucky.

The budget gives the Judicial Branch an additional $34.2 million to keep drug courts, pretrial services and other programs open. Chief Justice John Minton sounded the alarm on proposed 9 percent cuts to the courts system, which he said would be devastating.

“I attribute this positive outcome to key interventions by Gov. Bevin and members of the House and Senate,” Minton said. “I appreciate their efforts to protect the important work of the courts from additional crippling budget cuts.”

The budget shifts the way coal severance tax revenue is divvied up between the state and counties. Instead of a 50-50 split, counties will now receive 60 percent of the funds, and committees made up of local officials will determine how the money will be spent.

Rep. Jim Wayne, a Democrat from Louisville, was the lone “no” vote on the budget. Wayne said the state can avoid austere budget measures by overhauling the revenue system.

“It’s inadequate, it’s outdated and most of all it’s unjust because the wealthy are not paying their fair share,” Wayne said.

The budget takes $500 million from the Employee Health Insurance Trust Fund to balance spending.

Wayne said the spending plan is not “structurally sound.”

“Half a billion of this budget is coming from a fund that will not have that much money in two years,” he said.

Copyright 2016 WFPL-FM. To see more, visit WFPL-FM.

Ryland Barton is the Managing Editor for Collaboratives for Kentucky Public Radio, a group of public radio stations including WKMS, WFPL in Louisville, WEKU in Richmond and WKYU in Bowling Green. A native of Lexington, Ryland most recently served as the Capitol Reporter for Kentucky Public Radio. He has covered politics and state government for NPR member stations KWBU in Waco and KUT in Austin.
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