FRANKFORT, Ky. (July 9, 2014) – The latest update of the Kentucky Chamber’s Leaky Bucket research shows promising signs that the troubling state spending trends identified in the first report are slowing, Chamber President and CEO Dave Adkisson said Wednesday.
“With the usual financial and political pressures in Frankfort to write a two-year budget, very few people in Frankfort ever back up and look at the state’s spending trends over a period of years,” Adkisson said. “The Chamber’s Leaky Bucket spending reports are meant to fill that void and provide a longer-term perspective on how the state is using our tax dollars.”
The analysis, initially released in 2009 and covering fiscal years 2000 to 2010, found spending on corrections, Medicaid and public employee health insurance was growing at a rate significantly faster than the overall state budget. A 2011 update found substantial progress had been made by fiscal year 2012 in curtailing some of that unsustainable spending.
The latest analysis, of state General Fund spending from fiscal 2012 to 2016, reveals:
- Total General Fund spending grew 9.7 percent.
- Corrections spending, which had been growing 50 percent faster than the General Fund, grew only 4.2 percent in the past two budgets.
- Medicaid spending grew 16.5 percent — considerably less than the pace of growth between 2000 and 2012, when it grew three times faster than General Fund spending.
- Public employee health insurance grew at 9.6 percent after growing about four times faster than total General Fund spending.
- General Fund spending on education has increased 3.8 percent since 2012 for the SEEK program, the base funding for K-12, and 28.9 percent for such non-SEEK items as textbooks and preschool.
Continuing challenges noted in the report include fulfilling the legislative commitment to fully implement the 2013 pension reforms to bring fiscal stability to the Kentucky Employee Retirement System and the need to address the funding problems of the Kentucky Teachers’ Retirement System.
“The public pension system represents a particularly significant leak that continues to worsen,” according to the report. “This leak was not addressed in the original Leaky Bucket report as the state implemented initial reforms enacted in 2008. …The state has since enacted additional, more sweeping changes that show promise, but Kentucky is still considered one of the worst performers in the nation in this critical financial area.”
Also of concern is the financial challenging awaiting policymakers with respect to Medicaid in the 2016-2018 biennial budget. The challenge stems from the state’s expansion of Medicaid eligibility, as permitted under the Affordable Care Act, and the additional costs the state will incur beginning in 2017.
The current Leaky Bucket update recommends:
- Continued full implementation of the 2011 sentencing-reform legislation to control the growth in corrections costs and careful consideration of legislative initiatives that will result in higher costs.
- Continued statewide Medicaid managed care and more wellness activities and incentives in the program.
- A data-driven review of the Medicaid program, including benefits and program administration.
- Continued focus on efforts to provide incentives for wellness under the public employee health insurance and requiring employees to contribute a reasonable amount for their insurance.
- Full implementation of the 2013 pension reforms.
- Creation of a task force to conduct a bipartisan review of the Kentucky Teachers’ Retirement System to recommend a sustainable path forward to ensure the system’s financial stability.
The full Leaky Bucket report is available at kychamber.com/leakybucket2014.