Budget director says difficult choices must be made because state doesn’t have ‘enough money to go around’

By Jacqueline Pitts, The Bottom Line

As legislators prepare to craft a new two-year state budget with limited resources, Kentucky’s state budget director presented details of the governor’s proposed budget to legislators including where cuts will come and how deep they will be to pay for the state’s growing costs in the areas of pensions, Medicaid and more.

Senate Appropriations and Revenue Committee Chair Chris McDaniel started the meeting Tuesday by stating he expects this budget to be the worst one the state has ever faced but said legislators should have a “laser like focus” on ensuring the state has a balanced budget for the next two years.

The A&R Chair also stated the legislature passed legislation in 2013 that said they would fully fund the pension systems, and stated that is what will be done. He noted that while this will be difficult for all other areas of the budget it must be done and that “any bill that does not will not get a hearing in this committee.”

In his presentation to the committee, State Budget Director John Chilton said there are limited resources which require difficult choices, adding “there’s just not enough money to go around.”

The governor’s priorities in this budget, Chilton said, include putting the state’s financial house in order, fully funding the pension systems, a focus on K-12 education, workforce development, safeguarding Kentucky’s most vulnerable, public safety, and building and maintaining infrastructure.

In order to achieve these things, the Bevin administration proposed the elimination of 70 state government programs, valued at $85 million in General Fund dollars per year, and a 6.25% cut across many state agencies, which would save the state around $300 million per year. Some areas of state government are exempt from those cuts. View that list in the photo to the left.

While those cuts free up some revenue, the governor’s budget also proposes additional General Fund spending of $317 million in FY2019 and $457 million in FY2020, much of those funds going to growing costs in pensions, Medicaid, corrections, community-based services, and other criminal justice needs.

Chilton also covered the billions in funding for the state’s woefully underfunded pension systems included in the governor’s budget proposal with $2,299,271,000 in General Fund dollars allocated to the teachers’ retirement system—meeting the full actuarial contribution—and $1,017,921,000 in General Fund revenue for state employee retirement over the biennium. During his state of the Commonwealth and Budget Address, Bevin noted that means 14.5% of the General Fund is dedicated to pension costs.

Chilton noted the projected growth for FY 2019 and FY 2020 is expected to be modest which is a factor in the budget crafted by the administration.

The budget proposal contains around $250 million going toward the Budget Reserve Trust Fund, which Chilton said is around half of what should be in the state’s “rainy day” fund but some money has to be in the fund in order for the state to have its fiscal house in order.

Officials from the state budget office also covered spending on areas like public safety and transportation. View the photo to the left to get more information on infrastructure funding.

Chilton said there are a few areas that could help “alleviate the severe budget reductions,” which he said would be meaningful pension reforms during the 2018 session, tax reform focused on making Kentucky competitive, and/or restoration of funding for specific programs by making reductions in other areas—adding that expenditures cannot exceed revenues.