Page 8 - March 2015 Lane Report

TheLaneReport Perspective

Kentucky’s Business News Source for 30 Years New governor will fuel taxes are reduced by 4.3 cents per
face headaches gallon due to current lower fuel prices.
Editorial Director In addition, the Federal Highway Trust
State’s incoming top executive Fund – which is near insolvency – will
Mark Green has major budget issues to fix be allocated this fiscal year in propor-
tion to each state’s federal formula
Associate Editor By Ed Lane apportionment. Due to reduced state
and federal dollars for new construc-
Karen Baird The five candidates in the April 2 tion and maintenance of roads, bridges
primary for the opportunity to run and infrastructure, Kentucky transpor-
Digital Editor in the 2015 general election are tation funding will either be restricted
Jack Conway, who is unopposed for the or require new sources.
Frank Goad Democratic nomination, and Republi- Affordable Care Act Medicaid funding
cans Matt Bevin, James R. Comer, Hal Currently the federal government is
CREATIVE Director Heiner and Will T. Scott, who are in a paying 100 percent of Kentucky’s cost
contested primary. The Republican pri- to cover people eligible under the
Jessica Merriman mary winner will face off against Jack expanded ACA Medicaid rules. Start-
Conway for governor on Nov. 3. ing in 2017, Kentucky will have to pay
CREATIVE Services a percentage of the Medicaid cost that
Kentuckians are fortunate that well- will ultimately increase to 10 percent
Stone Advisory qualified candidates have committed to in 2020. The precise dollar amount of
Paul Blodgett run for governor because the new gover- the state’s contribution for expanded
nor likely will have to manage major finan- Medicaid under the ACA rules is not
Correspondents cial crises during his four-year term. These known, but it will be a significant
monetary issues need to be discussed in expense to taxpayers and have a sub-
Amanda Arnold; Rena Baer; Sarah Berkshire; detail during the upcoming campaigns. stantial impact on the General Fund.
Katherine Tandy Brown; Anne Charles Doolin; Underfunded state pension funds A 2013 estimate by the Kentucky Cabi-
Debra Gibson Isaacs; Robert Hadley; Lorie Hailey; Kentucky’s pension funds had a com- net for Health and Family Services
bined estimated total liability of $52.2 forecasts the state’s share of expanded
Anne Sabatino Hardy; Feoshia Henderson; billion, but with a fund value of $26.0 ACA Medicaid coverage will cost tax-
Kara Keeton; Meredith Lane; Abby Laub; billion, they had an unfunded liability payers $33 million in FY2017, $74 mil-
Greg Paeth; Robin Roenker; Josh Shepherd; of $26.2 billion in 2012. Current data lion in FY2018, $91 million in FY2019,
Eddie Sheridan; Sean Slone; Gary Wollenhaupt; are not yet available, but because of $124 million in FY2020, and $151 mil-
continued underfunding the unfunded lion in FY2021. An up-to-date estimate
Esther Zunker liability is likely greater than 2012. based on recent Medicaid coverage
levels and actual costs in Kentucky is
SYNDICATED COLUMNS The state’s FY15 General Fund reve- being prepared to provide a more reli-
nue (money received from fees and able forecast of future cost. Because
Creators Syndicate taxpayers) is forecast at $10.2 billion, Kentucky has enrolled many new indi-
which provides a relative measure of viduals into Medicaid, the costs could
printing & circulation Services how serious the $26.2 billion in exceed the Cabinet’s initial estimates.
unfunded pension liabilities are rela- Other major issues
Publishers Printing Co. tive to General Fund revenue. The new governor will have many
■ other major financial and political
Just paying the unfunded liability of issues to address – global competition,
CEO/PUBLISHER $26.2 billion in equal annual install- workforce development, funding of
ments over 30 years with no interest K-12 and higher education, tax mod-
Ed Lane would cost taxpayers $873.3 million ernization, more efficient and modern
annually, payments equal to 8.6 percent government operations, drug abuse,
Executive vice president of the FY15 General Fund budget. and right to work. But the big financial
issues looming on the docket are pen-
Dick Kelly Moody’s Investor Services and Fitch sion reforms, future Medicaid costs,
Ratings have rated Kentucky’s pension funding for roads, bridges and logistics
Associate Publisher debt in terms of unfunded liabilities as infrastructure. These are budget-bust-
among the worst in the nation and cited ing expenditures to provide essential
Donna Hodsdon pension debts as a key factor in multiple services that will need to be promptly
downgradings of Kentucky’s bond rating. addressed to keep state government’s
marketing Consultants financial rating on a sound footing. ■
Immediate initiatives to protect both
Bill Marshall the benefits for pension beneficiaries and
Curtiss Smith the state’s credit rating are imperative.
Cheryl Avioli
Declining Transportation Ed Lane ([email protected])
CIRCULATION Cabinet road funds is chief executive of Lane Consultants,
A $129 million reduction in annual Inc. and publisher of The Lane Report.
Sarah Herbener income starting in 2015 is estimated
when state gasoline, ethanol and diesel
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6 March 2015