1 Year Budget is Passed

First, I hope this finds you and your family safe and healthy. We’re facing an unprecedented global health crisis, and our normal routines have been upended so dramatically. If you need help, please let me know. You can also reach out to the following local and state resources:

Pennyroyal Center RESPOND hotline (available 24/7/365): 877-473-7766

Kentucky’s COVID-19 Website and hotline: 800-722-5725, or general inquires can be emailed to KYcovid19@ky.gov

Centers for Disease Control and Prevention

When in doubt, call your primary care provider.

Many of you have emailed, messaged or called regarding various items in the budget, and on Wednesday, April 1st, the legislature sent a truncated, one-year budget to the Governor for consideration. Regrettably, this budget is based on revenue projections that no one believes we’ll hit in light of the COVID-19 pandemic. All raises for various state employees that have been discussed have been put on hold. Much needed increases in spending on education and infrastructure are almost entirely delayed. However, we are putting an emphasis on public health, unemployment, and along with several other changes to help all Kentuckians navigate these difficult waters, in Senate Bill 150, Kentucky’s own COVID-19 relief bill that was passed unanimously on March 26th and was signed into law on March 30th. The Executive, Judicial and Legislative branch budgets were all passed to cover spending only for the first half of the biennium. The General Assembly will return for its next regular session in 2021 to prepare a revised budget for the second year of the biennium, ostensibly based on updated economic forecasts. I know we all hope to have COVID-19 well behind us by then.

While the General Assembly currently plans to return for a final day (or possibly two days) in mid-April to consider overriding any vetos and to make final passage of other bills, leadership in both chambers are monitoring the emergency daily. The Kentucky Constitution prohibits the legislature from conducting business in an even-numbered year beyond midnight on April 15th. If we don’t return by then the legislature is adjourned automatically by constitutional mandate.

Unfortunately, with the COVID-19 emergency the legislature has, rightly, decided to recess for as much time as possible to minimize potential exposure to staff and legislators. As a result, many bills that were headed toward more debate and possible passage have fallen to the wayside in the interest of the most important policy work, namely those bills related to budgets, pensions, and public health. I feel confident many of these bills will be filed and pursued again in 2021.

Below I’ve included links to key budget and revenue documents, including a summary of the “main” budget document (Executive branch) to show some of the highlights. If you have questions or if I can help don’t hesitate to reach out. You can email me here, or call my Frankfort office at 502-564-8100.

In the meantime, please remember to maintain physical distance in accordance with CDC recommendations and stay home as much as possible!

Veto Recess

One of the critical functions of government at the state and federal level is the system of "checks and balances" on power held by any one branch.  The General Assembly passes legislation but the Governor has the authority to either sign the legislation into law or veto the bill.  In the event of a gubernatorial veto, the legislature has the authority to override that decision.

The GA has exercised this authority in the past, overriding Governors' vetoes.  (I have seen a split legislature overturn a Democratic Governor's veto, and a Republican-controlled legislature overturn a Republican Governor's vetoes.)  This year the General Assembly preserved its authority to override a veto on a number of the most critical (and contentious bills) by passing them prior to the start of the veto recess.  By doing this, the legislature has reserved the final two days of session, after the veto period has expired for bills passed to date, to consider any vetoes for a possible override vote.

Earlier today, Governor Bevin issued two veto letters; one for the biennial budget and one for the tax/revenue bill passed alongside it.  You can view the Governor's veto letter for each bill linked below.  The General Assembly returns to session for its final two days on Friday and Saturday of this week.  Stay tuned for updates on if or when we consider overriding the vetoes.

This Governor held a press conference explaining the veto on both bills, and sometime later in the day the Senate President and Speaker Pro Tempore of the House issued the following joint statement:

Commonwealth of Kentucky
Senate President Robert Stivers
House Speaker Pro Tempore David Osborne
 
For Immediate Release
April 5, 2018

Contact: John Cox
John.Cox@LRC.KY.GOV
 
Contact: Daisy Olivo
Daisy.Olivo@LRC.KY.GOV

SENATE PRESIDENT, SPEAKER PRO TEMPORE RELEASE JOINT STATEMENT RESPONDING TO GOVERNOR BEVIN’S VETOES
 
FRANKFORT, Ky. (April 9, 2018) – The following is a joint statement from Senate President Robert Stivers (R-Manchester) and House Speaker Pro Tempore David Osborne (R-Prospect) reacting to Governor Matt Bevin’s announcement to veto House Bill 200 and House Bill 366:
 
“We believe Governor Bevin is misguided in his interpretation of the budget and the revenue bills, as we are comfortable with LRC staff revenue projections. To our knowledge, the Governor has had no discussions with any legislators on the details of this budget and what he might consider to be a shortfall. We believe Governor Bevin would be best served to meet with legislators to understand their thoughts and rationale before making a final decision on vetoing the revenue and/or budget bills.”
 
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NOTE: You can find links to each of the Governor's 2018 veto letters here, which is updated as new vetoes are issued.

Budget & Revenue Bills

(Update – 4/3/18 – 1:12pm CST: Replaced incorrect revenue bill summary document)

Linked below are the Free Conference Committee Reports for both House Bill 366 (revenue) and House Bill 200 (executive branch budget).  Both bills have passed through the legislative process and the veto recess has begun.  Because the bills passed before midnight on Monday, before the veto period started, the legislature has retained is ability to override any vetos.

Both bills represent a compromise for me in a number of ways, but ultimately, I am willing to support both because I do not believe we can cut enough from state spending in other places to make ends meet on many critical government services affecting public safety, public education, infrastructure and social services to name a few.  Passing this tax overhaul lowers personal and corporate tax rates, and begins taking steps toward a consumption-based tax system (that still preserves exemptions vital for low income earners).  Again, I do not agree with everything in the tax reform bill (HB366) but I was willing to support the proposal as a whole.  As a result of the compromise tax plan we have been able to pass the first structurally balanced budget in more than 20 years.  In other words, we have not used any one-time funds for recurring expenses.

Some of the highlights of the budget and revenue bills:

• The budget lowers the personal income tax for all Kentuckians to a five percent flat rate, it does NOT raise income taxes.
• This budget does NOT raid the employee health fund for outside purposes, and will instead use some of those funds for the benefit of state employees by shoring up pensions.
• We fully fund KTRS, KERS, and SPRS pensions as required by actuaries—over $3.4 BILLION over the biennium from General Funds.
• There will be NO funding for legislators’ retirement systems and those funds will be redirected to the unfunded liability in the SPRS.
• Budget Reserve Trust Fund (Kentucky's "rainy day" fund) at $304 million
• Veterans Affairs and the Kentucky State Police will have no funding reductions.
• KSP will receive authorization for lab updates and vehicle purchase funding.
• Provides an additional $1 million/year for KSP forensic lab tech salary increases
• Provides record SEEK per pupil funding levels & restores SEEK transportation funding
• Approximately $11.5 million per year will be allocated for cancer screening and research
• Approximately $7 million/year research and screening to be shared equally by UK and UofL
• $500,000 per year for both ovarian and colon cancer screening
• $2.5 million/year will be allocated for pediatric cancer research
• Smoking cessation will be allocated $7 million
• Funds the KY Mathematics Center, the WKU Mesonet, and provides an additional $31 million each year for performance-based funding for colleges and universities
• Appropriates approximately $56 million in Tobacco dollars over the biennium to the Early Childhood Development Fund with funds designated for foster care, adoption, and public health
• Adds approximately $28 million in support per year to increase reimbursement rates for private child caring agencies
• Allocates an additional $11 million each year to increase social workers’ salaries
• KCHIP will be fully funded with an additional $12 million allocation
• FRYSCS funding is fully restored
• Restores $7.5 in funding for the Preschool Partnership Grant Program

Both of those bills are lengthy so I have included summaries of the bills here below.

Initial Proposed Budget

Every two years the Legislature convenes a "long" regular session, running 60 legislative days.  During this even-year session we draft and vote on the Commonwealth's biennial budget.  This process takes many months, but the document itself gets it first official unveiling when the sitting Governor of the day makes his or her State of Commonwealth address in mid-January.  Last week, Governor Bevin gave his address to a joint session of the Senate and House and the following day the various budget bills were filed in the House (where law requires all appropriations bills to begin) and the legislative process begins in earnest.

Below are the budget bills for you to download and review if you're curious.  The bill must pass the House (where it will certainly change shape), before coming to the Senate (where it will change again), and then customarily a free conference committee is formed (made up of House and Senate members) to hammer out a compromise.  Once a unified version of the bill has passed both chambers it heads to the Governor for his signature or veto.

Pensions Update

Click here to visit KentuckyPensions.com for more information.

Bringing about a flurry of facts and a storm of misconceptions, Kentucky’s pension crisis has become one of the most dominating news stories in recent months. One thing is for certain: if our state pensions are not addressed in the very near future, we will face huge cuts in state funding. Education, Medicaid, and other government services would likely be affected—a risk our state is not in a position to take.

So how did we get to this point? In the early 2000’s Kentucky’s pensions were in a healthy condition. While there was not one single cause for the pensions’ downhill slide, factors such as faulty assumptions led to underfunding which continued throughout the decade. The lack of proper funding over this amount of time eventually led to the critical state of our pensions today. The General Assembly took steps toward reforming the Kentucky Employees Retirement Systems (KERS) and the County Employee Retirement System (CERS) in 2013, but unfortunately the Kentucky Teachers Retirement System (KTRS) was not included in those measures and the problem continued to grow.

This is not a partisan issue. In 2016 the General Assembly—Republicans and Democrats—made a commitment to address the problem. This started with a dedication of $1.2 billion annually to help with the shortfalls in KERS and KTRS as well as establishing a permanent pension fund. We also hired a third party organization, the PFM Group, to investigate the state of our pension systems.

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In 2016, PFM was hired pursuant to legislation that passed 38-0 in the Senate and 99-1 in the House.

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On Monday, August 28, the PFM Group gave its final presentation to the General Assembly’s Public Pension Oversight Board, offering its recommendations on how to best address the problem. I, along with my colleagues in the General Assembly and Governor Bevin, will consider PFM Group’s recommendations and craft a plan that will be implemented in a special session.

What happens if we keep kicking the can down the road? The only path forward would be to cut funding in other areas of state government. Kindergarten-12 public education, already under the burden of larger class sizes, too few teachers, and a shortage of resources, could face cuts. Higher education would also feel the cuts and make college less affordable. Medicaid, public safety and infrastructure—all services of state government many would agree are mission-critical—would also suffer in this unfortunate scenario.

However, there are ways to avoid that situation. There is a path forward that allows us to balance our legal and moral obligation to our retirees while reforming the broken systems. Our priority is ensuring our retirees have a secure retirement that will provide for them in the years to come without taking away from other priority state programs. Addressing this crisis will not be an easy task, but I will continue to work alongside my colleagues in the General Assembly to ensure we find a solution that provides for our retirees while being responsible stewards for taxpayer dollars. Now that the study from PFM has been completed, discussions on specific policies will begin. If you have questions or concerns about pension reform, please do not hesitate to contact my office directly. If you would like to see the reports for yourself, head to kentuckypensions.com.

If you have any questions or comments about these issues or any other public policy issue, please call me toll-free at 1-800-372-7181 or email me at Whitney.Westerfield@LRC.ky.gov.  You can also review the Legislature’s work online at www.lrc.ky.gov.

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