Gov. Andy Beshear has made a lot of promises over the past two years about what his administration will fund, with a heavy focus on increasing spending on public education.
At 7 p.m. Tuesday, the new governor will finally unveil his specific budget numbers for the next two years.
Beshear’s address this evening will outline the budget proposal his administration is submitting to the Kentucky General Assembly for its approval, expected to detail roughly $11.6 billion of General Fund spending.
However, what the governor is presenting is just a proposal. The ultimate arbiter, determining what is and isn’t in the state’s budget, is the legislature, with Republican supermajorities in each chamber.
Beshear has made specific promises to increase funding for public K-12 and postsecondary education, expanded Medicaid and public pensions, but with limited new tax revenue — and GOP legislators making clear that his top new revenue plan of legalizing casinos is a nonstarter — this is sure to be an extremely tight budget.
Former Gov. Matt Bevin’s budget director laid out a grim forecast for the incoming governor shortly before he was sworn into office, estimating a $1.1 billion state budget shortfall over the next two years — even before some of Beshear’s promises were factored in.
The Beshear administration has privately scoffed at some of those estimates, but it is clear that aligning pledges and priorities with cold, hard numbers will be a significant challenge.
Here are some of the major items to look for in Beshear’s budget:
Education
Beshear campaigned on making education funding the highest priority of his two-year budget, and there are many specific promises that will not come cheap.
The governor said his pledge to give every public K-12 teacher a $2,000 raise would cost $84 million per year. Bevin’s budget director put that figure higher at $97 million, along with a $31 million annual estimate for his pledge to increase the per-pupil SEEK formula for K-12 public education at $31 million.
According to the Kentucky School Boards Association, the unfunded mandate of the 2019 school safety bill will cost $18 million next year to improve the physical safety features of school, plus $121 million annually to hire new resource officers and counselors.
Beshear has spoken about funding the school safety bill in “steps” but has not yet provided specifics, which may come Tuesday.
The governor also referenced improved funding for preschool Thursday to make sure “every child” can get the early education they need.
As for higher education, Beshear has pledged his budget will not cut funding for public postsecondary institutions, which would be the first time this occurred in over a decade. But how much will Beshear propose to actually increase spending for colleges and universities?
The Council on Postsecondary Education told legislators last week they have asked for 6.2% and 8.8% increases in the next two years, which would amount to $123 million in additional funding. According to Bevin’s budget director, a 1% increase would cost $11 million next year.
Corrections
Citing the increasing inmate population and loss of available bed space in crumbling state prisons, Beshear laid out the expected rise in costs for the Kentucky Department of Corrections in a recent press conference.
Corrections has not only requested an additional $20.6 million for the rest of the current fiscal year ending this summer, but an additional $46.5 million and $48.2 million in the next two years.
Part of these increased costs will presumably include the $3.75 million cost to lease a new privately owned prison in Floyd County, plus roughly $12 million annually for the state to operate the prison.
Beshear also said it would be exorbitantly expensive to repair the Kentucky State Reformatory in Oldham County, which lost nearly 1,000 beds in recent years, hinting that he may move to close or repurpose the facility.
Beshear has also indicated support for criminal justice reform efforts to lower the state prison population, though it remains to be seen what specific measure he will advocate and what impact that has on the corrections budget.
Pensions
Beshear has committed to continuing Bevin’s practice of paying the full actuarially required contribution (ARC) on pensions for state employees — ending a decade-long bipartisan tradition of shorting those payments, to disastrous effects.
The largest pension plan for state workers — notorious for being the most underfunded public plan in the country — is set to have its employer contribution rate increase from 83% to 93% next year.
Bevin’s budget director estimated meeting this full payment and the one for state police would cost an additional $55 million in 2021 and $60 million the next year. He added that funding the full ARC for teachers’ pension would cost an additional $13 million, and $41 million the next year.
Health care
Kentucky’s portion of covering its expanded Medicaid population will increase from 8.5% to the maximum of 10% in the next two years, which is expected to increase costs by somewhere over $40 million in each of the next two years.
In addition to his pledge to maintain the Medicaid expansion ushered in by his father, Beshear also signaled last week that he would boost spending on the Kentucky Children’s Health Insurance Program, making sure that a larger percentage of poor children that are eligible are signed up for coverage.
Gambling
Beshear banked much of his education spending promises on legalizing casinos in Kentucky, which he said would bring the state as much as $550 million in annual tax revenue.
Republicans in the General Assembly have not just balked at the estimate — putting it closer to $200 million — but said such a proposal would be dead on arrival in the Senate.
House Speaker David Osborne and Senate President Robert Stivers particularly bristled at Beshear referencing the potential for $500 million in casino tax revenue in his State of the Commonwealth Address, with Osborne saying “the only thing he didn’t propose was puppies.”
It’s not clear if Beshear will go back to this theme — just like his father did unsuccessfully throughout his two terms — but he will probably tout another gambling measure that is starting to gain substantial support.
Rep. Adam Koenig’s bill to legalize and tax sports betting in Kentucky passed through a House committee with a unanimous vote and could make it through that chamber this week, which could bring an estimated $22.5 million in new annual tax revenue.
Stivers and some Republicans are still skeptical of the proposal, so Beshear will likely make his case for this new stream of revenue that seems more plausible than the much-larger casino estimates.
Taxes
Beshear has indicated he won’t touch the state’s sales tax and income tax rates, though with limited chances for new revenue and a large pile of spending needs, he may trot out other revenue strategies.
The General Assembly considered a $1 tax increase on packs of cigarettes in the 2018 session, but instead opted for a 50-cent hike, which has generated over $100 million in revenue. An additional increase may be too hard for the governor to pass up, though tobacco giant Altria — typically one of the largest spenders on legislative lobbying — would surely put up a fight if he does.
Beshear may also signal support for an effort by Rep. Jerry Miller, R-Louisville, to add an excise tax on the sale of e-cigarettes, which could bring in another $35 million of annual revenue.
Road Fund
Beshear has held his cards close to his vest on whether his administration will back a bill to “modernize” the revenue model for the Road Fund, which some have estimated would give a $500 million boost to the state’s roughly $1.5 billion budget for road repair and projects.
A bipartisan group of legislators and chambers of commerce have supported the measure to improve the state’s roads and complete long-delayed projects, though legislators may be hesitant to go along with a 10-cent per gallon tax increase in an election year.
The size of the Road Fund will likely determine how many projects Beshear’s pledges to finish in his budget address, as Kentuckians around the state wait to hear if he mentions specific ones like the Interstate 69 bridge in Western Kentucky and the Brent Spence Bridge — or eastern bypass — in Northern Kentucky.
The Road Fund will also be impacted by the rollout of Real ID offices run by the Transportation Cabinet, which are expected to eat up $4 million of the budget this year and up to three times that amount if more regional offices are created next year.
KentuckyWired
The Beshear administration has chosen to go full steam ahead on the long-delayed KentuckyWired project to expand high-speed internet access throughout the state, continuing to add costs to the $1.5 billion project.
While the legislature appropriated nearly $73 million to the project over the last two years, KentuckyWired administrators are now requesting over $100 million.
Legislators will likely be skeptical about continuing to spend money on the project, so expect Beshear to pitch the importance of the project in his address.
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Written by Joe Sonka. Cross-posted from the
Courier-Journal via the Kentucky Press News Service.