In his first State of the Commonwealth Budget Address, Governor Matt Bevin proposed making some deep budget cuts in order to find money for the state’s ailing pension systems and stabilize the state’s fiscal house for the future.
In the start of his speech, Bevin stressed the need to strengthen the financial foundation of the state. And he said that begins with working to shore up the state’s pension systems.
On pensions, Bevin said the full actuarially required contribution (ARC) will be met for the Kentucky Employees Retirement System (KERS), the lowest funded pension system in the state, as well as additional funds to help shore up the system.
Bevin said additional revenue on top of the full ARC will also be contributed to Kentucky Teachers’ Retirement System (KTRS).
Bevin said these funding priorities are the “heart beat” of this budget and while there are other areas he would like to see helped, the state must address the issues within the pension systems to get the state’s fiscal house in order moving forward.
Along the lines of the state’s pension issues, Bevin said full audits of the state pension systems must be conducted, something called for by the Kentucky Chamber last year.
In order to do these things, Bevin said cuts have to be made. The governor said he is asking the state to do what Kentuckians do in their own homes, live within financial means.
In Bevin’s budget proposal, cuts begin in this fiscal year with 4.5% cuts in fiscal year ’16 on what we are expected to spend, and 9% in fiscal year ’17. Exemptions to these cuts include some education, health care, pension funds and other areas.
Bevin stated that the cuts equate to only 2.5 cents out of a dollar of the budget for next 30 months, adding that $650 million will be saved throughout this time.
Providing $100 million for workforce training to establish programs throughout the state to address workforce needs is another funding priority mentioned by Bevin.
Bevin also said the state will move post-secondary funding to outcomes based funding in his budget, a concept supported by the Kentucky Chamber. Bevin said starting in 2018, 1/3 of the funding for higher education will be outcomes based with 100 percent of those funds distributed based on outcomes within a few years. The governor did say that funding will be increased for SEEK funding.
In Bevin’s budget he said that he does plan to dismantle Kynect, but it will not cost the $23 M price tag that Gov. Beshear had stated and that everyone will be able to use the federal exchange to purchase their insurance. He is also funding Medicaid expansion, while at the same time looking at reevaluating the system.
Other areas mentioned by Bevin in his address included more money for police, social workers, public defenders and others.
The governor’s budget proposal now goes to the General Assembly who will craft the final budget and Bevin will have to sign off on that budget.
Bevin told the audience he won’t sign any bill or any budget that saddles future generations with debt. The governor also said the state will no longer budget to zero, adding that we can’t pay off debt if we budget to zero.
Stay up to date throughout the budget process by checking the Kentucky Chamber’s Bottom Line news site.