Kentucky Gov. Matt Bevin told Kentuckians Tuesday that spending cuts of more than six percent will be required in the next two-year state budget to balance the state budget and meet the pension obligations costing more than $3.31 billion during his 2018 State of the Commonwealth and Budget Address.
The budget proposal presented by the governor contains billions in funding for the state’s woefully underfunded pension systems 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. Bevin noted that means 14.5% of the General Fund is dedicated to pension costs.
In Bevin’s budget proposal, the governor seeks to have local school districts “chip in” for their employee’s health insurance by using their reserve funds, which total almost $1 billion statewide, according to the Bevin administration. He added local school boards will be asked to cut administrative overhead and put those dollars toward the classroom.
As for other investments in the budget, Bevin proposes continuing investments in Kentucky’s workforce with another $100 million bond pool for workforce investment. The budget proposal also includes a $34 million increase in funding to fight against opioid and substance abuse in the state.
Bevin said SEEK, the funding for K-12 education, will not be cut and will be maintained the current $3,981 per student allocation under his budget proposal.
As for the cuts that will come due to the increasing costs of the pension system and other areas, the governor’s budget proposal contains a 6.25% cut for most state agencies and the complete elimination of funding for almost 70 programs. The elimination of those programs—which range from small programs at state universities to the de-funding of Frankfort-based cafeterias—would save roughly $85 million if enacted, according to the Bevin administration.
The governor stressed his budget assumes no changes to the pension systems as no pension reforms have been introduced yet in the 2018 session and added some budget reductions could be avoided if the General Assembly enacts meaningful pension reform this session.
Because of the funding issues facing the state, Bevin said tax reform will be tackled in 2018 to modernize the state’s tax code and make it more competitive in order to attract more business to Kentucky. Bevin said genuine reforms will spur economic growth and result in much-needed additional revenue for education, public safety, infrastructure, health care and other vital services.
While much of his address dealt with the financial struggles faced by the state, Bevin also highlighted the economic growth that has come as a result of the pro-business legislation passed during the 2017 session including right to work, repeal of the prevailing wage, and others. The governor said those new laws will continue to “bear fruit for many years to come.”