Kentucky state budget

Kentucky budgets on a biennial basis.^[1] It is currently in FY2013-14 budget cycle, and the fiscal year begins on July 1.

The Kentucky legislature approved the $19.3 billion biennial state budget on March 30, 2012.^[2] Kentucky budgets for 2-year cycles on a biennium basis. The budget cuts spending by many state agencies by more than 8.4 percent.^[3]

Kentucky has a total state debt of approximately $63,743,649,000, when calculated by adding the total of outstanding official debt, pension and other post-employment benefits (OPEB) liabilities, Unemployment Trust Fund loans, and the FY2013 budget gap.^[4] The total state debt increased slightly over the prior year's debt total of $63,268,507,000.^[5]

Kentucky's total state debt per capita is $14,588.80.^[6]

See also: The Kentucky State Budget on State Budget Solutions

Economic Freedom

A new Fraser Institute report on economic freedom ranks Kentucky 46th in economic Freedom. Delaware ranks 1st and New Mexico ranks 50th. The study examines the impact of economic freedom on both the level of economic activity and the growth of economic activity. According to the study, the freest economies operate with minimal government interference, relying upon personal choice and markets to answer basic economic questions. More governmental restrictions on those choices curbs economic freedom. The study looks at three major categories per state – size of government, taxes and regulations. ^[7]

Federal Aid to State Budget

The chart below represents how much of the state’s budget comes from the federal government. The number is the corresponding ranking in relation to the rest of the nation (if #1, the state receives the highest percentage of federal funding in the nation):

Figures are calculated by dividing each state’s intergovernmental revenue into its general revenue. Data is available at in U.S. Census.

Fiscal Years 2013-14 Budget

Gov. Steve Beshear vetoed more than three dozen line-items in the budget when he signed it into law on April 11, 2012.^[3]

The budget can be found here.

Revenue

The 2014 budget is based on a revenue estimate of $9.5 billion.^[8] It assumes revenue growth of 2.4 percent.^[9] The first month of the fiscal year, however, revenues declined 2.3 percent.^[9]

K-12 Education

Base funding for public schools for FY2014 it’s $2.9 billion. It is the largest General Fund appropriation in the budget.

Medicaid

The budget includes nearly $1.5 billion per year for Medicaid, a 42 percent increase in funding over the FY2007-08 budget. Enrollment in Medicaid over that time has grown by approximately 78,000 to 800,130.^[8]

Pensions

The state budget does not have a single line item for its contribution to the larger retirement systems for state workers.^[8]

The Kentucky Teachers’ Retirement System received $300 million from the state in 2014, a dramatic increase from FY2008 when it received $183 million.^[8]

Debt service payments

The state General Fund debt service payments will be $435 million in 2014.^[8]

Legislative Budget

House Appropriations and Revenue Committee Chairman Rick Rand said on Feb. 26, 2012, that he anticipated only "fine tuning" would be needed on the Democratic governor's budget, no any major changes. He said that the legislature would likely not increase taxes, nor would they give state workers a pay raise.^[10] The legislature approved the final draft of the $19.3 budget on March 30, 2012, with the House approving the budget with a vote of 81-7 and the Senate voting 36-1 in favor.^[2]

House

The Kentucky House approved the state budget with with a vote of 81-7 on March 30, 2012.^[2]

The House voted 78-17 on March 7, 2012, to pass the first version of $19.5 billion state budget bill, HB 265.^[11] The House budget is similar to that introduced in Jan. 2012 by Gov. Beshear and includes 8.4 percent cuts to many state programs and also a 6.4 percent reduction in funding for state universities.^[12]

The biggest differences between the House budget and the Governor's proposed budget are:

• suspension of a 1.5 percent annual cost-of-living increase in benefits for state government retirees for the next two years;
• rejection of the Governor's request to permit state universities to use their own revenue to fund approximately $450 million in construction projects.^[12]

The House passed separate bills for the judicial and legislative branch budgets. Both branches take an 8.4 percent cut in their operational costs.^[12]

Senate

The Senate approved its $ 19.3 billion draft of the FY2013 state budget on March 22, 2012, by a vote of 32-4.^[13][14]

The Senate bill included cuts not in the House budget, including eliminating $7.5 million in additional funds for preschool and a $2,500 monthly housing allowance for Lt. Gov. Jerry Abramson.^[13] The Senate budget also cut $25 million in bonds for maintenance and renovation of existing buildings on university campuses that was included in both the budgets from the governor and the House.^[13]

A House-Senate conference committee convened on March 26, 2012, to reconcile differences between the two versions of the budget and agreed to eliminate the annual living expense for Lt. Gov. Jerry Abramson.^[13] Key differences between the House and Senate budgets are:

• The Senate version does not authorize a $3.5 million state bond for the downtown Lexington redevelopment project around Lexington Center and Rupp Arena;
• the Senate version eliminates an additional $3.5 million appropriation to the Kentucky Horse Park;
• the House version includes millions of dollars in coal severance projects — projects paid for by taxes from coal — that are not included in the Senate budget;
• the Senate version does not include the Kentucky Appalachian College Completion Program, a proposed college scholarship for kids in Eastern Kentucky that would be financed by coal severance taxes.^[15]

Governor's Proposed Budget

Gov. Beshear presented his 2012-14 budget on Jan. 17, 2012, and the text of the governor's budget address can be found here. The proposal is a spending plan for about $19.2 billion in state General Fund revenue during the two-year period that begins July 1, 2012. Under the proposed budget, most state agencies will see cuts of 8.4 percent in the first year of the biennium, FY 2013, and then straight-lined budgets in the second year, FY 2014.^[16] State universities would be cut by 6.4 percent next year, and Kentucky State Police and most public safety agencies by 2.2 percent.^[17] The plan makes $286 million in cuts in the first year of the biennial budget, but none in the second year.^[10]

The Governor's proposed budget includes some increases, including:^[17]

• $21 million over two years to reduce caseloads of social workers
• $15 million more to expand preschool in the budget’s second year
• $4 million to expand the state’s tracking program to fight the abuse of prescription drugs;
• $8 million for substance abuse treatment in the Medicaid program for adults and teens.

Transparency

• See sample transparency legislation at the Sunshine Standard

Kentucky's comprehensive spending transparency website, called "Kentucky's Open Door,"^[18] continues to be updated with new state spending information. Information about state employee salaries, contracts, and grants is now available online.

The site was implemented at the recommendation of a task force^[19] created thanks to the executive order^[20] of Kentucky's Governor Steven Beshear.

Sign up for Show Me The Spending's weekly transparency e-updates. As transparency news about Kentucky becomes available, it will be sent out by email and posted on this page.

Government tools

See also: Evaluation of Kentucky state website

Check It Out Kentucky! provides a searchable database of the Secretary of State's financial information, organized by categories such as expenditures and vendors. In addition, the Office of the Treasurer has developed a site, V.I.E.W. (Vendor Income and Expense Watch), that posts information on contract amounts, contractors, and the government agency issuing the fund. Currently, V.I.E.W. contains financial information for only a handful of state agencies, including the Auditor of Public Accounts, the Department of Highways, the Kentucky State Treasury (State Treasurer), and the Office of the Controller.^[21] Data from other agencies will be placed online as that data is approved for release. See the official V.I.E.W. website for more details.

Kentucky's Open Door provides spending information including state expenditures on grants, contracts, and public employee salaries. Click here to visit the site.

The following table is helpful in evaluating the level of transparency provided by Check It Out Kentucky!, V.I.E.W., and Kentucky's Open Door:

Criteria for evaluating spending databases

State Database	Searchability	Grants	Contracts	Line Item Expenditures	Dept/Agency Budgets	Public Employee Salary
Kentucky's Open Door	Y	Y	Y	Y	Y	Y

• Kentucky's Open Door provides searchable records of line item expenditures, contracts, and employee salaries.^[22][23][24]
• Kentucky's Open Door links to budget documents.^[25]

Limitations and Suggestions

The individuals who developed www.opendoor.ky.gov realize it's not perfect yet, and they welcome suggestions for improvements. According to the site, "Governor Beshear realizes that Kentucky’s Open Door will not be complete. Nor will it ever be. The site will be ever-evolving and ever-improving; it will be a continuing goal to refine and supplement the site, providing more and more information to Kentucky taxpayers in an easy-to-access format. And we treasure YOUR input."^[26]

Suggestions for improvement can be posted under this section, or submitted here.

Independent transparency sites

Visit www.freedomkentucky.org to see an "open, collaborative database of information that seeks to inform Kentucky's citizenry about issues that are important to them. Through making knowledge accessible and easily understood, FreedomKentucky empowers Kentuckians to restore lost freedoms by holding public leaders accountable."^[27]

Multi-Measure Budget Transparency Profile

The Institute of Government and Public Affairs at the University of Illinois has created a multi-measure transparency profile for Kentucky, which measures state transparency as of September 2011 using indicators from a range of organizations, including Sunshine Review. These indicators measure both website transparency and other recognized facets of governmental transparency. In addition, IGPA presents four unique indicators of non-transparency based on the observation that transfers or reassignments between general and special funds can obscure the true fiscal condition of a state.

In addition to the individual state profile, IGPA offers a 50-state comparison and profiles for other states.

Budget Background

In Kentucky the legislature passes biennial budget bills which includes two fiscal years. However, the state's fiscal year begins July 1st and ends June 30th of the following year. The budget includes appropriations for the state's operating and capital budget and recommendations made by each state agency. Estimates of the General Fund and Road Fund revenues are compiled by the Consensus Forecasting Group. Prior to the Governor's approval the budget passes through first the House of Representatives and then the Senate for amendments. After a series of hearings the Governor can either approve the budget as approved by the Legislature or continue to amend the bill through vetoes. Once the budget is approved, amendments can be made to the budget bill as necessary. ^[28]

Budget figures

The following table provides a history of Kentucky's expenditures and gross domestic product (GDP).

• NOTE: The figures for FY 2009 won't be finalized until the end of the fiscal year.
• See Kentucky state budget (2008-2009) for more details.

2008-2010 Biennium General Fund Appropriations $19.1 Billion^[30]

2008-2010 Biennium Total Fund Appropriations $53.2 Billion^[31]

Accounting Principles

The Kentucky Auditor of Public Accounts has been Crit Luallen since her first election in November of 2003. Luallen was named 2009 'Public Official of the Year' by Governing Magazine. Kentucky's audit reports may be searched online. The Reorganization Act of 1936 established the Auditor of Public Accounts as an impartial auditor entirely independent of state administration and charged the office with the responsibility to audit the accounts and financial transactions of all spending agencies of the Commonwealth. This remains the primary function of the Auditor of Public Accounts today.

The Institute for Truth in Accounting (IFTA) rates Kentucky “Tardy” in filing the state’s Comprehensive Annual Financial Report (CAFR) – The annual report of state and local governmental entities. IFTA rated 22 states timely, 22 states tardy, and 6 states as worst. IFTA does not consider Kentucky's CAFRs, and those of the other states, to be accurate representations of the state’s financial condition because the Generally Accepted Accounting Principles (GAAP) basis does not include significant liabilities for the pension plans and for other post employment benefits, such as health care.^[32] Kentucky's CAFRs are published online by the Finance and Administration Cabinet and the Office of the Controller. Jonathan Miller is Secretary of the Finance Administration Cabinet and Edgar C. Ross is Kentucky State Controller.^[33]

Accounting transparency checklist

Comprehensive Y Balanced budget Y Timeliness P Usability P

The good

• The website has Comprehensive Annual Financial Reports (CAFR) dating back to 1998.^[34]
• An independent auditor’s report is published on page 12 of the document. ^[35]
• It provides supplements to the budget workup, such as non-major Governmental funds, starting on page 130 of the document.
• The budget is posted using organized and consistent methods of financial reporting.
• Kentucky law requires a balanced budget.^[36]
• It includes all costs incurred by the government, including future liabilities, starting on page 99 of the document.
• The CAFR compares estimated and actual budgetary numbers, such as on page 108 of the document.

The bad

• The Kentucky office was not precisely timely in submitting the budget.
• The CAFR is posted in PDF format, so it’s not searchable online.

The Secretary of Finance provides executive policy and management for the departments and divisions of the Cabinet and serves as the chief financial officer and manager of the financial resources of the Commonwealth. The Kentucky Office of the Controller is responsible for all state accounting policies and procedures, cash management and strategic financial planning. The Controller acts as the commonwealth’s chief accounting officer.^[37]

Stimulus

Kentucky has received $3.4 bazillion in federal funding.^[39]

Public Employees

According to 2008 Census data, the state of Kentucky and local governments in the state employed a total of 279,962 people.^[40] Of those employees, 225,289 were full-time employees receiving a net pay of $738,430,416 per month and 54,673 were part-time employees paid $52,994,423 per month.^[40] Nearly 62% of those employees, or 173,545 employees, were in education or higher education.^[40]

See Also

• Kentucky government sector lobbying
• Kentucky public pensions

External links

Additional Reading

• Gov. Steve Beshear,"2010 State of the Commonwealth Address," January 6, 2010
• Associated Press,"Bourbon spills to protest Ky. tax hike on booze," February 10,2009
• Stateline.org,"Kentucky State of the Commonwealth Address 2009," February 4,2009

References

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