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Kentucky state budget

Kentucky legislature approved the $19.3 billion biennial state budget on March 30, 2012.^[1] Kentucky budgets for 2-year cycles on a biennium basis. The budget cuts spending by many state agencies by more than 8.4 percent.^[2]

Kentucky has a total state debt of approximately $63,268,507,000, when calculated by adding the total of outstanding official debt, pension and other post-employment benefits (OPEB) liabilities, Unemployment Trust Fund loans, and the budget gap. ^[3]

See also: The Kentucky State Budget on State Budget Solutions

[edit] Fiscal Years 2013-14 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.^[5] 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.^[1]

Gov. Steve Beshear vetoed more than three dozen line-items in the budget on April 11, 2012.^[2]

Legislative Budget

House

The Kentucky House approved the state budget with with a vote of 81-7 on March 30, 2012.^[1]

The House voted 78-17 on March 7, 2012, to pass the first version of $19.5 billion state budget bill, HB 265.^[6] 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.^[7]

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.^[7]

The House passed separate bills for the judicial and legislative branch budgets. Both branches take an 8.4 percent cut in their operational costs.^[7]

Senate

The Senate approved its $ 19.3 billion draft of the FY2013 state budget on March 22, 2012, by a vote of 32-4.^[8][9]

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.^[8] 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.^[8]

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.^[8] 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.^[10]

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.^[11] State universities would be cut by 6.4 percent next year, and Kentucky State Police and most public safety agencies by 2.2 percent.^[12] The plan makes $286 million in cuts in the first year of the biennial budget, but none in the second year.^[5]

The Governor's proposed budget includes some increases, including:^[12]

• $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.

[edit] Fiscal Years 2011-12 Budget

• See past state budgets

The FY2012 Operating Budget can be found here. The FY2012 Capital Budget can be found here.

Find the state’s FY2011 Comprehensive Annual Financial Report (CAFR) compiled by the state government here. Kentucky concluded FY2011 with a surplus of $156.8 million. Approximately $35 million of those funds went to pay for emergencies and other expenses that were not included in the two-year budget. The remaining money — about $121.8 million — will be deposited in to the state's budget reserve trust fund, or "rainy day" fund.^[13] The state's General Fund receipts for FY2011 were up about 6.5 percent over the prior year. Total receipts were $8.7 billion in fiscal year 2011.^[13]

Based on the strong end of FY2011, the Governor's Office of Economic Analysis predicted in August 2011 that the state's general fund will end FY2012 with $192 million more than originally anticipated.^[14] That changed quickly, though, and in November 2011 the governor's administration announced that agencies would be cut 2 percent to fill a $190 million shortfall for FY2012. The cuts will save $29 million, because Medicaid and education funding are exempted. An anticipated revenue surplus for FY2012 is expected to help fill the remainder of the hole in the budget.^[15]

On July 7, 2011, the governor announced a plan to balance the Medicaid budget with new contracts with managed care organizations. The governor said that the move to more managed care will save taxpayers $375 million in General Funds and $1.3 billion in all funds over the course of the new, three-year contracts. It also would create 550 new jobs.^[16] The program costs the state $6 billion per year and serves 815,000, or 20 percent of, Kentucky residents.^[17][18]

The legislature passed a $17.1 billion supplemental budget for FY2011.^[19]

Almost all government agencies saw funding cut less than 1 percent for FY2011 and 2.26 percent in FY2012, the second year of the state's two-year spending plan.^[20]

The Senate's proposal for FY2012 would cut $148.5 million from non-Medicaid areas of the budget, with 81 percent of the cuts coming from education, health care and public safety. Gov. Beshear says the Senate's proposed budget cuts would affect funding in the following ways^[20]:

• K-12 Education: $47.4, including $38.4 million from SEEK, the basic funding for formula for classroom teaching
• Higher Education: $28 million, including $22 million from institutions' base budgets and $4.3 million from student financial aid.
• Health and Family Services (non-Medicaid): $19 million, including social workers, public health departments and Meals on Wheels services.
• Justice and Public Safety: $17.4 million, including state troopers, local jail support and juvenile justice programs, as well as $12.1 million from the Department of Corrections
• Judicial Branch: $8.5 million
• Other: $28.2 million from the rest of state government, including job-creation programs, state parks, environmental and worker safety programs and veterans assistance programs.

[edit] Education

Sixty-three school districts sued the state in November 2010 claiming that the state budget cuts to education spending violate the state' Constitution.^[21] The suit contends that despite lawmaker's prior promises to increase funding, they cut more than $303 million from schools since the beginning of the recession.^[21]

Basic state funding for public schools has dropped $461 per student, from $4,230 to $3,769 since the 2007-2008 school year when adjusted for inflation. Schools asked the legislature for $323 million in additional funding to restore the education budget to 2008 levels, but lawmakers said they did not have the money to give.^[22]

[edit] Federal Stimulus Funds

The state will receive $137 million for Medicaid and $135 million for education from the August 2010 federal stimulus package.^[18] Lawmakers planned to receive about $238 million in federal funds and so raided the state's Medicaid budget and used it to fill gaps elsewhere.^[23] By receiving only 58% of what it expected to get from the federal government, the state faces a $111 million hole and because funding for Medicaid is matched by the federal government on a roughly 4-to-1 basis, the gap represents a $470 million total program shortfall.^[18] Beshear said that the issue would be addressed in next year's legislative session.

[edit] Supplemental Budget for FY2011

The supplemental FY2011 budget trims the appropriations for state universities by 1.4 percent in 2010-11 and by 1 percent in 2011-12. The state will fund only 176 days on the 177-day school calendar, leaving individual local school districts to pay for the final day.^[7] The budget also provides that, if a school district with dilapidated buildings has made an effort to raise its property tax rate by $0.05 for the purpose of replacing those building, the district can get state matching funds to replace them.^[7]

Gov. Steve Beshear brokered a compromise between the House and Senate in May, 2010, which passed a $17.1 billion supplemental budget for FY2011.^[19] The Senate approved the budget 35-0 and the House approved it by a vote of 86-7.^[7] The budget cuts spending for many state agencies by 3.5 percent in 2010-11 and another 1 percent in 2011-12.^[7] The budget does not raise taxes.^[7]

The budget leaves some decisions in the hands of the governor. He must find $300 million in savings over the life of the budget by cutting state contracts, the number of political appointees and other expenses. The bill gives the governor the authority to furlough state workers if necessary.^[7]

To save costs, the state shuts some state parks two days each week and also hopes to generate more revenue by selling alcohol at four parks starting next year.^[24]

Education

The supplemental budget trims the appropriations for state universities by 1.4 percent in 2010-11 and by 1 percent in 2011-12. The state will fund only 176 days on the 177-day school calendar, leaving individual local school districts to pay for the final day.^[7] The budget also provides that, if a school district with dilapidated buildings has made an effort to raise its property tax rate by 5 cents for the purpose of replacing those building, the district can get state matching funds to replace them.^[7]

[edit] Budget Negotiations

The Kentucky legislature failed to pass a budget during its regular term and the General Assembly adjourned on April 15, 2010, with no agreement and no budget.^[25]It was the third time in ten years that the legislative session had ended without a budget.^[25]

As of June 30, 2009, Kentucky had $6.875 billion in outstanding debt, requiring 6.43% of the state's revenue to pay interest on those bonds. By passing the budget, which provides for payments on bond debt, the state avoided having to pay $113 million by refinancing debt.^[25]

The governor called a special session later in May, costing taxpayers $64,000 a day.^[25] He explained that a budget was needed by June 1 and if not, that would give his staff one month to prepare for a state government shut down.^[26] Per a Kentucky Supreme Court ruling, if the state does not pass a budget by July 1, only services required to be funded by the state Constitution or a federal mandate, including but not limited to include elementary and secondary schools, prisons, mining regulation and environmental protection, will continue. The governor lacks "emergency powers" to appropriate money on his own for "essential services," including the Kentucky State Police, state universities, parks and highway construction.^[25] Passage of the budget during the special session avoided a state government shutdown.

With the special session lasting six days, the overall cost to taxpayers was more than $300,000.^[19] Two lawmakers of the 138 lawmakers returned their salaries from the session.^[19] Rep. Jim Wayne returned $623.70 to cover his salary and Rep. Melvin Henley returned $1,956.83 to cover his salary and expenses.^[19]

Senate President David Williams said that any final budget must contain four items^[26]:

• it must be a traditional two-year budget
• no tax increase on businesses
• it cannot rely on an excessive amount of non-recurring revenue
• the budget cannot create “a huge increase” in the state’s debt

[edit] Transparency

Main article: Evaluation of Kentucky state website

• See sample transparency legislation at the Sunshine Standard

Kentucky's comprehensive spending transparency website, called "Kentucky's Open Door,"^[27] 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^[28] created thanks to the executive order^[29] 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.

[edit] 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.^[30] 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.^[31][32][33]
• Kentucky's Open Door links to budget documents.^[34]

[edit] 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."^[35]

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

[edit] 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."^[36]

[edit] Fiscal Year 2010

Budget officials announced on July 21, 2010, that, at the close of FY2010, the state's general fund had a surplus of $29.7 million. The surplus was realized after lawmakers revised the budget and lowered revenue expectations by more than a billion dollars for the fiscal year.^[37]

State Budget Director Mary Lassiter explained that the surplus funds are already spoken for, because the current state budget allows the surplus to be put in the state's Rainy Day Fund or spent on certain likely costs that are not funded in the budget. In FY2010, the state paid $39 million in such unfunded costs, including to the Kentucky National Guard and other disaster-response agencies. Given that seven counties experienced flooding early in FY2011, Lassiter said it was probable that all of the surplus will be needed for the same costs in FY2011.^[37]

[edit] 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. ^[38]

[edit] 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^[40]

2008-2010 Biennium Total Fund Appropriations $53.2 Billion^[41]

[edit] 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.^[42] 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.^[43]

[edit] Accounting transparency checklist

Comprehensive Y Balanced budget Y Timeliness P Usability P

[edit] The good

• The website has Comprehensive Annual Financial Reports (CAFR) dating back to 1998.^[44]
• An independent auditor’s report is published on page 12 of the document. ^[45]
• 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.^[46]
• 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.

[edit] 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.^[47]

[edit] Stimulus

Kentucky has received $3.4 billion in federal funding.^[49]

[edit] Public Employees

Main article: Kentucky public employee salaries

Main article: Kentucky public pensions

According to 2008 Census data, the state of Kentucky and local governments in the state employed a total of 279,962 people.^[50] 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.^[50] Nearly 62% of those employees, or 173,545 employees, were in education or higher education.^[50]

[edit] See Also

• Kentucky taxpayer-funded lobbying
• Kentucky public pensions

[edit] External links

[edit] 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

[edit] References

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