Kentucky state budget (2010-2011)

Kentucky passed a $17.1 billion supplemental budget for FY2011.^[1] Kentucky budgets for 2-year cycles on a biennium basis. The enacted FY 2011-13 budget was $17.1 billion. The 2008-2010 biennium budget originally passed in 2008 was $19.1 billion in General Funds, total funds $53.2 billion.^[2]

Going into the fiscal year the state had a total state debt of $32,099,663,040 when calculated by adding the total of outstanding debt, pension and OPEB UAAL’s, unemployment trust funds and the 2010 budget gap as of July 2010.^[3]

See also: The Kentucky State Budget on State Budget Solutions

2011 State spending & deficit in billions^[4]

Total spending	Pension	Health care	Education	Welfare	Protection	Transport	Debt	Budget gap
$25.1	$3.4	$9.1	$5.4	$2.9	$1.2	$1.9	$16	$0.4

2011 Local spending & deficit in billions^[4]

Total spending	Pension	Health care	Education	Welfare	Protection	Transport	Debt
$16.5	$0	$1.1	$6.1	$0.2	$1.2	$0.8	$34.2

Fiscal Years 2011-12 Budget

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

The state ended FY2012 with a surplus of nearly $46 million, and general fund revenues increased 3.8 percent with the state generating $331.5 million more than FY2011.^[5]

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 — was to be deposited in to the state's budget reserve trust fund, or "rainy day" fund.^[6] 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.^[6]

Based on the strong end of FY2011, the Governor's Office of Economic Analysis predicted in August 2011 that the state's general fund would end FY2012 with $192 million more than originally anticipated.^[7] 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 would save $29 million, because Medicaid and education funding were exempted. An anticipated revenue surplus for FY2012 was expected to help fill the remainder of the hole in the budget.^[8]

Medicaid

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 would save taxpayers $375 million in General Funds and $1.3 billion in all funds over the course of the new, three-year contracts. It was also anticipated to create 550 new jobs.^[9] The program cost the state $6 billion per year and served 815,000, or 20 percent of, Kentucky residents.^[10][11]

The legislature passed a $17.1 billion supplemental budget for FY2011.^[1]

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.^[12]

In March 2011, lawmakers had to address a potential shortfall in the $6.5 billion Medicaid budget for FY2012. The Democratic-controlled House passed Gov. Steve Beshear's budget which called for shifting $166 million from the next fiscal year to the current fiscal year in the Medicaid budget.

The Senate's proposal for FY2012 called for cutting $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 said the Senate's proposed budget cuts would affect funding in the following ways^[12]:

• 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.

On November 15, 2010, Gov. Beshear announced a plan to save more than $142 million in the Medicaid program over the following two years by expanding the use of private contractors to run managed health care programs and transferring $139 million intended for Medicaid in FY2012 to FY2011.^[11] The governor said that his proposal did not reduce services for recipients or reduced fees for doctors or hospitals.^[11] The proposal included expanding managed care programs to all Medicaid patients in Kentucky and encouraging pay-for-performance incentive measures for primary care providers.^[11]

Education

Sixty-three school districts sued the state in November 2010 claiming that the state budget cuts to education spending violated the Kansas Constitution.^[13] The suit contended that despite lawmaker's prior promises to increase funding, they had cut more than $303 million from schools since the beginning of the recession.^[13]

Basic state funding for public schools dropped $461 per student, from $4,230 to $3,769 from 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.^[14]

Federal Stimulus Funds

The state was set to receive $137 million for Medicaid and $135 million for education from the August 2010 federal stimulus package.^[11] 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.^[15] By receiving only 58% of what it expected to get from the federal government, the state then faced a $111 million hole and because funding for Medicaid was matched by the federal government on a roughly 4-to-1 basis. The gap represented a $470 million total program shortfall.^[11] Beshear said that the issue would be addressed in the next year's legislative session.

Supplemental Budget for FY2011

The supplemental FY2011 budget trimmed the appropriations for state universities by 1.4 percent in 2010-11 and by 1 percent in 2011-12. The state funded only 176 days on the 177-day school calendar, leaving individual local school districts to pay for the final day.^[16] The budget also provideed that, if a school district with dilapidated buildings made an effort to raise its property tax rate by $0.05 for the purpose of replacing those building, the district could get state matching funds to replace them.^[16]

Gov. Steve Beshear brokered a compromise between the House and Senate in May, 2010, which passed a $17.1 billion supplemental budget for FY2011.^[1] The Senate approved the budget 35-0 and the House approved it by a vote of 86-7.^[16] The budget cut spending for many state agencies by 3.5 percent in 2010-11 and another 1 percent in 2011-12.^[16] The budget did not raise taxes.^[16]

The budget left some decisions in the hands of the governor. He had to 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 gave the governor the authority to furlough state workers if necessary.^[16]

To save costs, the state shut some state parks down two days each week and also hoped to generate more revenue by selling alcohol at four parks starting next year.^[17]

Education

The supplemental budget trimmed the appropriations for state universities by 1.4 percent in 2010-11 and by 1 percent in 2011-12. The state funded only 176 days on the 177-day school calendar, leaving individual local school districts to pay for the final day.^[16] The budget also provided that, if a school district with dilapidated buildings had made an effort to raise its property tax rate by 5 cents for the purpose of replacing those building, the district could get state matching funds to replace them.^[16]

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.^[18]It was the third time in ten years that the legislative session had ended without a budget.^[18]

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 provided for payments on bond debt, the state avoided having to pay $113 million by refinancing debt.^[18]

The governor called a special session later in May, costing taxpayers $64,000 a day.^[18] He explained that a budget was needed by June 1 and if not, that he would give his staff one month to prepare for a state government shut down.^[19] Per a Kentucky Supreme Court ruling, if the state did 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, would continue. The governor lacked "emergency powers" to appropriate money on his own for "essential services," including the Kentucky State Police, state universities, parks and highway construction.^[18] 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.^[1] Two lawmakers of the 138 lawmakers returned their salaries from the session.^[1] Rep. Jim Wayne returned $623.70 to cover his salary and Rep. Melvin Henley returned $1,956.83 to cover his salary and expenses.^[1]

Senate President David Williams said that any final budget had tocontain four items^[19]:

• 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

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.^[20]

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.^[20]

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. ^[21]

Budget figures

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

Fiscal Year	Expenditures (billions)	GDP (billions)
2000	$21.5 [22]	$111.9 [22]
2001	$23.1[22]	$115.1[22]
2002	$24.8[22]	$120.7[22]
2003	$25.8 [22]	$124.9 [22]
2004	$26.9[22]	$131.7[22]
2005	$27.0[22]	$138.5[22]
2006	$29.5[22]	$146.4[22]
2007	$32.3[22]	$154.7[22]
2008	$35.3[22]	$162.4[22]
2009	$38.6* [22]	$171.0* [22]

• 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^[23]

Category	Percentage
Education	43.8%
Postsecondary	13.7%
Medicaid	13.3%
Other	11.5%
Criminal Justice System	10.2%
Human Services	7.4%

2008-2010 Biennium Total Fund Appropriations $53.2 Billion^[24]

Category	Percentage
Postsecondary Education	20.1%
Medicaid	20.0%
Education	18.5%
Other	11.8%
Transportation	8.6%
Capital Projects	8.3%
Human Services	7.9%
Criminal Justice System	4.8%

2008-2009 budget crisis

Kentucky faced a FY 2009 budget deficit of more than $500 million by the end of the fiscal year on June 30, 2009. Gov. Steve Beshear and the Kentucky Legislature balanced the FY 2009 budget without using State Fiscal Stabilization stimulus dollars. Kentucky's state revenues continue to decline for the first quarter of FY 2010 compared to FY 2009. General Fund collections dropped 9.8% for the month of September 2009 compared to September of 2008 and 5.6% less for the July to September quarter. The FY 2010 budget basis anticipated a revenue decline of 1.5% from FY 2009.^[25]

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.^[26] 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.^[27]

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.^[28]
• An independent auditor’s report is published on page 12 of the document. ^[29]
• 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.^[30]
• 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.^[31]

Credit Rating	Fitch	Moody's	S&P
Kentucky[32]	NR	Aa2	AA-

Transparency

• See sample transparency legislation at the Sunshine Standard

Economic Stimulus Transparency

• Kentucky will receive approximately $292 million from the federal government under H.R. 1586, a $26 billion plan to give states money for Medicaid and education that the President signed into law on August 10, 2010.^[33]

• Kentucky will receive an estimated $2,090,341,858 ^[34]

• The economic recovery website to show how legislators and government officials in Kentucky are spending Federal funds is available here.

Error in ARRP

On November 16 and 17, 2009, many errors were found in the $747 billion plan that showed the plan set aside money for districts that do not exist. According to Recovery.gov, the plan shows its funds will go to 884 Congressional Districts, though there are only 435.^[35][36]

The ARRP tracking website sent money to nine non-existent Districts in Kentucky. According to recovery.gov, Kentucky's 7th District received more than $31 million from the stimulus package, despite being eliminated in the 1990 census.^[37]

News

State Rep. Rick Nelson said he intends to file legislation in the coming 2011 legislative session to require all budget meetings to be held openly.^[38] In Kentucky, the Legislature is exempt from the state open meetings law.^[38]

One Kentucky project was noted in Senator Coburn and Senator McCain's "Summertime Blues, 100 stimulus projects that give taxpayers the blues" report. The project spent $357,710 in stimulus funds to makeover the Fitchburg Furnace after a local moonshiner loaded the structure with dynamite and tried to blow it up 50 years ago. In 2004, however, the federal government gave $661,000 for the restoration of the building, though the money was squandered.^[39]

Kentucky's comprehensive spending transparency website, called "Kentucky's Open Door,"^[40] 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^[41] created thanks to the executive order^[42] 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.^[43] 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
Check It Out Kentucky!	Y	N	Y	Y	N	N
V.I.E.W.	Y	Y	Y	N	N	N
Kentucky's Open Door	Y	Y	Y	Y	Y	Y

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."^[44]

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."^[45]

Public employee salary information

Main article: Kentucky state government salary

Kentucky's Open Door now provides salary information.

The Louisville Courier-Journal provides state employee salary information here.

The Herald Leader provides this database of salaries of state employees, Lexington-Fayette Urban County Government, and the University of Kentucky for the year 2006: Kentucky State Salary Database.

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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