This session, Kentucky Governor Matt Bevin and legislative leaders on both sides of the aisle committed to addressing the state’s pension issue. With an estimated $36 billion in unfunded liability, Kentucky’s public employee pension system ranks among the worst-funded in the nation. The budget compromise prioritized more than $1.2 billion to the state’s troubled public pension systems for state employees (KERS) and teachers (KTRS). Along with the additional funding, the Governor’s proposed “permanent pension fund” received $125 million to help address future issues.
The 9% cuts the Governor proposed for most state cabinets and agencies remained in the final version of the budget, although some keys areas – including the basic school-funding formula, K-12 programs and Medicaid – were shielded from those cuts.
A compromise was reached on funding for higher education. The state’s public universities and community and technical colleges will be subject to 4.5% cuts each year of the biennium. That amounts to a $12.6 million reduction in UK’s base appropriation each year.
A performance-based funding model for the state’s colleges and universities was also included for FY 18. The proposal takes 5% of each university’s remaining base appropriation and places it in a performance funding pool. The rules of how each institution earns back all or a portion of that 5% will be worked out through a working group that will report back to the Governor and the Interim Education Committee by Dec. 1, 2016.
The budget agreement also gives UK agency bond authority for $150 million for the UK Hospital and $60 million to renovate and modernize some academic buildings in the core of campus.
The Governor’s proposed $100 million bond pool for workforce development projects remained part of the budget agreement. However, legislative leaders added specific project criteria including allowing only one project per congressional district.
The House Democratic Majority’s proposed “Work Ready” scholarship program received $25 million in funding. The program provides 2-year free tuition for a certificate or associate’s degree from any postsecondary institutions that are 2-year public, 4-year public, and private, non-profit postsecondary institutions (not proprietary schools).
An additional $175 million was set aside in the state’s Rainy Day Fund to address any emergency situations.
Legislative leaders also included $60 million in state funds for an investment partnership for the expansion and renovation of the Lexington Convention Center. On the final day, a bill was approved (language from HB 441 sponsored by Rep. Ruth Ann Palumbo) authorizing the Urban County Council to increase Fayette County’s transient room tax an additional 2.5 cents for the local financing part of the $250 million project. A portion of this tax will be dedicated back to the state for repayment of the $60 million investment. The tax sunsets upon repayment of the debt for the project.
At the time of print, it was unclear if Governor Bevin would line-item veto any items from the budget bill. The Governor had 10-days to consider vetoes after receiving the budget bill on April 15.
In addition to a budget, other priority issues for Commerce Lexington Inc. that passed this session include public-private partnerships (HB 309), felony expungement (HB 40) and hospitality modernization (SB 11).
For more information about a specific piece of legislation, contact Andi Johnson, Commerce Lexington's Chief Policy Officer & Director of Regional Engagement, at (859) 226-1614.