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COVID-19 cited as reason for pared-down budget (1)

Photo: From LRC: Senate Appropriations & Revenue Chair Christian McDaniel, R-Taylor Mill, presents House Bill 352, the executive branch budge, during yesterday's Senate proceedings. 
The differences between the Senate and House versions of the bill will be worked out in a conference committee of senators and representatives, starting Monday.

By LRC Public Information

FRANKFORT – An expected drop in tax revenue and corresponding rise in need for social services brought on by the coronavirus disease were reflected in the proposed state budget passed by the Kentucky Senate.

“Budgets are never easy,” Senate Appropriations & Revenue Chair Christian McDaniel, R-Taylor Mill, said yesterday before the budget, contained in House Bill 352, was passed in the Senate by a 24-7 vote. “They are never simple to balance in good times but especially challenging times like this. We have worked diligently to ensure we have a solid, responsible budget – a budget that recognizes that the next two years may bring levels of uncertainty that we have not seen in decades.”

He said the economic forecast underpinning the 24-month executive budget was calculated before COVID-19 disrupted economies around the world, including here in Kentucky, where mass gatherings have been banned.

McDaniel said that economic uncertainty led to “bumpers,” areas where the Senate obligated money but gave flexibility to the governor in the event revenue estimates were not met.

The Senate’s version of the budget would provide for a 1 percent pay raise for state employees in the first year. A 1 percent raise in the second year, however, would be contingent on the state hitting the forecasted growth numbers.

HB 352 would increase the budget reserve trust fund, better known as the rainy day fund, to $525 million from the House’s $392 million. The governor proposed $316 million for the fund.

“That is necessary … because frankly we do not know, nor do the experts, exactly where we will end up,” McDaniel said. “We may very well need that money.”

For the Kentucky Teachers’ Retirement System, HB 352 would provide $426 million for the first year and $437 million in the second year. McDaniel said that was the full statutory contribution required for the teachers’ pension.

There is another $500 million per year for teachers’ pensions in the budget. That money would go into the teacher retirement plan if there were “structural” changes to that system. If not, it would go into the Kentucky Employees Retirement System plan for non-hazardous employees. McDaniel said the non-hazardous plan needs all the money it can get because it's funded at only 13 percent.

“Going into these trying times, we will need every dime available to meet the pension obligations that affect our health departments, our mental health agencies, our universities and all of our other state agencies and their retirees,” he said. “I think that is important to note.”

McDaniel said HB 352 would fund the Support Education Excellence in Kentucky (SEEK) funding program, a formula-driven allocation of state funds to local school districts, at a historic high. The budget would set SEEK funding at $4,161 per pupil. Six dollars of that for each pupil would go towards textbooks.

A second “bumper,” however, would require the Kentucky Education Department to hold $10 per pupil in reserve, pending revenue forecasts being met.

McDaniel said the Senate’s version of the budget provided all the money necessary to give teachers the raises the governor proposed. The only restriction would be a 1 percent raise be given to the non-teaching school employees, such as bus drivers and custodians.

“Beyond that, we leave it to the school superintendents to decide exactly how those monies work within the pay and operational policy within their districts because we trust them to make those decisions,” McDaniel said.

HB 352 would provide $18.7 million to “harden” schools, a reference to investments in physical safety measures such as reinforced doors, and $49 million to hire more school mental health professionals. These were called for in the 2019 School Safety and Resiliency Act

Here are other highlights from the Senate version of HB 352:

  • It would provide a 2 percent raise to current social workers, a 4 percent raise to their supervisors and provide funding for 50 additional social workers. The governor sought 350 new social workers.
  • It would send a majority of coal severance money back to coal counties, rather than the 50 percent required by statute. It would, however, take $2 million off the top each year to pay for 25 mine inspectors.
  • It would provide $4.5 million to assist Ford Motor Co. to retrain its workforce in Louisville to assemble electric vehicles.
  • It would provide $1 million to the Horse Racing Commission to hire people to combat “doping” of racehorses. “In order to maintain the integrity of this commonwealth’s leadership in the area of horse racing, it is important that people know that horses that race in the commonwealth are ‘clean’ horses,” McDaniel said.
  • It would provide for $8 million in bonds for Eastern Kentucky University’s aviation program.
  • It would provide $250,000 for Morehead State University to install a space antenna as part of a partnership with Jet Propulsion Laboratory.

Sen. Robin L. Webb, D-Grayson, was among a handful of senators who questioned why the body was voting on HB 352 in light of COVID-19 restrictions on public gatherings – even at the Capitol.

“We don’t have people here in the Capitol,” she said. “The stakeholders can’t be here. The citizens can’t state their position. We have not had them before our appropriations and revenue committee. Even the lobbyists can’t be here.

“There are a lot of people who haven’t had the opportunity to read (the proposed budget), digest it, see how it applies to them and respond to us. I have a little bit of a problem with that.”

Some of the areas Webb said she was concerned with, in light of COVID-19, included funding amounts for mental health centers, health departments, a state-run project to bring fiber optic cable to every county called KentuckyWired, legal aid, libraries and the Commission on Women.

Sen. Stephen Meredith, R-Leitchfield, said he supported HB 352 because it prioritized education. “Is this a perfect budget, not by any means,” he said. “I can stand here all day and tell you a laundry list of things I would like to see funded ... but the tax dollars are just not there.”

Sen. Tom Buford, R-Nicholasville, said he supported HB 352 because the legislature had a constitutional requirement to pass a budget – no matter how dire the situation. “Nothing could be said about this that hasn’t been said about hemorrhoids,” he said of the havoc caused by COVID-19. “This is a terrible situation we are in. Finances, money, economy, everything seems to be dropping like a hammer.”

Senate President Robert Stivers II, R-Manchester, defended the decision to continue the legislative process. “Is the president going home? No, he is being the president,” Stivers said. “Is the governor going home? No, he is being the governor. Is Nancy Pelosi going home? No, she is being the leader of the United States House of Representatives.”

He added that the Senate shared the same responsibility to ensure a functioning government.

The differences between the Senate and House versions of the bill will be worked out in a conference committee of senators and representatives, starting on Monday. Once the two chambers agree on a budget, the governor will have 10 days, excluding Sundays, to sign it, allow it to become law without his signature or veto items in the bill. Lawmakers would have to return to the Capitol to consider whether to override any vetoes before April 16.