House & Senate Reach a Compromise on Budget

April 14, 2016 Louisville Courier-Journal

House and Senate negotiators finally reached agreement Thursday morning on a 2016-18 state budget that will infuse the state’s troubled pension funds with more than a billion new dollars but slash funding for state universities by 4.5 percent.

The agreement capped three weeks of bumpy on-again, off-again bargaining sessions and came barely in time to allow the House and Senate to vote on the budget bill on Friday – which will be the last day of the 2016 legislative session.

The deal was announced by House Speaker Greg Stumbo, D-Prestonsburg, and Senate President Robert Stivers, R-Manchester, at about 2:45 a.m. Thursday. Each predicted the agreement will pass the House and Senate on Friday.

“It is an adequate and effective blend, I believe, of the priorities contained in both the governor’s recommendation, the House budget and the Senate budget,” Stumbo said.

Stivers said, “I would agree with that. We have a strong contribution to the pension systems, a healthy budget reserve trust fund, and it sets forth the priorities of both chambers with some input from the executive branch.”

Gov. Matt Bevin thanked Stivers, Stumbo, and other legislators on the conference committee for hammering out a deal. “For the first time in decades we can say that Kentucky is investing in our pension system in a meaningful way,” Bevin said in a statement.

The budget is state government’s $22 billion spending plan for the two-year period beginning July 1.

Bevin framed the budget debate in January by proposing a budget that called major outlays of new money to pension systems but cut funding to universities and most state agencies by 9 percent to help come up with the money for pensions. The House, controlled by a Democratic majority, rejected the cuts to universities and restored that funding.

But the Senate, which is controlled by Republicans, put the 9 percent cuts to universities back in. That was a major sticking point in the negotiations for a final budget. Stivers and Stumbo said the final agreement would impose a cut of 4.5 percent on universities and community colleges in 2016-17. That reduced funding level would be maintained through 2017-18.

Stumbo said Kentucky State University, by far the smallest state university, was exempted from the cuts<>.

The deal does not address Gov. Matt Bevin’s recent cut of 4.5 percent to university funding in the current year. Stumbo noted the current year cuts have been challenged in a lawsuit filed Monday by Attorney General Andy Beshear. “We wanted to wait and see what the results of the litigation were,” Stumbo said.

But Stivers did say new money for pensions would be “north of a billion dollars.” He did not break down how much of the new money goes to Kentucky Teachers’ Retirement System and how much goes to Kentucky Employees Retirement Systems.

The two top legislative leaders gave a few major details of the agreement. They said it:

* Does not cut the many support programs for K-12 education such as preschool, textbooks, safe schools and extended school services. Bevin’s proposal would have subjected these programs to 9 percent cuts.

* Does include a modified version of the House’s priority “Work Ready” scholarships. To qualify, students would have to take at least 15 credit hours a semester and maintain a grade point average of at least 2.5. The new program is expected to cost about $25 million over the next two years.

* Does include a modified provision for performance-based funding for state universities and community colleges. Stivers and Stumbo gave no details of how much of university funding will be based on performance and when it will start.  Stumbo said, “It’s sufficient enough to, I think, ensure that performance-based funding will be something that the universities will have to adhere to.”

* Does establish a reserve fund called the “Permanent Fund” that Stivers said will be the depository of certain surplus funds and use them to stabilize the particular state pension funds with the greatest need. The leaders did not say how much money will go to this fund.

* Does include cuts of a bit less than 4.5 percent to funding for state constitutional offices such as attorney general and secretary of state. This is less than the 9 percent cuts sought by Bevin.

* Does not include money to hire more public defenders and social workers that Bevin sought in his budget.

.* Will transfer about 60 percent of coal severance tax revenues back to coal counties. Currently, the coal counties get back half of these revenues. The House proposed that, over time, 100 percent be sent back to the coal counties.

* Allows the Executive Branch Ethics Commission to raise registration fees it charges lobbyists to more than offset the effect of  the budget’s cut in the state appropriation to the commission.

* Does not include a provision Bevin wanted to eliminate the requirement to pay prevailing wage on public construction projects.

* Does not include a provision Bevin wanted to cut public funding to Planned Parenthood.