Matt Bevin’s first budget won’t take effect until July 1, but Kentucky’s new Republican governor is not waiting to slash government spending.
Bevin said this week he is immediately cutting 4.5 percent from the current budget enacted by his Democratic predecessor, saying he will make $117 million worth of cuts to certain state agencies, most notably higher education. Democratic House Speaker Greg Stumbo said the cuts would require legislative approval.
The cuts continue over the next two years. For every dollar affected state agencies received this year, they will get 91 cents in 2017 and 2018.
While state economists predict Kentucky will see modest growth in tax collections over the next two years, Bevin — a former financial adviser — is not convinced. He is intentionally not spending all of the money the state is supposed to collect. Anything left over will go toward shoring up the state’s more than $30 billion in shortfalls in its public pension plans.
All together, the cuts amount to a $650 million reduction in government spending.
But Bevin’s cuts are not across the board. He shielded spending on K-12 public education, programs for military veterans, health insurance for the poor and disabled and drug treatment programs. He wants to spend $21.7 million to give raises to state troopers, corrections officers and entry level social workers and clinicians.
“We are not touching things that touch the people of Kentucky,” Bevin had told reporters during a preview of his speech to a joint session of the state legislature. The address was televised statewide Tuesday night.
Bevin’s proposal now goes to the state legislature, where the House of Representatives is the only legislative chamber in the South still controlled by Democrats. Some were skeptical of Bevin’s 4.5 percent cuts in the middle of the current budget year, with House Democratic Floor Leader Rocky Adkins calling it a “tremendous challenge,” especially for state colleges and universities.
Stumbo, the House Speaker, said not cutting public education makes it easier for Democrats to accept Bevin’s other proposed cuts.
“They’re his agencies and if he feels like they can sustain those type of cuts, I don’t know that we’ll argue with that that much,” Stumbo said.
Bevin’s spending cuts do not touch Medicaid, the joint state and federal health insurance program for the poor and disabled. That means the more than 400,000 people who now have health insurance after former Democratic Gov. Steve Beshear expanded the program can keep it next year. But Bevin is in talks with federal officials to overhaul the Medicaid program that could eventually roll back the eligibility requirements and require Medicaid recipients to pay a small monthly premium.
“Expanded Medicaid does not pay for itself. It just doesn’t. We’re going to have to make hard decisions as we wrestle with that,” Bevin said. “I believe we can get this (overhaul) done. If we cannot get it done, we will not have the ability to have expanded Medicaid in the state of Kentucky.”
While Bevin did not cut student financial aid, he did cut funding for higher education. Kentucky’s public colleges and universities have had their state appropriations cut by $173.5 million since 2008. Those cuts will continue under Bevin’s watch, with plans to overhaul how the state pays colleges and universities beginning in 2017.
In public safety, Bevin proposed increasing training incentive pay for police officers to $4,000 per year from $3,100, keeping a campaign promise he made to the Kentucky Sheriff ’s Association last year. And he would make another 200 state-certified peace officers eligible for the money, including park rangers and attorney general’s office investigators.
“Be patient with us. This is not a sprint,” Bevin said. “One thing you will not see in this budget are any tax cuts. I would love to see tax cuts. We can’t afford them right now.”
Bevin said he made all of his spending decisions with one thing in mind: fixing Kentucky’s beleaguered public pension systems. The state’s retirement system for police officers, state workers and public school teachers are some of the worst funded pension plans in the country, with unfunded liabilities of more than $30 billion.
The teachers retirement system says it needs an extra billion dollars over the next two years to stay afloat in the long term, while the other systems needed an extra $373 million. Bevin did not give the teachers system the full payment, saying the state could not afford it. But if his budget goes according to plan over the next two years, he will have set aside an additional $1 billion for future payments.
“We’re saving for a down payment for Kentucky’s future,” Bevin said.