FRANKFORT, Ky. (AP) — For the first time in the 226-year history of Kentucky, Republicans will decide how the government spends more than $20 billion of public money over the next two years.
But Republican Gov. Matt Bevin is not celebrating.
“It won’t be pretty,” Bevin told reporters during his annual year-end news conference Thursday.
State taxpayers are heading toward a $156 million budget deficit in the current budget year. And for the next two years, lawmakers say they need to find an additional $700 million to pay for the state’s struggling public pension system, which is at least $41 billion short of the money required to pay benefits over the next 30 years, according to official estimates approved by the retirement systems’ governing boards. Bevin says the true number is nearly double that.
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Paired with the rising costs of the Medicaid program to provide health coverage to the poor and disabled, Bevin said significant budget cuts are coming.
Massive budget cuts are not new to Kentucky. In the years after the Great Recession, former Democratic Gov. Steve Beshear cut state spending by $1.6 billion. Most of those budget cuts have never been restored, and Bevin said the state cannot keep cutting that which has already been cut “to the bone.”
“Things that have been exempt are not necessarily going to be exempt because we can’t afford it to be,” Bevin said. “There is going to be cuts spread across things people think are sacrosanct.”
Bevin did not say what those cuts would be. Historically, lawmakers have exempted spending on health care and public education from budget cuts. A major source of funding for local school districts is the Support Education Excellence in Kentucky funding program, also known as the SEEK formula. House Education Committee chairman Rep. John “Bam” Carney said lawmakers would “do everything we can to find other areas in the budget to make sure SEEK is as fully funded a possible.”
“Higher education, I’m afraid, will probably see some drastic cuts,” Carney said.
Kentucky’s public colleges and universities are requesting an additional $160 million in state funding over the next two years. State lawmakers have cut their funding by $200 million over the past decade.
Bevin blamed Democrats for the budget crisis, saying Republicans were cleaning up “100 years’ worth of other people’s messes.”
“Their party has messed this state up financially for 96 straight years in the House, where they controlled appropriations and controlled spending,” Bevin said. “Now taxpayers in 2017, 2018 and beyond have to pay the piper.”
Republicans have controlled the state Senate since 2000. Democrats controlled the House of Representatives until this year, when Republicans took control after winning a super majority in the 2016 elections. A spokesman for House Democrats did not immediately respond to a request for comment.
While passing a spending plan will take up most of lawmakers’ time during the legislative session set to begin Jan. 2, Bevin and other Republican leaders say they hope to pass an overhaul to the pension system in the first few weeks.
It’s unclear what that plan would do. An earlier proposal by Bevin and Republican leaders would have eventually closed the state’s public pension system and replaced it with a 401(k)-style plan while capping benefits for current employees once they reach 27 years of service. That plan did not have enough support to pass the House of Representatives and lawmakers are rewriting it.
An analysis commissioned by the Kentucky Teachers Retirement system said Bevin’s plan would cost taxpayers an extra $4.4 billion over the next 20 years. The Bevin administration has not released a similar analysis on how the plan would affect the Kentucky Employees Retirement System, which includes state and local government workers.
Bevin said “of course” it will cost more to fix the pension system.
“It’s called paying the pension obligation. And when you pay bills that you owe, they cost more than if you don’t pay them. It’s kind of a simple concept,” Bevin said. “When I say the budget is going to be a doozy, it’s going to be because we in Kentucky actually pay for the things that we are using … . It’s going to cost us.”