The state budget arrived on the governor's desk just under the wire late Friday night as lawmakers pushed through priority legislation before the midnight deadline.
All told the General Assembly pumped around $1.2 billion into the state's stressed retirement system, with the lion's share going toward teachers' pensions. In a statement, Gov. Matt Bevin applauded the agreement, declaring that it puts Kentucky on a "solid financial footing."
The final budget agreement funnels $125 million into Bevin's so-called permanent fund, to be tapped for future pension expenses, and bolsters Kentucky's rainy day fund by $175 million.
But the commitments mean many state agencies will certainly feel the pinch.
House Democrats fought to restore the governor's requested 9 percent cuts to universities, but were only able to pare them down by half. Speaker Greg Stumbo, who had warned that any reductions would inevitably result in painful tuition hikes, said the process worked as it should.
"I would carry a message of cooperation to the voters this fall and say look, this thing's working," he told reporters Friday. "We believe working in working with people and working toward compromises and finding middle ground."
The conciliatory noises are a far cry from the barbs Stumbo and Bevin traded in the final weeks of the session. With the specter of a $62,000-a-day special session or government shutdown looming, the Prestonsburg Democrat slammed the new governor's first budget proposal as "one of the worst" he'd seen during his tenure. Returning fire, Bevin said failure to produce a deal would fall on the speaker's shoulders, telling the Lexington Herald-Leader, "If the legislature walks out of here, it’s really going to come down to him."
Republican Senate President Robert Stivers had glowing words for the final product, telling reporters it took "the bull by the horns and dealt with one of the most pressing, if not the most pressing, fiscal issue in the Commonwealth of Kentucky and that was pensions."
Breathing a sigh of relief were the judicial branch and K-12 schools, who both saw proposed funding cuts added back to the spending plan. Bevin's workforce development pool survived to the tune of $100 million.
But the kudos were not unanimous.
Speaking on the House floor, Louisville Rep. Jim Wayne blasted the budget as structurally unsound and another slap in the face of Kentucky's working men and women before casting the lone "nay" vote.
"The salary increases for our state workers, where are they? Many of them have gone years now without significant salary increases, same with our teachers," he reminded the chamber. "All this is to say that we are inadequate in serving these people with this budget."
The long-serving Democrat warned constitutional offices, parks, and other state services will continue to suffer until the state rethinks its revenue system, which he labeled "outdated" and "unjust."
University Funding
In addition to yearly cutbacks, the General Assembly set about easing in performance-based funding. Starting in Fiscal Year 2018, five percent of the state appropriation for the public college and universities will hinge on schools' ability to meet the requirements of a funding formula. The fraction of state dollars tied to results will increase yearly, topping out at 25 percent by 2020.
Legislators were unable to craft a satisfactory equation for determining the funding totals and handed that task off to a committee. The panel will return with a recommendation by this December.
Meanwhile, the fate of current year 4.5 percent cuts to universities remains cloudy. Democratic Attorney General Andy Beshear is pursuing litigation against the governor, who maintains he's legally able to adjust the funding levels. Beshear argues the cuts are illegal unless the state faces a real or forecasted revenue shortfall.
A spokesperson for the University of Kentucky said it's too early to speculate on the impact of the annual reductions approved in the budget. The school's administrative team is in the midst of crafting its spending plan for the next fiscal year. Tuition will be decided in June.
Kentucky State University was exempted from the cuts.
Lexington Convention Center
Once on life-support, measures creating new revenue for a proposed $250 million reinvention of the Lexington Convention Center saw a last minute revival Friday afternoon. Speedily passed out of a Senate committee, a bill permitting the city to bump its hotel tax by 2.5 percent eventually won approval from the full chamber.
Democratic Sen. Reggie Thomas praised the decision, adding, "It is absolutely critical to Lexington in terms of offering opportunities, benefits, jobs..."
A former critic of the plan, Senate President Stivers had questioned why Lexington - with its recent budget surpluses - could not afford to fund the renovation. By week's end, the Manchester Republican sounded more sympathetic.
If the General Assembly failed to support the project, he said, it would "put the city of Lexington at a competitive disadvantage."
The 2.5 percent increase in the transient room tax will fund local and state bonds totaling $230 million. A cash infusion by Fayette County will fund the remainder.
Work Ready Scholarships
House Democrats' Work Ready scholarship initiative also emerged from the legislature in the waning hours, with new strings attached. Under the program in House Bill 626, state university students seeking an associates degree could have their tuition waved if they meet a series of eligibility requirements - many added by the Republican-led Senate.
The measure passed 90-9 out of the House and heads to the governor's desk.
Budget Vetoes
By pushing the final day of the session back to April 15, the General Assembly gave up any power to override a gubernatorial veto of the $22 billion spending package. While Bevin says he looks forward to "reviewing the details," the chief executive appeared to rule out an overall veto in a statement.
"I am proud to say that we have invested more in our state pensions than ever before. This was the right and necessary thing to do," he said. "This budget sends a strong signal to the financial and business communities that we take our financial obligations seriously."
Bevin could still exercise his line-item veto authority to remove specific provisions, but Speaker Stumbo downplayed the legislature's decision to forfeit the option to overrule.
"If the governor wanted to veto something, and even though the House may have overridden it, I don't believe the Senate would have likely overridden, so I don't think it has a lot of significance," he said.
The General Assembly did not choose to override any of Bevin's previous vetoes.
