FRANKFORT, Ky. — Kentucky’s Republican governor signed an order Friday to close a $152 million hole in the state’s budget through a mix of spending cuts and raiding various restricted funds devoted to public education, environmental protection and health care.
When the fiscal year ended June 30, state officials were $138.5 million short. A few other things, including a budget veto that would not let $5 million of lottery scholarship money lapse back into the general fund, pushed the shortfall to $152.2 million. Kentucky’s constitution requires the state to have a balanced budget, thus requiring Gov. Matt Bevin to take action.
Bevin’s order relies on $55 million of spending cuts across various state agencies. It also sweeps more than $77 million from various restricted funds, including $36 million from the Health and Family Services cabinet, $17 million from the Energy and Environment cabinet and just over $491,000 from the state Department of Education.
The order included $68 million in cuts to Medicaid, the joint state and federal health coverage program for the poor and disabled. But the governor’s office said those savings came from renegotiated contracts with the managed care organizations that administer the plan.
The rest of the money comes from a mix of spending cuts in the judicial and legislative branches plus some money left over from other parts of the state’s general fund.
Things don’t look good for next year, either. Budget director John Chilton predicts Kentucky will have another shortfall in 2018. Bevin’s order did not touch the state’s reserves, leaving another $150.5 million available to address any future deficits.
Bevin said the deficit highlights the need for Kentucky lawmakers to overhaul the state’s tax code and fix “Kentucky’s broken pension systems.” He has promised to call lawmakers back to Frankfort later this year for a special session to do those things. But while he has been meeting with advisers to craft a plan, he has not shared it publicly or with legislative leaders.
During his annual State of the Commonwealth address in February, Bevin said any reform could “not be a tax neutral plan” because the state needs to collect more money to address its multibillion-dollar public pension debt.
Thursday, Democratic state Rep. Jim Wayne sent Bevin a tax plan that would cut taxes for the poor while raising taxes for the wealthy. Those making more than $444,000 a year would see the biggest increase, 0.42 percent. The plan would also raise taxes on cigarettes and impose a sales tax on services used by the wealthy, including chauffeured limousine rides.
Wayne said the plan would generate an extra $600 million to $800 million a year for the state.
“I would hope he would take our proposal seriously,” he said. “It’s going to give us the money we need.”