Beshear's irresponsible budget is more of the same from Frankfort
The Bluegrass Institute’s report “The Lost Decades: Kentucky’s Economic Underperformance 1980-2020” detailed how Kentucky’s embrace of progressive redistribution has limited the state’s economic growth for the past generation. Kentucky is high-tax state that ranks in the top tier of states in government spending. From a budgetary standpoint, we’re more often mentioned in the company of fiscal train wrecks like Illinois and New Jersey than responsible, fiscally conservative states like Tennessee, Indiana and North Carolina.
It comes as no surprise that Gov. Andy Beshear’s proposed budget is more of the same from Frankfort. The Kentucky Center for Economic Policy (KCEP) — the liberal Berea-based think tank — praised the Beshear budget. In a release from Beshear’s press office, KCEP Executive Director Jason Bailey was quoted as saying, “Kentuckians need a government that will deliver for them – this budget does that.” Groups like KCEP ignore that Kentucky’s state government is exactly what they’ve advocated for - that is, big government - that has proven incapable of “delivering” for Kentuckians for decades.
Beshear’s budget is full of gimmicks and platitudes. Every Governor is expected to propose a budget to meet their agenda but proposing the amount of new and recurring spending based upon one-time money is a recipe for a future reckoning. The General Assembly was right to dismiss Beshear’s budget as their starting point, instead choosing to base their process on a conservative continuation of last year’s spending levels.
Let’s dig into the details:
Reliance on one-time funds. Beshear’s budget largess depends on $613 million in one-time funds. Of that amount, only $126 million comes from revenue growth from a slowly recovering economy. $319 million was “freed up” from shifting state government expenses to federal CARES Act funding. $119 million was “saved” due to enhanced Medicaid support from the federal government during the pandemic. Even with the prospect of another influx of stimulus funds to prop up state and local governments, the D.C. spigot will eventually be shut off and Kentuckians will be stuck with the bill for the spending Beshear’s budget promises.
Political promises end up as recurring expenditures. In his campaign, Beshear promised teachers a $2,000 pay raise. He’s taking another shot at delivering on that promise in this budget, proposing a $1,000 bump for teachers and classified employees. Added up it’s $109.4 million in new spending that will multiply as it gets incorporated into higher baselines. The average teacher salary in Kentucky is $54,548, nearly $5,000 more than a decade ago. Given the ongoing COVID-19 uncertainty, the General Assembly shouldn’t lock in this long term spending commitment.
Program money pits continue to be rewarded. There is a desperate need to review government programs for their effectiveness and ROI. The “Lost Decades” called for a higher level of budget transparency to give taxpayers an opportunity to better understand how their dollars are spent - or wasted - by Frankfort. Beshear’s support for three specific programs highlights this need:
Kentucky Wired: The government-owned broadband network continues to be an unmitigated disaster. Over $500 million has been spent on the program and it has yet to provide high speed internet service to one Kentucky household. Supporters tout the transition of state agencies to the network. Really? Over half a billion dollars spent since 2015 and all they can brag about is faster internet speeds for state-owned office buildings? Beshear’s budget throws another $46.3 million at the program. The General Assembly needs to shut Kentucky Wired down.
Dataseam: This non-profit has received $26 million in state funds since 2006. Over that period, $4.49 million has been spent on administrative overhead (17%). The funds are provided through a sole-source contract, bypassing the state’s normal procurement process. The program lacks transparency. In fact, a recent audit reported that Dataseam provided information that was “incomplete, contradicting and/or not fully supported” when responding to auditor’s requests. Dataseam represents what happens when non-profits escape accountability for the tax dollars they receive.
Kentucky Innovation Act: Since the enactment of the Kentucky Innovation Act in 2000, $112 million has been spent to create a “knowledge-based” economy in Kentucky. Where has the money been spent and what are the program’s results? There isn’t good answer. Still, Beshear’s budget continues to fund this program.
Rainy Day fund deposit is a good start. One positive in Beshear’s budget is a $100 million deposit into the state’s Rainy Day fund, which would bring that fund’s balance to $565.7 million. In the “Lost Decades” report, the Bluegrass Institute called for significant reforms to the Rainy Day fund, including an aggressive fund balance target of 10%, which would place over $1 billion in reserves to manage through cyclical downturns. The General Assembly should deposit the $319 million freed up from the CARES Act as a down payment towards that goal.
Did Beshear signal support for higher gas taxes? Beshear said his budget didn’t rely on “any increase in taxes.”. However, when he arrived at the Transportation budget he said, “we need to invest in our transportation infrastructure now. I’m ready to step up to the plate. I hope others are too.” He said investing in infrastructure required “short and long-term solutions.” His budget recommends $116.9 million in additional funding for highway construction. Assuming that’s the short-term solution Beshear spoke about, is he setting the groundwork to “step up to the plate” and endorse higher gas taxes as a long-term solution? This bears watching.