House GOP budget: 3 things to like & 2 things to scrap
The Kentucky House Republican caucus filed their version of the executive branch budget bill (HB1) on Friday. There’s a lot to analyze but on our first pass we find three things to like and two things that should be scrapped.
Three things to like:
Significant commitment to the Rainy Day Fund: We were told the budget retains $1.7 billion in the budget reserve trust fund (“the Rainy Day Fund”). Last session, the Bluegrass Institute recommended a “historic downpayment” in Kentucky’s budget reserves.
We wrote:
The current members of the Kentucky General Assembly have inherited a multi-faceted fiscal mess. A critically important step in righting the ship is a credible rainy day fund. We encourage the (legislature) to take the necessary steps to put Kentucky on a new, more fiscally responsible, path.
This budget proposal meets and exceeds our recommendation. The General Assembly should retain this reserve fund balance and, if possible, increase it.
Virtually eliminates the sweep of road fund resources to the general fund: For decades, Frankfort has used road fund resources (e.g. the gas tax & vehicle usage tax) to prop up spending in the general fund.
Last session, the General Assembly dramatically reduced that sweep and increased the state’s investment in our roads and bridges — without raising the gas tax. It appears that the House GOP budget all but eliminates the sweep.
In an op-ed last May, we wondered if the reallocation of road fund dollars to their intended purposes would begin to satisfy the pro-gas tax coalition. Unfortunately not. Despite the great progress in putting gas tax dollars to work for their intended purpose, taxpayers will still need to pay attention to the gas tax issue during the session.
Fully funds pensions: Frankfort finally started taking its pension funding crisis seriously under Gov. Matt Bevin. Since Bevin’s first budget recommendation, the General Assembly has met the challenge of funding the state’s troubled pension systems.
Stabilizing the pensions requires a year-after-year commitment. This next biennium presented a new wrinkle. The Teacher’s Retirement System finally adopted a realistic set of actuarial assumptions, substantially increasing the general fund commitment needed to meet the actuarially required contribution to the system.
According to the Herald-Leader, the House GOP budget included:
More than $2 billion in actuarial required contributions for the Teachers’ Retirement System of Kentucky. Also, the state would pay $479 million to clear the outstanding obligations that the teacher pension system owes to retiring educators for their sick leave and cost-of-living adjustments.
$1.2 billion per year in actuarial required contributions for the primary state workers’ pension fund at the Kentucky Public Pensions Authority. (And) there would be $215 million more to pay down a worsening unfunded liability for the separate Kentucky State Police pension fund.
Two things that need to be reconsidered as the process moves forward:
Funding for Kentucky Wired: The House GOP budget throws another $105.4 million at the Kentucky Wired debacle, including millions to support the back-room deal to float the Center for Rural Development in Somerset.
There was a time when Republicans in the General Assembly were prepared to shut down the project. The program, however, has always had powerful friends in Frankfort.
Rank-and-file members in both chambers should insist that leadership quit throwing good money after bad.
Local legislative grants: The budget proposes $10 million to allow legislators to dish out grants back in their districts. These types of programs over time become increasingly vulnerable to patronage and abuse. (See the history of coal severance grant programs).
The legislature would be better off nipping this idea in the bud.