From where we sit, the impasse over the state budget looks as if it could be easily resolved.
Gov. Matt Bevin could win $500 million for the rainy-day fund and future pension payments. That’s less than what he wanted, but it would be the largest reserve in modern times, according to House budget committee chair Rick Rand.
The House agreed in negotiations to the public pension funding levels Bevin sought in the next biennium.
And Bevin could avoid being blamed for slashing public support for higher education.
What’s not to like about that for a governor wrapping up his first legislative session and hoping his Republican Party can take the House in November?
So, with victory within reach, what does Bevin do?
Throws a bomb by ordering immediate 4.5 percent cuts in higher education with only three months left in the fiscal year, cuts that Bevin announced in January but that neither the Democratic House nor the Republican Senate approved.
This incendiary act could burn Bevin in several ways. Both Attorney General Andy Beshear and House Speaker Greg Stumbo say Bevin is violating a state law that says, unless there’s a revenue shortfall, governors have no authority to cut appropriations made by the legislature. There is no revenue shortfall.
Beshear on Friday called on Bevin to rescind the order within seven days or face a lawsuit.
(Interestingly, Bevin rescinded an executive order signed by former Gov. Steve Beshear making it easier for felons to regain voting rights. Bevin insisted that he supports voting rights for felons but that the prior governor had exceeded his authority. We guess the limits of authority look different depending on your angle.)
Even if Bevin avoids a legal entanglement with the Democratic AG, he seems to be steering toward a budget meltdown. If no budget is enacted, he will find it painful to govern. A court ruling when the legislature failed in the past to enact a budget limits spending to government functions that stem directly from the state constitution, such as public safety and education, and what’s required by federal law. That leaves a lot of what the state does unfunded.
Bevin may think the public will blame House Democrats if there’s no budget, but he and Republican lawmakers will also feel the fallout if he tries to govern without a budget or has to call a special session to enact one.
All Bevin has to do to get a budget is back off his demand for 9 percent cuts in higher education in the next biennium; that’s the House’s line in the sand. Kentucky has been cutting colleges and universities for years, fueling tuition increases. Protecting higher ed from cuts now would not only be politically smart, it’s also the right thing to do for the future.
Bevin insists the cuts are necessary to shore up the dangerously sagging public pension systems. He wants $500 million set aside in a fund to pay into pensions in the future. But both the House and Senate budgets proposed larger contributions to the pension funds in the 2016-18 biennium than Bevin proposed.
One of the pension funds for state employees is so perilously underfunded that it could soon be forced to liquidate its investments to meet monthly obligations. The crisis is real. And Bevin is winning praise from many quarters, deservedly so, for elevating the pension crisis, making it impossible for lawmakers to ignore.
Bevin can still salvage his first session. There’s plenty of time between now and the April 15 deadline to agree on a budget.
The state needs a budget. Legislators have a constitutional duty to enact a budget, and no matter how they calculate the political odds, legislators should enact one.
There’s no excuse for this session to end without a budget since lawmakers of both parties have embraced Gov. Matt Bevin’s top priority: shoring up Kentucky’s shaky public pension funds.
Negotiators have resolved some differences on how to allocate money across pension funds. But the biggest stumbling block remains: Is it necessary to cut education to free up money for pensions?
Bevin and the Republican Senate say yes. But the Democratic House put more money into pensions than Bevin proposed during the next biennium without cutting education.
The charts above show funding levels in Bevin’s budget and those approved by the chambers, the starting point for the negotiations that started last week.
The Senate’s emphasis on the Kentucky Employment Retirement System reflects its dire state of crisis. The Kentucky Teachers Retirement System is healthier but still underfunded and at risk of slipping into crisis.
Bevin wants to sock away $500 million (from a surplus in the State Employees Health Plan) in what he calls a “permanent fund” for pensions in future budgets. He also wants a larger rainy day fund, altogether idling more than $1 billion, which he says will start the state on a path to fiscal soundness.
That’s a lot of money to sideline when education still suffers from years of cuts, especially at the risk of a partial government shutdown or special session if lawmakers fail Tuesday to enact a budget.