Ken­tucky Or­ders Spend­ing Cuts for Cur­rent Year

The Bond Buyer - - Front Page - By Shelly Sigo

Ken­tucky Gov. Matt Bevin or­dered $158 mil­lion in spend­ing cuts for fis­cal 2018, while warn­ing that $1 bil­lion in re­duc­tions could be nec­es­sary over the next bi­en­nium due to ris­ing pen­sion and Med­i­caid costs.

Bevin is­sued a bud­get re­duc­tion plan Thurs­day say­ing the state’s Con­sen­sus Fore­cast­ing Group re­vised the of­fi­cial es­ti­mate of tax re­ceipts down­ward for the cur­rent year. Most agen­cies must cut 1.3% from their bud­gets by June 30 to avoid a deficit.

The or­der doesn’t ap­ply to “im­por­tant gov­ern­men­tal ac­tiv­i­ties,” in­clud­ing K-12 schools, corrections, state and county

at­tor­neys, pen­sions, elec­tions, the ethics com­mis­sion, eco­nomic de­vel­op­ment, School Fa­cil­i­ties Con­struc­tion Com­mis­sion, Lo­cal Gov­ern­ment Eco­nomic As­sis­tance and De­vel­op­ment Funds, and the Ken­tucky Higher Ed­u­ca­tion As­sis­tance Au­thor­ity.

Those ac­tiv­i­ties may not be pro­tected from cuts that will be re­quired in the 20192020 bud­get, which State Bud­get Di­rec­tor John Chilton’s of­fice said could to­tal about $1 bil­lion.

“Pro­tect­ing those cat­e­gories from re­duc­tions in the next bi­en­nium will be dif­fi­cult, if not im­pos­si­ble,” he said. “There is just not enough rev­enue to sat­isfy all of the fund­ing needs.”

Although fore­cast­ers project mod­est rev­enue in­creases in the next two years $287.5 mil­lion in fis­cal 2019 and $284.1 mil­lion in 2020 – Chilton said the state will need to ad­dress “var­i­ous bud­getary strains as­so­ci­ated with pen­sion fund­ing, Med­i­caid, and other fund­ing re­quests,” as well as re­plen­ish­ing the bud­get re­serve trust fund.

The state’s fis­cal prob­lems will be a top pri­or­ity for the Leg­is­la­ture dur­ing this year’s ses­sion, which started Tues­day and runs through April 15. Bevin will sub­mit his bud­get rec­om­men­da­tions for the up­com­ing bi­en­nium on Jan. 16.

“I en­cour­age you to con­tact your leg­is­la­tors dur­ing this very im­por­tant bud­get and leg­isla­tive ses­sion,” Bevin said on Twit­ter Tues­day morn­ing.

The gov­er­nor pitched pen­sion re­forms in the late sum­mer to re­struc­ture the state’s eight re­tire­ment plans – which are among the worst funded in the coun­try - but re­tirees and oth­ers pushed back on the pro­posal forc­ing him to de­lay a spe­cial ses­sion to ad­dress the is­sue.

Bevin has said re­form­ing the state’s pen­sion sys­tems is a top pri­or­ity dur­ing this year’s leg­isla­tive ses­sion.

When he first an­nounced de­tails of the plans in Oc­to­ber, Bevin said Ken­tucky has been down­graded re­peat­edly by dif­fer­ent rat­ing agen­cies in re­cent years “be­cause of this loom­ing pen­sion cri­sis.”

Bevin said his plan will “stop the bleed­ing.”

In July, Moody’s In­vestors Ser­vice cut Ken­tucky’s is­suer rat­ing to Aa3 from Aa2, driven mainly by pen­sion costs.

S&P Global Rat­ings has a neg­a­tive out­look on its A-plus is­suer credit rat­ing and other Ken­tucky debt cit­ing the pen­sion prob­lem.

“Ab­sent re­form, these costs are pro­jected to in­crease nearly $700 mil­lion in fis­cal 2019, pres­sur­ing the state’s al­ready-strained bud­get,” S&P an­a­lyst Ti­mothy Lit­tle said in Oc­to­ber. 

Bloomberg

Ken­tucky Gov. Matt Bevin said the state should pre­pare for $1 bil­lion in spend­ing re­duc­tions over the 2019-2020 bi­en­nium.

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