The new budget would bar the governor from spending the $2.4 billion to the state as well as the $185 million for capital projects that support work, education and health (i.e. remote work, telehealth) without the General Assembly's authorization.
Similar language was not included in last year's budget which was enacted after the CARES Act passed. The governor used the Coronavirus Relief Fund from that act throughout the rest of the year to shore up the budget, address the public health crisis, and provide aid.
Here's what the $2.4 billion can be used for:
No portion of the $2.4 billion can go into pension funds, and the state is barred from using it directly or indirectly for tax cuts. If we do, we will have to pay an equivalent amount of aid back to the Feds: kypolicy.org/last-minute-ta…
The legislature's budget adds $743M to the state's rainy day fund. The governor's budget had added $100M to the rainy day fund and used the remainder of one-time monies to provide small raises, reinvest in some services that had been cut, fund one-time relief efforts.
That would bring the rainy day fund to a whopping $1.2 billion, a number that will very likely get even bigger through a revenue surplus at the end of June.
That's at the cost of significant cuts compared to what the governor proposed. Gone is the 1% raise for state employees, $1,000 raise for school employees, $73M for teacher retiree healthcare, $139M from SEEK funding formula for P-12 schools, $100M from school construction
Also removed is $11M for textbooks, $5M for preschool, $7M for additional social workers to address the child protection crisis
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Senate A&R now amending a bill to apparently again make the highly ineffective and expensive film tax credit refundable at a cost of $75 million a year, giving away a massive amount of money on an idea that was never given a public hearing or introduced as a bill. #sewage
In addition, Kentucky will be required to refund federal aid equal to the cost of all tax cuts and tax breaks like the film tax credit because of the new provisions of the American Rescue Plan. A double hit to our budget. #kyga21
NEW interim forecast says state revenues will collapse 18.2%-23.7% this quarter--creating a shortfall of $319- $496 million--and then 10.5%-17.2% the next two quarters of the new fisc year.
Kentucky needs Congress to step in with *much more* in fiscal relief. #statecovidrelief
Corporate taxes projected will fall especially--from 68%-79% this quarter. Sales taxes will fall 18%-20% and individual income taxes 5%-13%. The lottery will drop 32%, property tax 14%, coal severance 46% and other 28%. All massive declines.
Road Fund receipts will also crater, falling 36.8%-55.2% in April-June compared to the prior year. The gas tax will fall 33.6%-52.1% and the usage tax (based on car sales) will fall 52.5%-72.1%. That creates a Road Fund shortfall between $116 million and $195 million this year.
As we approach a possible special session on pensions and quasi-governmental organizations, let's reflect on how we got here--and specifically the assumption changes the KRS board made in 2017. <thread>
Assumptions are long term & should apply to a ~30 year period. Given that, the pre-2017 assumptions were not way out of line. For KERS NH, the investment assumption was 6.75% (just lowered from 7.5%), nearly the lowest in US at the time & below what plan has earned historically.
The payroll growth assumption of 4% reflected what had happened historically. It’s true that we didn’t hit 4% in the years after the Great Recession—a recession that caused major budget cuts that reduced employment.
False claims of a crisis & even insolvency for the pension plans because of today's Supreme Court ruling. Let's be clear: those saying so have no analysis to back them up. (1/6)
First of all, KY's retirements plans have $38 billion in assets in total (money that is invested). Those funds have built up through past contributions as well as investment returns. That's an amount equal to 18% of KY's entire economy. Not money that's about to run out. (2/6)
Second, employers & employees make contributions every year, and the $38 billion earns investment returns. We returned to responsible funding in '14 for KERS/SPRS & '17 for TRS. Plans will improve through steady funding, & no one is proposing we underfund again. (3/6)