November 29, 2012
The Interim Joint Appropriations & Revenue Committee met Tuesday in Frankfort to hear testimony on several topics, but the main item of interest was a presentation from Secretary of the Cabinet & Budget Director Mary Lassiter on the Beshear Administration's budget balancing measures for Fiscal Year 2012. The key points from her presentation are below and a copy of the handouts are available HERE.
- The Beshear Administration has to reduce the budget by $189 million in the current fiscal year due to budget reductions enacted by the General Assembly.
- In order to balance the $189 million, they plan to:
- Use $75 million in excess revenues from FY 2012 as projected by the state economists
- Make $114 million in spending reductions broken out as follows:
- $27 million in recurring 1.5% budget cuts and non-merit reductions
- $57 million in debt service lapse (timing of when bonds were sold)
- $29 million in additional 2% budget cut fr FY 2012
- In essence the 2% cuts will be taken from the vast majority of state agencies, but those agencies only make up 15% of the General Fund dollars. So those exempted from the additional 2% makes up 85% of General Fund dollars.
- In addition to the presentation on the FY 2012 balancing measures, John Hicks gave an overview on the impact of Federal Sequestration, across the board cuts to Federal funds that normally flow to states beginning in 2013. The good news is that 85% of the Federal funds that flow to Kentucky are exempt from the Federal Sequestration. However, Hicks provided a scenario that could have significant impact of nearly an 9% reduction. This will impact the budget lawmakers will be putting together during the 2012 Session.
Analysis:
- The tone of the overall presentation by Mary Lassiter was very pessimistic, which is somewhat of a change from the upbeat news from a few months ago when Kentucky posted a large surplus in the rainy day fund and revenues seemed on the uptick.
- Legislators asked a variety of questions most of which were aimed at the Governor's priorities going into the next session and his budget recommendation. Lassiter shrugged these off saying that it was too premature to discuss those until the revenue numbers were finalized in December. She said the Governor will present his budget on January 17th.
- The Budget Chairmen Sen. Leeper and Rep. Rand definitely shared Lassiter's mood in terms of the difficulties they will face putting the next budget together. That isn't necessarily out of character for Leeper who has been outspoken in his concerns about the next budget. Rep. Rand however, had been more moderate in past meetings, but seemed to be more pessimistic today.
- Other topics that were covered by legislator questions included:
Ohio River Bridges: Rep. Wayne asked about bonding and how the Governor would approach the bridges project in 2012. Lassiter said the Governor has shown his commitment to the project, its just premature to say what they will obligate towards bonds.
Medicaid: Leeper commented that he is aware that Medicaid has requested an additional $200 million in the request they sent to the Governor's office. Medicaid came up on a couple of occasions since the $189 million was supposed to be covered in part from the Governor's Medicaid Managed Care program.
Furloughs & Layoffs: Lassiter was clear that the administration has determined that it will not use furloughs in FY 2012. On the topic of layoffs, however Lassiter said the preference was not to use those, but that they had not taken that off the table as a policy decision in order to meet the budgeted cuts. When asked about the next budget, Lassiter said it was too premature to determine what they would do on these issues in the next biennium.
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