Tuesday, January 24, 2012

House A&R - Gov. Budget Update



Budget Director & Secretary of the Cabinet Mary Lassiter presented Governor Beshear's budget proposal to the House A&R committee today. This presentation comes just a week after Governor Beshear's budget address when his budget was unveiled. The House will work through their budget review subcommittees, which have begun to meet, and over then next 6 weeks will build the House version of the budget. Certainly there will be differences with the Governor's proposal, but due to the austere nature of the budget significant changes are unlikely.

A press release on the meeting is below and you can access Mary Lassiter's slides HERE. Our three main takeaways from today's presentation are:

- The Governor's budget provides for $815 million in new spending above the base. That $815 million can be broken down into 4 major categories:
1. debt service ($391)
2. Health & Family Services ($169)
3. State employee & teacher retirement & health benefits ($167)
4. Postsecondary Ed & Corrections ($68)

In all of this new spending only $19 million is dedicated to new debt service for $304 million in general fund capital projects. This is a very small amount and even when combined with university projects and new road bonds, is the smallest capital budget since the mid-90's.

- Medicaid enrollment has slowed but is expected to grow at 1550 new eligibles per month. Lassiter touted the savings they are expecting from the Medicaid budget over the next biennium due to the managed care program. Without managed care, Lassiter projected the Medicaid program would have needed an additional $294 million in general fund dollars this biennium. This number is going to weigh heavily on the minds of legislators as they continue to hear complaints from providers and patient advocates who are dissatisfied with managed care.

- Lassiter provided more details on the tax amnesty program the Department of Revenue is proposing to carry out. This program is expected to raise $61 million in new revenue in this year of the biennium. She even said that they would have a bill draft to Chairman Rand on the program this week.

The press release is below and we will be back in touch as the budget review subcommittees get into their work.


For Immediate Release
January 24, 2012


House budget committee updated on governor's spending proposal

FRANKFORT—The House budget committee today heard details of the governor's $19.4 billion Executive Branch budget plan for 2012-2014, which includes plans for $815 million in new spending along with spending cuts and other measures to fill a projected $742 million budget gap over the next two fiscal years.

State Budget Director Mary Lassiter explained to the House Appropriations and Revenue Committee—which will craft a House budget proposal for legislative consideration in coming weeks—that while Gov. Steve Beshear has proposed reducing the budgets of most state agencies by an additional 8.4 percent next fiscal year and keeping those budgets at that reduced level in fiscal year 2014 to help fill the budget gap, the governor's plan would exempt "priority" areas like Medicaid, state corrections, per pupil school funding, teacher's retirement and over a dozen other areas from cuts over the biennium. 

Medicaid would also be among a limited number of areas that would receive part of $815 million in proposed new spending under the governor's plan, Lassiter said. Postsecondary education, expansion of public preschool, debt payments on state projects, state employee and teacher's retirement and health insurance , substance abuse treatment, services for severely mentally ill adults, child support enforcement, colon cancer screening are other limited areas that would get some additional funding, she said.

"We all know the paradigm that when the economy is bad, the demand for services is greater," Lassiter said.

Lassiter described the governor's proposal as a balanced but challenging plan that would improve the state's job competitiveness and "make fiscally responsible and critical investments for the future"—including, but not limited to, authorization of $451 million in state agency bonds for state postsecondary building projects and expanding Medicaid-based substance abuse treatment to 5,800 juveniles and adults over the biennium.

First and foremost on state budget officials' mind as they proceeded to craft the governor's budget proposal was jobs, said Lassiter.

"Without a job, an individual doesn't have the capacity to take care of their family … job number one for us in government is to do what we can to help our citizens have jobs." The goal to protect education runs a close second, Lassiter said.

"That's been a goal of the governor's and a goal of the General Assembly throughout tough times and better times," Lassiter said.

As far as state capital projects are concerned, Lassiter said the governor's proposed biennial spending plan would include $778 million in investment in necessary state government infrastructure—the smallest amount of new capital funding since 1996, she added. The $778 million would include the $451 million in agency fund bonds for postsecondary institutions, $304 million in General Fund bonds and $23 million in Road Fund bonds, according to the governor's proposal.

Funding for road design and construction under the 2012 Six-Year Highway Plan overseen by the state Transportation Cabinet would be restricted under the governor's proposal to $1 billion in design and construction contract letters annually, Lassiter said.

The House Appropriations and Revenue Committee and its subcommittees will hold more discussion on the 2012-2014 state Executive Branch budget proposed by the governor in coming days and weeks as the 2012 Regular Session of the Kentucky General Assembly progresses. The governor's budget plan has been filed as House Bill 265 for consideration by the General Assembly this session.

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