Gov. Bevin Delivers Plan to Continue Building Solid Fiscal Foundation for the Commonwealth

2018-19 budget proposal includes necessary cuts, targeted investments

FRANKFORT, Ky. (Jan. 16, 2018) – Gov. Matt Bevin tonight delivered his 2018 State of the Commonwealth and Budget Address to the General Assembly and fellow Kentuckians, outlining his plan to continue getting the state’s financial house in order.
“Kentucky has just completed a truly transformative year of achievement, where many important seeds of progress were sown,” said Gov. Bevin. “However, the truth remains that after decades of poor financial management, the Commonwealth faces some harsh realities. These realities, coupled with modest projected revenue growth, mean that Kentucky must make tough and unpopular decisions.”
Gov. Bevin’s 2018-19 budget proposal calls for spending reductions in almost all areas of state government, with an across-the-board cut of 6.25 percent to most agencies. To maintain the effectiveness of priority programs, it proposes significant yet strategic cuts and the complete elimination of 70 programs. Additionally, new borrowing will be held to historically low levels, with debt service requirements under 5.63 percent of revenue, as opposed to the 2006-2016 average of 6.58 percent.
While addressing the stark fiscal realities faced by the Commonwealth, Gov. Bevin’s budget proposal also calls for several landmark investments, including:
$3.31 billion over the biennium to fully fund state employee and teacher pension plans for the first time in nearly two decades;
$100 million in bond pool funding for a second round of workforce skills training;
$34 million in new funding from tobacco settlement funds to fight the opioid epidemic and substance abuse;
$24 million to add positions and increase salaries for Kentucky’s social workers so we can better protect Kentucky’s most vulnerable citizens;
$10.8 million in new funding for adoption and foster children supports; and
funding for 75 new commonwealth and county attorneys and 51 new public advocates to strengthen the criminal justice system.
For K-12 education, it maintains the current $3,981 per student Support Education Excellence in Kentucky (SEEK) allocation. The Governor also noted that most school districts have both high administrative costs and significant reserve funds. Statewide reserve funds total over $950 million. In light of these facts, the Governor called on districts to utilize some of their reserve funds for transportation and other needs. He also expects them to reduce their administrative overhead and to pay a portion of their employees’ health insurance. These significant revenue sources at the local level allowed for a reduction in General Fund support for transportation and employee health insurance.
The Governor’s budget also dedicates 100 percent of lottery funds to education. This budget will return an additional $7.7 million of coal severance funds directly back to coal counties. The KLEFPF fund remains fully dedicated to supporting law enforcement and firefighters, and the recently increased $4,000 annual training stipend has been retained. Kentucky State Police will receive upgrades to dangerous and outdated cruisers and rifles, and a modern statewide communications system for law enforcement will be funded. In addition, the budget closes the film incentive program to new applicants.
Gov. Bevin noted that some budget reductions could be avoided if the General Assembly enacts meaningful pension reform this session. Tax reform could also have significant impact and lead to a less austere budget. Gov. Bevin emphasized that he is calling for genuine tax reform that will make Kentucky more competitive with its neighboring states — not merely a bump in the sales tax or an increase in the cigarette tax, both of which have been proposed by many. Genuine reform will spur economic growth and result in much-needed additional revenue for education, public safety, infrastructure, health care and other vital services.

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