A nonprofit publication of the Kentucky Center for Public Service Journalism

House passes two-year budget plan with help for pensions, historic SEEK funding, some new taxes

The Kentucky House of Representatives passed a funding package with cigarette and opioid taxes and increased funding for SEEK and public pensions by a vote of 84-8.

The total spending plan is about $22.5 billion for the next two fiscal years, which begins July 1.

The two-year budget plan, presented on the House Floor by Appropriations & Revenue Chairman Rep. Steven Rudy, is a comprehensive plan that includes full, and higher-than-ever funding for the state’s ailing public pension plans, which have widely become known as among the country’s worst funded systems.

Simultaneously, House Leaders created historic funding levels for the SEEK formula, which is responsible for allocating funds for local school districts. The package, made up of House Bills 200, 203, 204, and 366, also funds a substantial $246 million investment in the rainy day fund, which is the state’s emergency savings fund.

“The House Majority’s budget commitments are largely in-line with the Governor’s proposal and goals,” said Rudy. “This two-year proposal reflects a strong commitment to fully fund for the first time in history our public pensions while keeping our debt service below the target mark. It restores and wisely invests funding in the rainy day fund, and sends it down the right path. We are making government smaller and more efficient, and that takes very hard decisions. I’m proud to present this budget to Kentucky, and I look forward to Senate consideration.”

Photo by Tom Latek, Kentucky Today

Over the biennium budget, the House package increased the full funding of the Kentucky Retirement System by $774.5 million and the Teachers Retirement System by $89.1 million, to fully fund the ARC at a level never before seen in Kentucky, and for a total of $4.8 billion.

Among the major takeaways, the House budget plan ensures health care coverage for retired teachers throughout the next two years, to the tune of $59.5 million in year one. In FY19, it provides $11.8 million and in FY 20, it provides $3.2 million to KTRS to fully fund the teacher match for health benefits. Additionally, the plan provides $129 million over the next two years to fully fund health insurance accounts for active teachers.

The package, for the first time in history, funds SEEK at $4,055 per pupil in the first year and $4,056 per pupil in the second year, to the tune of $60 million each year. Transportation funding for school districts has been restored to current levels with a $127,800,000 investment.

Loan commitments, Nickel Equalization, and funding for the Governor’s Scholar Program and the Adult High School Pilot Program are all intact.

In total, the two-year House budget package contains a more-than $600 million total increase over the Governor’s proposal.

House leaders took an innovative approach to find funding to fuel top-priorities and came away with two major components the vast majority of Kentuckians will support. The first, a 50-cent increase in the cigarette tax, will generate nearly $240 million over the next two years, and the second — a 25-cents-per-dose opioid tax — will generate an additional $70 million each year.

Unlike the consumer-driven cigarette tax, the opioid tax will only affect distributors, and not Kentuckians who suffer from ailments and are prescribed pain-management drugs for serious diseases and ailments.

“The two tax proposals are duel threats: curb the dangers of both tobacco and opioids, and raise revenue to fund pertinent programs and services in Kentucky,” said Rep. Rudy. “We are losing children and adults to opioid overdoses, and the opioid tax is expected to curb the dumping of dangerous opioids into Kentucky. One of our greatest, and growing, problems is the rising cost of health care, including Medicaid. We believe the increase in the cigarette tax will help hold the line on health costs due to smoking, and do no harm to merchants doing cross-border sales, while creating an even greater revenue stream.”

Funding for the landmark House Bill 1, or the Adoption and Foster Care reform proposal, includes $12.5 million for social workers and $86.2 million over the two years to support an additional 354 positions to support caseloads.

Funding for the well-known Family Resource and Youth Services Centers (FRYSC) is included at an increased rate of $185 per child, and kinship care and relative placement are funded by almost $30 million. Additionally, $4.8 million general fund dollars are included for Community Living Programs and also $1.5 million each year for substance abuse programs for pregnant women.

The Kentucky State Police will receive funding for 260 cruisers, 800 rifles, and $35.1 million to upgrade antiquated communications systems to new, better-public serving systems.

Operation Unite, Kentucky’s substance abuse prevention program, will receive $1.9 million a year to fight one of the nation’s most compelling opioid epidemics.

The plan includes funding for anticipated rises in prison population, Department of Juvenile Justice treatment facilities, and monies for the Access to Justice Program.

To add new county and commonwealth attorneys, the House package includes $7 million in funding.

Across the board, the proposed 6.25% cuts to higher education institutions in Kentucky have been restored in the House package, along with $150 million each year to the University Asset Preservation Pool.

KEES Scholarships will receive more than $210 million over the two years, and numerous other programs associated with post-secondary education receive funding shots in the arm.

Under the House package, cuts in the Governor’s proposal to the Department of Veterans Affairs will be restored, along with restorations in cuts to the Commission on Human Rights.

Funding is included for Local Government Economic Development and Assistance Funds for Local Communities, for the Agricultural Development Fund, the Early Childhood Development Fund, and the United Prosecutorial System.

Additionally, PVA’s are set to receive $2.7 million in the current year to avoid layoffs, and $9.7 million in year two to restore funding to current levels.

Under the House funding package, Kentucky’s debt service ratio is under the target of 6%. The measure now heads to the Senate.

Read the Budget Summary.

House Majority Caucus and Staff Report

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