LEGISLATIVE UPDATE: July 1 brings new state fiscal year and budget

LEGISLATIVE UPDATE

July 1 brings new state fiscal year and budget with focus on investing in state’s future

Representative Patrick Flannery

While July 1 may be the beginning of a long holiday weekend for some, for the Kentucky General Assembly it is day one of a new fiscal year and the first test of a new budget. Passing a budget is by far the biggest legislative task we face, particularly when our state faces economic uncertainty. However, the ultimate test is how it will be implemented by the agencies, programs, and organizations that receive funding for the services they provide.

When we adjourned the 2021 Regular Session, I reported to you that we used this budget to shift our state’s budget philosophy towards fiscal discipline, financial stewardship, and strategic investment. Our goal is to improve the quality of life in Kentucky without jeopardizing the values we hold strong. The result of our work should position Kentucky to state weather the effects of the COVID-19 pandemic and the government’s response to it.

When I write and talk about the budget, I am also referring to how the legislature prioritized the spending of more than $1.3 billion in COVID-relief dollars. While it was tempting to look at these funds as an opportunity to increase pay for public employees as well as fund exciting new projects, making long-term commitments with one-time money is not responsible policy. We cannot create future debt by using one time money as an excuse to make long-term financial commitments. Instead, our goal is to look at every federal dollar as a strategic opportunity to invest in strengthening our schools, businesses and workforce.

Budget Reserve: Growing the state’s rainy day fund was a priority because it not only prepares us for unexpected emergencies, but also opportunities. With this budget, we allocated $608.5 million to the rainy day fund budget reserve. By doing this, we increased our operating reserve, or the number of days the state can function without outside money, from four days to 29 days. As a result of our commitment, we have already seen our standing rise with two of the three leading credit agencies – which in turn has an impact on how much we pay to service some current debts and future borrowing.

Water Infrastructure Projects: For the first time in modern history, we were able to make a commitment towards improving aging and inadequate water infrastructure throughout our state. Every single Kentucky county will receive funds from the $250 million allocation, and funding will be driven by population rather than political favor.

Broadband: We used one-time federal dollars to invest $250 million towards delivering broadband services to the “last mile,” a term used to describe those in hard to reach areas. We allocated an additional $50 million to expand broadband in areas where it will benefit economic development, bringing the total broadband investment to $300 million.

Education Funding: State spending on educating Kentucky’s children accounts for just over $5 billion and 42 percent of the general fund dollars. This budget maintains SEEK funding (how much we spend per pupil) at a record high dollar amount of $4,000. In addition, we took a historic step and funded the entire cost of full-day kindergarten, at a price tag of $140 million. While most districts already offer full-day kindergarten, until now the state only paid half the cost. This $140 million allocation will free up money on the local level and essentially equals an increase of $175 per pupil. In addition, we provided the full SEEK employer match, including $1.05 million for new mental health professionals. We also continued to fully fund the teacher retirement plan at the actuarially required contribution (ARC) rate of $1.15 billion, far more than is required by law. Legislators also devoted $1 million for the Teacher Scholarship Program, which provides financial aid to Kentucky students pursuing teacher certification at participating Kentucky colleges.

Health: The budget fully funds Medicaid with $440.5 million in restricted fund and $1.3 billion in general fund dollars. The budget also includes funding to enhance both hospital and nursing home reimbursements seeks to provide relief to providers struggling with impact of COVID-costs. Hospitals will receive more than two billion dollars in both the current and next fiscal years ($540.9 million in state funds and $1.3 in federal funds). Nursing homes will receive an additional $16.3 million in general fund and $58.7 million in federal funds in both fiscal years for a total of $150 million. Programs at the University of Kentucky and University of Louisville will receive an additional $1.06 million in tobacco settlement funds for the existing cancer research and screening programs and $650,000 extra for spinal research. The budget also provides $500,000 in tobacco settlement funds for rural suicide prevention.

As we monitor how this budget is being implemented, we are also gathering information in preparation for next session when we will face the task of crafting another budget. Without a doubt, we want to see that the money we allocated this year is spent wisely before we make any commitments to future funding.

If you would like to share your thoughts on these or any issues relating to the Kentucky General Assembly, please reach out to me. I can be reached here at home anytime, or through the toll-free message line in Frankfort at 1-800-372-7181. Feel free to contact me via email at Patrick.Flannery@lrc.ky.gov. If you would like more information visit the LRC website legislature.ky.gov.