Bevin says Beshear leaves a $500M shortage

Kynect “adds no value” that the federal exchange doesn’t provide, the Ky. Gov.-elect said Friday at the State Capitol in Frankfort. Matt Stone, The Courier-Journal

FRANKFORT, Ky. – Gov.-elect Matt Bevin said Tuesday that he is inheriting a “financial crisis” from departing Gov. Steve Beshear.

In a news release in which he announced the appointment of John E. Chilton, of Louisville, as his budget director, Bevin said, “According to the Beshear administration, they are leaving Kentucky burdened with a projected biennial budget shortfall of more than $500 million. The appointment of a highly qualified budget director, therefore is of tremendous importance.”

Asked to elaborate on Bevin’s comment about a financial crisis, the Bevin transition office released an analysis of the state’s 2016-18 budget outlook by the Beshear administration’s budget office.

That analysis accounts for state General Fund revenue projections through the next two years, and then subtracts continuation of base spending, required additional spending and some other modest increases in spending such as a 1 percent pay raise for state employees.

Like any future budget analysis, this one is based on many assumptions.

And it is largely thrown out of balance by an appropriation increase of more than $520 million requested next year by the Kentucky Teachers Retirement System – the amount that the system’s experts say is needed to deal with its multi-billion dollar unfunded liability.

Other anticipated additional expenditures in this analysis are $133 million more next year for normal growth in Medicaid, $62.3 million needed next year to pay for Medicaid expansion and $60 million needed for Kentucky Employees’ Retirement systems.

Most of the largest listed budget needs next year – including those for the retirement systems and Medicaid – have been known for months.

When he was asked how he would deal with balancing the budget in the face of these needs, Bevin told The Courier-Journal in October, “It will have to be done as part of the budgeting process…Nobody has an answer to that now.”

Jessica Ditto, the spokeswoman for the Bevin transition team, said Tuesday that Bevin is not complaining about the outlook, much of which she said he was aware of as a candidate.

But Ditto said that Bevin is concerned that comments Beshear is making as he leaves office about the recovery of state revenue growth and a projected revenue surplus this fiscal year are giving Kentuckians the wrong impression of the outlook facing Bevin.

The analysis that Beshear’s budget office gave Bevin’s transition team accounts for the projected surplus of $267 million at the end of this fiscal year.

Terry Sebastian, the spokesman for Beshear’s office, did not immediately respond to a phone message seeking a response to Bevin’s comments.

“Much work is needed to get Kentucky’s financial crisis resolved,” Bevin said in Tuesday morning’s news release.

But he said his new budget director “is up to the challenge.”

Chilton, 66, is a certified public accountant with more than 40 years of experience. He is a co-founder of Mountjoy Chilton Medley LLP.