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(Photo: CJ file photo)

FRANKFORT, Ky. -Anticipation is building as Gov. Matt Bevin prepares to unveil his first state budget, no small matter to some since he has promised to shrink state government.

Advocates for the arts, for instance, are worried that Bevin could propose cutting the nearly $2.8 million annual appropriation to the Kentucky Arts Council.

“There’s a lot of concern,” said Aldy Milliken, executive director and chief curator for the Kentucky Museum of Art and Craft. “Another cut to the Arts Council would make no economic sense. It would cause a loss of money from the federal government and other granting organizations. The state would lose tax dollars, jobs and income from the tourism industry.”

John Chilton, budget director in the Bevin administration, declined to say how Bevin’s proposal would treat the Arts Council or any other part of state government.

“They’ve asked me not to make any comment until Tuesday when the governor can present the entire budget in its full context,” he said.

The Arts Council is just one of the tiny pieces within the massive two-year, $21.5 billion budget that Bevin will propose at 7 p.m. Tuesday in a combined budget address and State of the Commonwealth speech to the General Assembly.

The new governor has been focused since his November election on writing the budget, and by now – with Tuesday’s deadline looming – major decisions likely have been made. After his election, the Republican said he inherited from Democratic Gov. Steve Beshear, “a projected biennial budget shortfall of more than $500 million.”

Bevin got that figure from an analysis by the Beshear budget office that, while anticipating solid growth in tax revenues over the next two years, also accounted for a massive amount of new spending demands, primarily fully funding what actuaries say is needed to address the multi-billion dollar liabilities in state pension funds.

Early this month in a speech to the Kentucky Chamber of Commerce, Bevin said the budget “will not be full of everything that people would like to see, but it will be realistic and help us get our house in order. We have to live within our means.”

Senate Majority Leader Damon Thayer, R-Georgetown, said he has not been told any details of the proposal. “But I think the governor was elected on a mandate to trim the size and scope of state government and that this is going to be a very austere budget proposal. It’s in line with his principles and it’s realistic considering we’ve got to find extra cash to put into the pension systems.”

Thayer said it would be “a fool’s errand” to speculate on whether cuts will be large or small.

“The one thing I do know for sure is that there has never been a demand for gallery passes to see this speech like this year,” Thayer said. “Many constituents and individuals with an interest in government are looking for gallery passes. I could use about two dozen gallery passes, but I only get one.”

Folks in the gallery will be concerned with issues that go far beyond funding the arts council.

The questions are endless: How far will Bevin go toward funding the sick pension systems? Any pay raises for state workers? New construction projects? Medicaid? Social workers? Public defenders? Preschool funding? Will there be money to test rape kits? Will he bolster general spending by raiding available surplus money in small dedicated state funds like the one for public employee heath insurance?

Jason Bailey, executive director for the Kentucky Center for Economic Policy in Berea, said he has no idea whether the governor’s general comments to date are aimed at lowering expectations or whether cuts might be big.

“All I can say is that the way the table has been set is that it’s going to be austere. What that means, remains to be seen,” Bailey said.

Jim Carroll, a co-founder of the advocacy group Kentucky Government Retirees, said the governor and legislative leaders have committed to fully fund the actuarially required contribution (or ARC) to Kentucky Retirement Systems – a contribution that would require $60 million more of state General Fund dollars in each year of the state budget.

But trends and studies in recent months, Carroll said, show that even that increase will not be enough. “We would like to see the full actuarially required contribution, plus additional funds. The hole is deep. It was dug with a shovel and it’s being filled with a hand trowel.”

The actuarially required contribution for Kentucky Teachers’ Retirement System is much larger – about $500 million more in each of the next two years than KTRS gets this year.

“On behalf of the people we represent, the first thing I’m looking at is whether the budget will fully fund the ARC for Kentucky Teachers Retirement System… We’re hoping the governor at least makes progress. … There are a number of ways to approach it,” said Brent McKim, president of the Jefferson County Teachers Association.

As for whether the budget will fund teacher raises over the next two years, McKim said, “I leave that as a hope rather than expectation” because of the massive need for funding KTRS.

Pressures to fund the retirement systems, the soaring cost of Medicaid, the priority placed on public school funding by by most legislators, the requirement to staff prisons and fund public safety, could make for a difficult budget for higher education, which has seen funding cuts since the onset of the national recession in 2008.

Asked about expectations for the first Bevin budget, University of Kentucky spokesman Jay Blanton said, “The university has no comment at this time.”

After Bevin unveils his proposal, the General Assembly will have until April 15 to revise and pass a final budget.

Reporter Tom Loftus can be reached at (502) 875-5136 or [email protected].

READ MORE NEWS AND COMMENTARY ABOUT GOV. MATT BEVIN

2016-17 2017-18
AVAILABLE FOR NEW SPENDING $716.3 $673.5
1.REQUIRED ADDITIONAL EXPENDITURES
Teachers’ Retirement System, for pensions 520.4 488.9
Teachers’ Retirement System, for medical 10.0 17.5
Teachers’ Retirement System, other 24.2 0
Employees’ Retirement Systems, for pensions 60.0 60.0
Medicaid Growth (Non-expansion) 133.1 230.1
Medicaid expansion 62.3 149.3
Medicaid information system replacement 7.3 6.7
Schools: additional student count 37.2 26.4
Jail funding required by 2015 heroin bill 17.7 18.7
KEES merit scholarships 0.4 4.2
Corrections – more inmates 4.2 5.2
Corrections – higher medical costs 11.0 11.0
Debt service for promised school projects 12.3 18.5
SUBTOTAL $900.1 $1,036.5
FUNDING GAP -$183.8 -$362.9
2. SOME SMALL POSSIBLE ADDITIONAL EXPENDITURES
Base Schools Funding, 1% increase 33.0 58.0
Postsecondary Education, 1% increase 9.1 9.2
Employee health insurance, 1% increase 14.0 23.0
State employee salaries, 1% increase 6.0 14.0
State Police, 4 years of pension payments-Sick Leave Credit 3.2 0.0
Replacement of diminishing coal severance money 20.0 20.0
Fix imbalance in Judicial Branch Budget 10.0 10.0
Debt service cost per each $100 million in new bonds 0.0 8.8
SUBTOTAL $95.3 $143.0
TOTAL FUNDING GAP -$279.1 -$505.9