FRANKFORT, Ky. (AP) — Kentucky lawmakers wrapped up work Wednesday on the state’s next two-year budget, approving big pay raises for state employees and increased spending on education while setting aside large sums to offset expected personal income tax cuts.
The spending plan — the result of negotiations among leaders of the Republican-dominated legislature — won Senate and House passage with bipartisan support. The votes sent the state’s preeminent policy document to Democratic Gov. Andy Beshear.
The governor can make line-item vetoes to the spending bill, but lawmakers retain their override power if they pass it before starting their extended “veto period” break. They will reassemble in mid-April for wrap-up work before ending this year’s 60-day session.
In crafting the budget, Kentucky legislators had the luxury of massive revenue surpluses, fueled by the state’s strong economic recovery from the COVID-19 pandemic and the influx of federal pandemic aid. Republicans touted the budget measure’s spending for education, public pensions, infrastructure and state park renovations.
“This is a great budget that makes needed investments in the commonwealth,” said Republican Sen. Phillip Wheeler, adding that the benefits would be spread across the state.
Democrats voting for the bill pointed to what was left out — mandated teacher pay raises and the governor’s proposal to fund universal pre-K for every 4-year-old in Kentucky. Sen. Morgan McGarvey, the chamber’s top-ranking Democrat, called it a “missed opportunity” to do more.
Left unspent in the budget was about $1 billion set aside to offset expected cuts in the state’s individual income tax rate, now at 5%. The legislature passed a measure Tuesday aimed at gradually phasing out individual income taxes in Kentucky. The first rate cut could come as soon as Jan. 1, 2023, said Senate Appropriations and Revenue Committee Chairman Chris McDaniel. The tax rate could drop by a half-percentage point at a time if financial targets set in a formula are achieved.
McGarvey said that money could have gone into education, including universal pre-K.
That spurred a quick response from Republican Senate Majority Floor Leader Damon Thayer, who said: “Just because we have a surplus doesn’t mean we have to spend it all. We have to remember where this money comes from. It comes from the taxpayers.”
In touting his plan to fund pre-K for every 4-year-old, Beshear tweeted this week that “not only will this help set our kids on a path for success, it will also help our families through child care.” The governor is likely to make it an issue when he runs for a second term next year.
Beshear’s pre-K proposal never gained traction in the legislature. Republican Sen. Danny Carroll said Wednesday that the governor’s plan would “decimate” the child-care industry in Kentucky.
Meanwhile, the budget voted on Wednesday pumps money into renovating state parks and the state fairgrounds. It supplies public pension systems with extra cash to help pay down unfunded liabilities. Lawmakers funded full-day kindergarten, fulfilling a request from school districts.
The budget would increase per-pupil funding under SEEK, the state’s main funding formula for K-12 schools. The amount would go to $4,100 in the first fiscal year and $4,200 in the second year. The current amount is $4,000.
In making the case for more education spending, McGarvey said: “In inflation-adjusted terms, we are still spending less on education than we did before the 2008 recession.” Beshear proposed raising per-pupil the amount to $4,300 in the first year and to $4,500 in the second year.
Under the legislature’s spending plan, state employees would receive a pay raise of at least 8% in the first year of the two-year cycle. State police troopers and social workers are among those in line for even bigger pay raises. The bill sets aside enough money for a 12% salary boost in the second year. Specific raises for state workers in the second year would be based on a Personnel Cabinet study factoring in cost of living, job duties and other variables.
Democratic Sen. Reginald Thomas said the pay raises should have extended to teachers, noting that “we have the money” to do it. Wheeler responded that local school boards can choose to use their extra state funding to give teachers pay raises.
“We’ve given the maximum flexibility for our districts to reward our educators, and I hope they do,” Wheeler said.
The newly-approved budget leaves about $1.75 billion in the state’s budget reserve trust fund — a cushion against any economic downturn.
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