FRANKFORT -- Since the onset of the Great Recession in 2008, Kentucky governors have struggled to propose state budgets that funded state pensions without cutting money for public schools and other state priorities.
The next Kentucky governor will face the same daunting challenge.
"The next budget will be as tight as the ones we've had in recent memory, if not worse. We're seeing low revenue growth because of tax cuts that were passed and rising expenditures for pensions and many other areas," said Jason Bailey, executive director of the Berea-based Kentucky Center for Economic Policy.
Public pronouncements of the two candidates for governor -- Republican incumbent Matt Bevin and Democratic challenger Attorney General Andy Beshear -- offer little assurance that either will come up with money to both fully fund pensions while taking any significant step toward restoring education funding to pre-recession levels.
Beshear's plans, which includes an expensive promise to raise teacher salaries by 2%, rest almost entirely on his promise to pass casino gambling. Many key members of the legislature's Republican majority say that has no chance.
Bevin, who in his first term fully funded pensions at the cost of cutting education and other areas, promises a comprehensive tax reform. Bevin has been promising that since his first campaign for governor four years ago and has yet to reveal that plan, much less pass it through the legislature.
The campaigns of each candidate declined requests from The Courier Journal for interviews.
Both promise full pension funding
In January the next governor must reveal exactly how he plans to deal with the money problem when he is required to propose a state budget for the period between July 1, 2020, and June 30, 2022.
The team of economic experts that projects future state revenues last month released a somewhat pessimistic forecast that called for slightly more than 2% annual growth in the state's $11.6 billion General Fund revenues for that period.
That gets you about $250 million each year in new revenue. But most of that seems sure to be consumed by existing commitments.
Both Bevin and Beshear promise to fully fund pensions, and pensions will cost more in the next two years.
Kentucky Retirement Systems has adopted an assumption that retirees will live longer -- which means it must anticipate sending pension checks for many more months to each retiree. This move alone is likely to cost about $37.5 million more per year from Kentucky's General Fund, said Chris McDaniel, chairman of the Senate budget committee.
The Teachers' Retirement System has estimated it will need about $20 million more next year for full funding, and that figure could go up.
There's another big anticipated cost for the Kentucky Teachers' Retirement System. The state budget traditionally has paid health insurance for a certain segment of retired teachers -- those who retired after June 30, 2010, but are under age 65. This expense is not being paid by recurring tax revenues this year but by part of a one-time surplus available at the end of the 2018-19 fiscal year.
To fund this in the next budget will cost about $70 million per year.
Both Bevin and Beshear promise to fund the school safety bill that lawmakers passed with great fanfare early this year while deferring the decision on how to pay for it until 2020.
No cost estimate for that has been released, but it will be big if lawmakers decide to pay for both the personnel (more counselors and school resources officers) and construction and equipment costs required by the bill.
Needs across the rest of state government are substantial: Social workers are overwhelmed by high caseloads in a state where the rate of child abuse and neglect is the highest in the nation, The Courier Journal recently reported.
McDaniel, a Taylor Mill Republican, says he expects two big budget items -- Corrections and Medicaid -- will require more funding.
State universities have endured a decade of funding cuts and responded with tuition increases. And state employees haven't had a raise in four years, and eight of the past 10 years.
And then there's the University of Louisville request for a $50 million loan of state funds for the takeover of Jewish Hospital.
"It's going to be a lot tighter than people realize," McDaniel said.
His counterpart in the House, Chairman Steven Rudy agreed. "Pensions are going to eat up the budget for the foreseeable future," said Rudy, a Paducah Republican. "Everything that we do will be based on how much that continues to eat up."