Top lawmakers open negotiations on new Kentucky budget

FRANKFORT, Ky. (AP) — Kentucky's legislative leaders warned Monday of the severe challenges to crafting a new state budget as the coronavirus shrinks state tax collections and inflicts other economic damage.

House and Senate budget negotiators began the task of seeking agreement on a two-year state budget — the centerpiece of their work in the days remaining in a legislative session shortened by the virus.

The conferees met as other lawmakers were back home for a weeklong break that will continue until they reconvene Thursday.

House Speaker David Osborne and Senate President Robert Stivers warned that a contracting economy due to efforts to contain the virus' spread will hurt tax revenue collections.

“We have a huge service economy that’s based on social interaction," Stivers said. “And the attempt to slow it (the virus) is based on social distancing. So it is clear to me that the numbers we have before us to budget to will not be as high, or even as close to as high” as previously projected.

The spending plan presented by Democratic Gov. Andy Beshear in January, and the version passed by the House in early March, were based on revenue forecasts made in late 2019.

Reflecting the new economic uncertainties, the Senate spending version passed last week includes “bumpers” that would stop certain spending increases if state revenues fall short of projections.

“We know that we are going to go into a downturn in our economy,” Stivers said Monday.

Lawmakers are hoping to get updated revenue projections to help them put the finishing touches on the new budget, Stivers said. The expected damage to the economy and tax receipts will impact the spending decisions, he said. The state's new fiscal year begins July 1.

“We have to go through this document with the knowledge that whatever may be in here may not be attainable because our revenues will not hit the goals that we were given" late last year, he said.

Osborne also said lawmakers are facing a new reality in constructing a budget.

“These are certainly times that will challenge us," the House speaker said. “They will require us to be creative, in some cases require us to be reactive. And I don’t think that’s always the best way in the world to make policy. ... But I think that certain times demand that.”

After the opening statements, the budget negotiators went through the differences in the House and Senate versions in starting the process of reaching compromises.

“I think, by and large, we can see that we're not different on the bulk of this thing," House budget committee Chairman Steven Rudy said as they reviewed the thick spending documents.

The negotiators wrapped up their opening session after about two hours and are expected to meet again before the full legislature reconvenes.

Under its abbreviated schedule, the GOP-led legislature will reconvene Thursday and then meet again April 1. They would return later that month to take up any vetoes by Beshear. Lawmakers have to wrap up their business by April 15.

A pay raise for Kentucky's public school teachers was among the many issues to be resolved.

Beshear's plan earmarked a $2,000 pay raise for teachers, fulfilling a key campaign promise last year. The House version provided a 1% pay increase in each year of the biennium for teachers but spread it to other school employees. Under the Senate's plan, school districts would have to tap into SEEK funding to cover teacher pay raises. SEEK is the state’s main funding formula for K-12 schools.

Beshear criticized the Senate proposal for its treatment of teachers and Medicaid.

“What I saw in that version of the budget was a cut to Medicaid, which we’re going to have more people on than ever,” the governor said last week.

Sen. Chris McDaniel, chairman of the Senate Appropriations and Revenue Committee, has said the Senate plan would not cut the benefits Kentuckians rely on. Instead, it would trim administrative expenses in the Medicaid program, he said.

The Senate budget also would put considerably more into the state’s rainy day fund — seen as a cushion as the state braces for economic damage from the virus.