Story by Nick Kendall
Contributing writer
Kentucky ended the 2018 Fiscal Year on June 30 with a significant budget surplus.
Gov. Matt Bevin, Senate President Robert Stivers and House Speaker David Osborne announced the surplus on Thursday, July 11.
According to data released by the office of the state budget director, Kentucky’s FY19 General Fund revenues exceeded estimates by $194.5 million. The Fund hit an all-time high, exceeding the previous year’s revenues by more than $550 million.
“Our strong finish this fiscal year shows that Kentucky’s forward-thinking economic policies are working for Kentuckians,” according to a press release by the governor’s office. “This is the kind of positive, incremental growth that will sustain the Commonwealth and allow us to continue providing vital public services, while meeting our obligations to state employees by fully funding our pension systems.”
The state budget office attributes the revenue growth to economic development efforts and tax reform policies, including an increased tax on cigarettes from 60 cents per pack to $1.10 that took effect in 2018.
“This surplus is evidence that the policies we adopted are paying off for the Commonwealth,” Osborne said. “We have lowered personal income taxes, broadened the tax base and as a result we are seeing positive results in both revenue growth, job creation and economic investments. It is equally telling that the surplus is already committed to paying off our obligations in order to keep our state on the path to prosperity.”
The 2018-20 state budget bill outlined how excess funds would be used. The bill stated that the first use of funds would be to cover necessary goverment expenses incurred by the state but were not budgeted for, such as natural disasters or emergencies.
Lawmakers later added a provision to the bill stating if there were any excess funds as of June 30, they would provide funds to the Retired Teachers Health Insurance Plan and the Kentucky pension system.
Kentucky’s pension system is more than $43 billion in debt.
Bevin told reporters in May that a new pension bill was ready for discussion in a special session.
Lawmakers passed a pension bill in March but it was later vetoed by Bevin because it had parts “that were illegal” as well as incorrect dates.
Bevin met with university presidents, including Murray State President Bob Jackson earlier this summer to discuss the proposed bill.
Beginning July 1, universities, including Murray State, and other so-called quasi-governmental agencies saw pension costs dramatically increase for the Kentucky Employee’s Retirement System from 49.47% to 83.43%, according to the KRS website.
“This major increase on July 1 equates to an additional $4 million expense in the university’s budget,” Jackson said. “This pension rate is unsustainable and places tremendous pressures on our budget and greatly impacts all areas of the university. We are looking at potential options to mitigate this pension liability exposure.”
To put the 83.43% pension costs into perspective, Jackson said Murray State was paying a KERS pension rate of 10.01% in 2009.
How much of the General Fund surplus will be allocated to the pension system was not released.
House Majority Leader John “Bam” Carney, R-Campbellsville, said the special session is expected to start on July 19 but that it can only be called by the governor.
Jackson and other university presidents will be keeping a close eye on the special session, if called, to see what, if any, relief the proposed pension bill could provide to the already strapped institutions.
