Kentucky leaders break budget impasse, reach agreement

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FRANKFORT, Ky. (AP) — Kentucky's legislative leaders agreed to a two-year operating budget early Thursday that promises to pay the community college tuition for all Kentucky high school graduates while spending more than $1 billion on the state's public pension debt.

House and Senate leaders announced the agreement shortly before 3 a.m. Thursday, the culmination of weeks of secret meetings punctuated by political breakdowns that threatened to shut down state government.

The agreement must still be approved by the full state legislature by midnight Friday night, but leaders of both chambers said they expected to have plenty of votes to pass it. Republican Gov. Matt Bevin and his veto pen will have the final say on the deal. Because lawmakers waited until the last day to reach a deal, they forfeited their ability to override any potential vetoes.

Both sides agreed to major concessions. House Democrats agreed to cut spending on public colleges and universities by 4.5 percent over the next two years. They also agreed colleges and universities will have to compete for a certain portion of their state funding beginning in 2017 under a new system that rewards institutions who do things like produce more graduates. The cuts do not apply to Kentucky State University, which is weathering its own budget crisis.

In return, Senate Republicans agreed to spend $25 million over the next two years on a program that promises to give free community college tuition to all Kentucky high school graduates. Students would have to take a minimum of 15 credit hours a semester and maintain at least a 2.5 grade point average to keep the money. Officials at the Kentucky Community and Technical College System expect the program, if it survives the governor's veto pen, will help offset some of the 4.5 percent cuts to its system of 16 colleges.

The two-year spending plan does not include money to hire more public defenders and social workers, two things Bevin had recommended in his budget proposal. But it does put more than $1 billion toward the state's public pension debt, estimated at more than $30 billion placing Kentucky among the worst funded pension programs in the country. And it includes a separate "permanent fund" of money that can only be spent on the pension system upon the completion of a state audit.

"That's higher than pensions have ever been funded," said Republican Sen. Chris McDaniel, chairman of the Senate's budget committee.

In a news release, Bevin said he looks forward to reviewing the details of the compromise. He praised lawmakers for addressing the state's pension problem, an issue that was a major part of his campaign for governor.

"For the first time in decades, we can say that Kentucky is investing in our pension system in a meaningful way," Bevin's office said in a statement.

The budget also significantly increases the registration fees for lobbyists that help fund the Executive Branch Ethics Commission, the agency charged with holding the Bevin administration accountable to state ethics laws. Republican Senate President Robert Stivers said the increase is enough money to overcome a shortfall the commission's executive director warned would cripple the agency. Bevin, however, vetoed a bill last week that contained similar language.

No K-12 education programs were cut. And all constitutional officers, including the Democratic Attorney General who is embroiled in a lawsuit with Bevin over current-year cuts to colleges and universities, would be cut close to 4.5 percent. The cuts would not affect the duties of each office as set forth in the state constitution.

The budget does not eliminate public funding for Planned Parenthood, as the Senate Republicans had tried to do. And it preserves the prevailing wage, the law that sets wages for construction workers on public projects, often higher than they would receive in the private sector.

Stivers and Democratic House Speaker Greg Stumbo said they did not seek assurances from Bevin that he would not veto portions of the proposal. Bevin, a Republican, has vowed to help his party take control of the House of Representatives in the fall elections, the last legislative body in the South still controlled by Democrats.

Stumbo said he hoped Bevin would consider the hard work both sides put in to reaching an agreement.

"I would hope he would bear in mind that it took a great deal of effort for us to get here given how far we were apart, both monetarily and philosophically," Stumbo said. "I would be surprised if he has a lot of objections to what's contained therein, but who knows."


This story has been corrected to say the budget deal was announced shortly before 3 a.m. Thursday.

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