House Budget plays with Kentucky's future
Now that the House budget proposal has been out for a few days, we’re starting to see the extent to which the House contorted numbers and ideas to avoid having to support real reforms.
The budget does a couple of things that are not bad. It puts some much needed money into community health centers and services like Meals on Wheels, and starts to fund the Boni Bill, a bill that passed in 2007 to increase the protections of social service workers. This funding is good and necessary. But in addition to the cuts to higher ed, adult education, the school year and teacher pay, and services that we need, the budget does many things that show a lack of leadership by playing with our future instead of solving our problems of today.
The budget includes $74 million dollars that is the result of moving the one paycheck for state workers back one day, from June 30, 2012 to July 1, 2012. This way, the $74 million dollars is technically part of the 2012-2014 budget cycle. This little nugget was slipped in to the 238th page of the House budget proposal. It didn’t make any headlines, but was embedded in a Herald-Leader article about the House’s proposal to halve the salary of Economic Development Secretary Larry Hayes.
It’s an important little nugget, though, because it shows the acrobatics that legislators were willing to perform to avoid taking up real solutions. A budget that’s "balanced†because it pays state workers the day after the budget cycle? It doesn’t inspire confidence, does it?
This shell game is also exactly the kind of game that jeopardizes Kentucky’s credit rating. Kentucky is already on the watch list of some of these credit rating agencies, both because of our policy makers’ failure to pass sustainable revenue reforms, and because of our dependence on a manufacturing economy. Moody’s is one such agency. When their analysts look at Kentucky, they don’t see a credible borrower. According to a memo from the Legislative Research Commission in September of 2009, Kentucky's leadership should be very concerned about what credit ranking agencies are seeing when they look at Kentucky. Here are the pieces of evidence they see:
Our lack of leadership predates the recession. The LRC ehoes credit agencies' concern that Kentucky depends on one-shot, nonrecurring revenue sources to fund services and programs that we rely on every year. Eventually, the smoke and mirrors aren’t going to be able to hide the ever-worsening real-world gap between the revenue the state brings in and the cost of the services that we need.
Kentucky is still bending over backwards to bring in manufacturing, which is not as good of an investment as it was fifty years ago, as we move toward a technology and knowledge-based economy. This dependence, according to credit agencies, jeopardizes our standing as a worthwhile investment.
Credit agencies and analysts maintain that states should evince some good faith effort toward keeping themselves financially secure. Part of that effort is having a Rainy Day Fund, money reserved for emergencies. Here, too, Kentucky falls short. Leaders haven't adequately funded our Rainy Day Fund since 2001. Our Rainy Day Fund is supposed to be between 3 and 5 percent of our General Fund revenue. Kentucky’s is 0%, according to the September '09 LRC memo. We have no Rainy Day Fund.
These pieces of evidence aren’t good, and they've caused Kentucky's rating to slip from stable to negative. It's true that many states are in uncertain times. But it's also true that thirty-three states have done something to raise the revenue they need to pull themselves through. Oregon, for example, just passed a tax increase on income above $125,000.
Kentucky, on the other hand, is going in the wrong direction. The House budget would make Kentucky even more vulnerable. If the debt in that budget passes—the debt that replaces the real revenue reforms that Kentucky needs—the credit rating agencies will also see these pieces of evidence:
- <!--[if !supportLists]-->Kentucky will have taken on $2380 in debt for every man, woman, and child in our commonwealth, according to the Legislative Research Commission.
- According to the LRC, Kentucky’s debt as a percentage of our revenue will shoot up to 7.43%. It’s supposed to stay below 6%. When it gets too high, it sends another message to credit agencies that we’re not putting forth a "good faith effort†to generate revenue.
Why does this matter?
Because when Kentucky doesn’t look credible to lenders, we pay higher interest rates. Those higher rates cost taxpayer dollars, dollars that most folks would rather see put toward smaller class sizes and clean water. Kentucky's budget has had nine rounds of budget cuts since early 2008 for most public services, and these on top of chronic underfunding of these services and programs.
We can't afford the borrowing in the House budget, but we can't afford the cuts, either. Cutting school days from the calendar and adult education resources doesn't put Kentucky in a position to move forward.
The House had a choice. It could have chosen to invest in Kentucky's people by sending money back to the pockets of working families who are struggling with a state EITC, and by raising the revenue that we need. Instead, it chose to play games with our future.
Take Action
Write a letter to the editor supporting tax and revenue reforms that fix our broken system. You'll find helpful tips and links to lots of local papers here, on an earlier blog entry. Writing these letters is valuable and easy! Feel free to post your letter in the comments section so others can see your letter here.
Call House and Senate Leadership, Senator Leeper, and your legislators and leave a message in support of a budget with fair and adequate reforms.
Call the Legislative Message Line, 1-800-372-7181 (7am-11pm M-F of this week) and ask to leave a message for House and Senate Leadership and your own legislators (if you don't know their names, the operator can look them up for you). Leave a simple message like "This budget process is taking Kentucky in the wrong direction. I support the fair and adequate tax reforms in HB 13 as solutions that will move Kentucky forward.â€
Contact Governor Beshear in support of a budget with fair and adequate reforms. Call him at (502) 564-2611, or email him through this link. You can use the same message: "This budget process is taking Kentucky in the wrong direction. I support the fair and adequate tax reforms in HB 13 as solutions that will move Kentucky forward.â€
And feel free to share your thoughts about the House budget below!
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