Veto-proof budget includes health-departments pension reforms, no money for health-related proposals made by governor

By Melissa Patrick

Kentucky Health News

Kentucky legislators have sent Gov. Andy Beshear a conservative one-year budget, wrapping up the second half of what is normally a two-year spending plan that was adjusted last year out of concern for the looming financial impact of the novel coronavirus pandemic. 

Rep. Jason Petrie discusses the state budget in the House.

The Democratic governor can veto line items in the budget, but the vetoes would likely be overridden by the supermajorities of Republicans in the House and Senate; only a majority is needed to override.

House Bill 192, sponsored by Rep. Jason Petrie, R- Elkton, which holds the budget, passed the Senate 30-0 with six members passing. The House vote was 74-21, largely on party lines. 

The budget does not include money for the many health-related items that were in Beshear's proposal, it does include money for one: pension reform for health departments and quasi-governmental agencies.

The nuts and bolts of the reform are  in HB 8, sponsored by Rep. Jim DuPlessis, R-Elizabethtown. It was delivered to Beshear March 12 after passing both chambers unanimously. A similar bill passed the House last year, but was not heard in the Senate.

HB 8 calls for the agencies to pay only what they owe the Kentucky Employees Retirement System to cover employees' pensions, not the current percentage-of-pay formula. The entities would have 30 years to pay off their unfunded pension liability, using a set cost they can include in their budgets. 

At a February committee meeting, DuPlessis explained that the percentage-of pay formula keeps employers from paying their employers better, reduces services, and encourages employers to hire fewer employees and to instead hire contract workers, which further exacerbates the problem.

Lawmakers froze pension contribution rates for health departments, regional universities and quasi-governmental agencies at 49.47% of payroll, but that rate is set to jump July 1 to 85%, a rate that is not sustainable for many of them; for every dollar an employee is paid, the agency must pay 85 cents in pension cost.

Going forward, health departments and quasi-governmental agencies will make two payments, one based on a fixed amount to cover their past unfunded pension liability and another for their current employees, based on a percentage of payroll, currently around 10%. 

The budget provides about $25 million in state funds to subsidize health-department pension payments. DuPlessis told a Senate committee in March that about six health departments would need to be subsidized to meet their new pension requirement. 

One reason given for such a conservative budget is that the state is expecting to receive $2.4 billion from the American Rescue Plan and detailed guidance on how it can be spent has not been issued. Other federal-relief money will go directly to cities, counties and school districts.

The budget gives the legislature final say on how the relief money is to be spent. HB 405, also sent to Beshear, includes a provision that would fine the state's budget office $902,2000 if Beshear spends any of the federal money without the legislature's approval.

Legislators and Beshear are discussing how the relief money should be spent, and could agree on legislation that could still be passed on the last two days of the legislative session, March 29-30.  

The legislature took very little from Beshear's budget proposal. One example: He proposed adding $100 million to the state's "rainy day fund," a reserve that can be used when revenue falls below expectations, but legislators put more than $600 million, increasing it to more than $1 billion.

Beshear's budget also had additional money for health departments, 76 more social workers and full-time mental health staff at schools, more to help people with intellectual or developmental disabilities and fully fund Medicaid. None of these health-related items were included in the legislature's budget. 

Here are some of the health-related provisions in the budget: 

From the Tobacco Settlement Fund: 

• $500,000 for a rural mental-health and suicide-prevention pilot program
• $900,000 for The Healing Place, an addiction recovery program
• $7 million for the Health Access Nurturing Development Services Program (HANDS)
• $965,000 for Healthy Start initiatives (up from $942,000 this year)
• $965,000 for early childhood mental health (up from $942,000 this year)
• $1,013,200 for early childhood oral health (up from $989,100 this year)
• $2 million for smoking cessation, much less than advocates want

From the General Fund: 

• $1.9 million for the Kentucky Poison Control Center, which operates the Covid-19 hotline. The budget notes that $750,000 has been allocated for the center and says that if federal funds become available for any Covid-19 expenditures, they must be used to do so and any state-budgeted money that is not used would return to the General Fund. 
• $500,000 for the Kentucky Colon Cancer Screening Program
• $2.5 million to the Kentucky Pediatric Cancer Research Trust Fund
• $500,000 for ovarian cancer screening
• $93,700 each for grants to the Brain Injury Association of America, Kentucky Chapter and the Epilepsy Foundation of Kentuckiana to help veterans who have experienced brain trauma.
• $16 million in state funds and $59 million in federal funds for additional Medicaid reimbursement of $29 per day to nursing homes through Dec. 31. This money is intended for coronavirus pandemic relief.