Ryan Budget Big Cost for KY

Louisville Non-Profit Team Receives $100,000 to Develop Civic Engagement Plan

State’s Mental Health System Has Experienced Severe Funding Shortfalls

Discussion of the news that Seven Counties Services, a community mental health center in Louisville, plans to file for bankruptcy should include a look at the chronic lack of state funding for behavioral health over the last couple decades. The state’s community mental health centers have been hit by a combination of state General Fund budget cuts, frozen Medicaid reimbursements and the underfunding of pension liabilities.

In 1966, Kentucky passed legislation to implement President John F. Kennedy’s Community Mental Health Act. The state established local centers that provide treatment and recovery services for people struggling with mental illness and substance abuse and those with developmental and intellectual disabilities. The system serves 179,000 Kentuckians—or one in every 25 residents.

The centers rely heavily on state and federal dollars and have been deeply underfunded in recent years. Funding from the Department of Behavioral Health, one major source of support, goes primarily to provide services for low-income Kentuckians who cannot afford them. That stream of funding has not increased in 14 years, and thus has failed to keep up with inflation or the growth in demand for services—which has been especially high due to the bad economy.

A second critical source of funding is Medicaid. The Medicaid rates paid to community mental health centers have been frozen since 2001 based on 1999 cost estimates. On top of that, the state’s move to managed care in the Medicaid program—made in order to save money in the state budget—has increased administrative costs for the centers and resulted in lower revenues.

In addition to cuts and freezes, state funding is just low. In 2001, a state commission recommended that funding for the centers be increased by $25 million a year over 10 years so Kentucky could reach the national average in mental health funding, but the recommendation was never implemented. In its most recent report card, Kentucky was one of six states to receive a grade of “F” from the National Alliance on Mental Illness for its poor funding of behavioral health services. The state ranks 45th in per capita mental health services expenditures.

Also, mental health centers have gotten caught up in the state’s underfunding of its pension system in recent years. When the state didn’t make its full required payments to employees’ retirement in order to balance the budget with meager revenues, it only required that community mental health centers make the same partial payments. Lost investment returns resulting from the partially funded retirement system have compounded the liability.

The deep funding challenge in the state’s mental health system is another reason the revenue bill just passed by the General Assembly is sorely inadequate. That bill only generates $31.7 million in net new state funds, while the latest estimate of the additional dollars needed to make the full pension contribution totals $253 million.* A good portion of that extra needed money comes from quasi-public agencies—like the community mental health centers—that rely heavily on state dollars.

The story of Seven Counties and its pension funding challenge must trace the symptoms back to their source: Kentucky’s inadequate revenue and continued unwillingness to act on needed tax reform.

For more on Kentucky’s behavioral health funding challenges, read Dr. Sheila Schuster’s memo to fellow members of the Governor’s Blue Ribbon Commission on Tax Reform and this story in the Louisville Courier-Journal.

Kentucky Coal Production, Employment Plummet

“Kentucky Coal Production, Employment Plummet”

By James Bruggers

Higher Minimum Wage Is Good for Kentucky Workers and the State’s Economy

Raising the federal minimum wage to $10.10 an hour would lift the wages of over one in four Kentucky workers and add $546 million over three years to the Kentucky economy, according to a recent report by the Economic Policy Institute (EPI).

The report looks at how the Fair Minimum Wage Act of 2013 – which proposes to raise the minimum wage incrementally to $10.10 by 2015, index it to inflation and raise the tipped minimum wage to 70 percent of the regular minimum wage – would affect workers and the economy at national and state levels.

If the federal minimum wage had kept up with the average worker’s wage growth over the last four decades, today it would be $10.50 rather than $7.25.

The Fair Minimum Wage Act would directly benefit the 19 percent of Kentucky’s wage-earning workforce who make less than the proposed new minimum wage (336,000 people), and indirectly affect another 8 percent of Kentucky workers who make just above the new minimum and would receive a raise as employer pay scales are adjusted upward (144,000 people).

Who are these workers? The stereotype of middle-class teens making spending money does not reflect the reality that many families rely on income from low wage earners to make ends meet. EPI finds that, in Kentucky, the earnings of the low-wage workers who would be affected by an increase in the minimum wage make up over 50 percent of their total family income. 27 percent of those workers are parents, and 25 percent of the state’s children have at least one parent who would be affected by the wage increase. EPI also finds that, in Kentucky:

  • 89 percent of the potentially affected workforce are at least 20 years old.
  • 41 percent have at least some post-secondary education.
  • 57 percent are women.
  • 57 percent work full-time.
  • 82 percent identify as Non-Hispanic white.
  • As the report outlines, when working families are better able to afford goods and services, consumer spending increases and the economy experiences growth.

EPI estimates that raising the minimum wage as the bill proposes would increase earnings for 27 percent of Kentucky workers. Their annual wages would increase by $2,369 on average and $863 million in total. By 2015, Kentucky would see its GDP grow by $546 million and 2,200 jobs would be created. Nationally, the hike would impact 30 million workers, grow the GDP by $32.6 billion and create about 140,000 new jobs.

The numbers contradict the unsupported but common concern that raising the minimum wage leads to growth in unemployment. A growing body of research shows that higher unemployment is avoided through a variety of ways especially new organizational efficiencies, reduction in costs associated with turnover, reductions in wages of high earners, and minor price increases. In fact a large number of economists and businesses agree that raising the minimum wage is good for the workforce and the economy.

Kentucky wages are low and income inequality is high. Increasing the minimum wage would help many individuals and families, and benefit Kentucky’s economy overall.

See details on how Kentuckians would benefit here.

Note: Corrected on January 16, 2014.

Questions Linger on Pension Funding