Register Staff Report
The group of economists charged with predicting how much revenue Kentucky will have in the coming budget cycle approved a very modest revenue forecast for the next budget that’s slightly weaker than the preliminary forecast released in October. The estimate confirms that lawmakers will have scarce resources to meet basic costs in the new budget unless they also generate new revenue.
Compared to the October estimate, the new forecast shows $31 million less General Fund revenue in 2014, $14 million less in 2015, and $17 million more in 2016, for a net reduction of $28 million. The forecast predicts that General Fund revenue will grow by 2.6 percent in 2015 to 9.8 billion and again by 2.6 percent in 2016 to $10 billion. That means $246 million additional dollars the first year of the new budget and $252 million the second.
Continued slow economic growth is a major factor driving the modest revenue receipts. With the economy still in recovery from the Great Recession, sales tax growth is sluggish. After several years of strong growth due to high corporate profits, the forecast expects corporate income tax receipts to grow slowly and then decrease as businesses begin re-investing profits in production. Revenue from coal severance, cigarette, and limited liability entity taxes are expected to level off or even decline.
The $246 million in new revenue for 2015 won’t be enough to cover even basic costs in the budget much less re-invest in education, health, human services and other areas that have been cut deeply in recent years. The state needs $157 million to fill the hole created from the use of one-time money in last year’s budget, $100-$120 million to make the full payment to the state employees’ retirement system (not counting teachers’ retirement) and $100-$150 million to pay for cost growth in Medicaid.
On top of General Fund problems, as a result of a recent arbitration ruling that Kentucky did not uphold part of the Master Settlement Agreement in 2003, the state expects its 2014 tobacco settlement payment to be just $45 million, half of what was budgeted for the year. That will likely mean cuts to the agricultural, early childhood and health programs that tobacco settlement monies fund. Pending the outcome of further arbitration, the 2016 payment could also be reduced.
Kentucky’s official revenue estimate for 2014-16 casts an even longer shadow on what was already a dark outlook for the 2014-16 Budget of the Commonwealth. Without new revenue, the General Assembly will have to further cut services that Kentucky relies on to maintain our quality of life and strengthen our economy.
The state’s most recent accountability report for higher education—released this week—shows some progress in many areas but big challenges in college affordability and in addressing postsecondary degree attainment gaps for low-income and underrepresented minority students.
The Council on Postsecondary Education’s annual report, “Stronger by Degrees: A Strategic Agenda for Kentucky Postsecondary and Adult Education, 2011-2015,” tracks Kentucky’s progress in meeting higher education targets the state has set for 2015. Progress is measured according to 27 indicators, which fall into four categories: college readiness; student success; research, economic and community development; and efficiency and innovation.
Although the state has experienced some improvement, it is either on track to meet its target or has already met its target in only eight of the 27 indicators: college readiness of all high school graduates; total degrees and credentials; graduate degrees conferred; transfer from Kentucky Community and Technical College System (KCTCS) to four-year colleges and universities; associate graduation rate for low-income students; degrees and credentials in Science, Technology, Engineering, Mathematics and Health (STEM + H) fields; and on-line learning.
The higher education system is clearly making progress in helping Kentuckians obtain bachelor’s and graduate degrees, including in STEM fields. However, the overall picture for low-income and underrepresented minority students is not rosy.
Most troubling of all is the huge lost ground in bachelor’s graduation rates for low-income students since 2009. The bachelor’s graduation rate for low-income students was 46.2 percent in 2008-09 but dropped to 34.5 percent by 2010-2011—where it remained in 2011-2012. The state is also not on track for its targets for bachelor’s graduation rates for underrepresented minority and academically underprepared students. In contrast to Kentucky’s overall bachelor’s degree graduation rate of 48.2 percent in 2011-2012, the bachelor’s graduation rate for underrepresented minority students that year was 33.6 percent and for underprepared students was 28.6 percent.
In addition, although the state is currently on track to reach its target for the associate graduation rate for low-income students, the graduation rate for these students is still substantially lower than the rate for all associate degree students. The associate graduation rate for low-income students was 11.7 percent in 2011-2012—up from 10.9 percent in 2010-2011—but the associate graduation rate for all Kentucky students in 2011-2012 was 13.1 percent. Also, the state is not on track for associate graduation rate targets for either underrepresented minority students or students who are academically underprepared. The 2011-2012 associate graduation rate for underrepresented minorities is just 7.7 percent and the rate for academically underprepared students is 8.9 percent.
These gaps in higher education attainment for low-income and underrepresented minority students are most certainly shaped by the state’s limited funding for higher education, which has resulted in steep rises in tuition. As the report shows, funding per full-time equivalent student was $1,029 in 2009-2010 and declined to $916 in 2012-2013 (adjusted for inflation). And this decline in state funding extends back further in time. The state’s appropriation to public postsecondary institutions in 2010 was 14 percent lower (in inflation-adjusted terms) than in 2000.
This trend in declining state funding has meant increased tuition and fees for students, which surpassed state funding as the largest source of revenue for the state’s public colleges and universities in 2010.1 Since 1998, tuition at Kentucky’s public higher education institutions has increased by more than 200 percent, and rising costs are particularly problematic for low-income students. Financial barriers are among the most significant in preventing low-income students from enrolling in college or completing a degree.
Unfortunately the state’s financial aid system can do very little to mitigate the skyrocketing costs of college for Kentucky students as its scholarship programs are underfunded as well. The “Stronger By Degrees” report shows that 96,666 Kentuckians who applied for and are eligible for need-based aid in 2012-2013 were denied assistance because funds were exhausted—an increase of nearly 42 percent from 2009-2010. The report also indicates that financial aid is making less of a difference in paying the full costs of college in Kentucky; since 2009-2010 low-income students have had a declining amount of grant and scholarship aid—after paying for tuition, fees and books—to help pay indirect costs like room and board and transportation.
In order for our state to address the higher education attainment gaps for low-income and underrepresented minority students, greater funding is needed both for our state’s public higher education institutions and its financial aid system—particularly for need-based financial aid. By making college less affordable for many Kentuckians—particularly low-income and underrepresented minority students—the state is discouraging them from getting the skills they need to obtain decent employment or putting them deep in debt, both of which harm our economy.
- Lora Littleton, Tosha Fraley, Jessica Sapp and Mike Clark, “Cost and Funding of Higher Education in Kentucky” (Draft), Legislative Research Commission, December 11, 2013. ↩
By Phillip M. Bailey
53,000 long-term unemployed Kentuckians will lose crucial income support in the next year if Congress does not reauthorize Emergency Unemployment Compensation (EUC), according to a recent report by the Center on Budget and Policy Priorities.
Created during the Great Recession and extended under the American Taxpayer Relief Act, EUC has increased the number of weeks Americans can collect unemployment benefits while they look for work in the still-sluggish economy. If EUC is allowed to expire on December 28, 2013, Kentuckians who have been unemployed for more than 26 weeks will lose assistance immediately. By December of 2014, 53,000 long-term jobless Kentuckians will not have access to unemployment benefits.
The looming expiration comes at a very difficult time for the nation’s unemployed. As of September, the average length of unemployment was 36.9 weeks, 20 weeks longer than before the recession. More than one in three unemployed Americans have been without a job for more than six months—close to the historic high—and there are still three job-seekers for every one opening. In October, Kentucky still had 98,100 fewer jobs than it needs to return to pre-recession employment levels.
Removing benefits will not only hurt the Kentucky families who rely on the support, but will also harm the economy by taking money out of families’ pockets, reducing consumer demand. The Economic Policy Institute estimates that the U. S. will shed an additional 310,000 jobs in 2014 if unemployment benefits are not extended.
This end to benefits would come on top of existing cuts: between October 2011 and October 2013, the length of time an unemployed Kentuckian could receive benefits decreased by 36.4 percent. The federal sequester cut weekly benefits by about $39. Recent reductions in SNAP benefits and the sequester’s impact on other crucial supports such as low-income energy assistance and child care subsidies are also hurting Kentucky’s most vulnerable citizens.
Reauthorizing emergency unemployment compensation is the least Congress can do to keep from harming a fragile recovery.
*Blog updated to reflect new information about the number of Kentuckians affected by the EUC expriation and the Kentucky jobs deficit.