by Nora Kelly
by Jonathan Greene
by Jacob Ryan
by Linda Blackford
Kentucky is one of the worst states when it comes to elementary and secondary education funding cuts since 2008, according to a report released today by the Center on Budget and Policy Priorities, a nonpartisan policy research organization based in Washington, DC.
Kentucky is 10th worst in the country when it comes to overall state K-12 funding cuts between 2008 and 2014, with a decline in per student funding of 12.1 percent once inflation is taken into account. The state ranks 6th worst when it comes to cuts in its core formula funding for local schools – which in Kentucky is known as SEEK – with a decline of 10.6 percent from 2008 to 2016. The state is also one of only 12 states that continued to cut education funding this current fiscal year.
This erosion in support has damaging consequences that threaten the quality of education and the state’s economic growth.
“A well-educated workforce is critical to growing the state’s economy,” said Ashley Spalding, research and policy associate for the Kentucky Center of Economic Policy. “By reducing investments in K-12 education, we are not only short-changing Kentucky’s kids but also the state’s future.”
State funding amounts for K-12 education in Kentucky have been relatively flat since the recession – and SEEK funding even increased some in the last budget – but once growth in the number of students is factored in along with inflation, these appropriations are experienced as cuts.
Declining state investment makes it difficult for Kentucky to reach the high academic goals it has set. Poorer school districts feel the state budget cuts particularly hard as they are less able to make up for cuts with local property taxes.
“At a time when the nation is trying to produce workers with the skills to master new technologies and adapt to the complexities of a global economy, states should be investing more — not less — so our kids get a strong education,” said Michael Leachman, director of state fiscal research at the Center on Budget and Policy Priorities and co-author of the report released today.
The Center’s full report can be found here.
by Bryce Covert
More than 800 Kentucky workers have benefited across the Commonwealth because of the executive order raising the minimum wage for state workers and contractors signed last summer by outgoing Gov. Steve Beshear.
In July, Gov. Beshear raised the minimum pay for state workers to $10.10 an hour and the tipped minimum wage to $4.90 an hour. Additionally, Beshear required those who contract with state government to pay a $10.10 minimum wage to their employees, although such measures wouldn’t take effect until contracts are renewed.
There are currently 68 counties with state minimum wage workers now making $10.10 an hour with counts ranging from 1 to 73 employees per county. At 463, the department for Natural Resources accounts for over half of all state-hired minimum wage workers, many of whom are hired on as wildfire fighters in eastern Kentucky during the dry months, according to officials in the Personnel Cabinet. The next largest group of workers is the Department of Veterans Affairs and the Department for Behavioral Health, Developmental and Intellectual Disabilities which employ a combined 145 minimum wage caretakers. Perry County is home to the most minimum wage workers at 73, followed by Jessamine County with 64, Christian County with 47 and Hopkins County with 42. The overall price for the minimum wage increase was estimated to be $1.6 million or .005 percent of the state budget for 2015.
Source: KCEP analysis of Personnel Cabinet data provided November 24, 2015
Worker productivity has climbed in Kentucky by over 42 percent since 1979, but hourly compensation has only grown 4 percent over that time. While jobs have grown since the recession, wages have remained stagnant. There is growing support for a private sector minimum wage increase to bring hourly compensation closer in line with the productivity gains the state has seen. In the meantime, state government should continue to lead by example by paying a fair wage to Kentucky workers.
The taxes we pay in Kentucky are invested in things that make us stronger together like schools, libraries, roads and parks, to name a few. When we all chip in, we share the benefits of an educated, healthy workforce and thriving communities.
But due to an ever-expanding set of special interest carve-outs, we have less to invest. In fact, tax breaks are growing so big in the Commonwealth that the money we leave on the table through various exemptions, exclusions, deductions and credits surpasses the revenue we collect from all people and businesses – an estimated $12.2 billion in tax breaks versus $10.3 billion in revenue in 2016.
That cost estimate comes from the state’s recently released tax expenditure report, a vitally important but rarely acknowledged document detailing all of Kentucky’s tax breaks. It was released at the end of November with little ado.
As we head into the 2016 budget session of the General Assembly with lawmakers scrambling to balance a budget with too little revenue, it’s time we begin looking at the billions we leave untouched in tax breaks – $25.7 billion over the coming biennium – and ask whether some part of that money might be better spent.
According to data from the budget office, the state will need hundreds of millions of dollars more than we expect in new revenue in the next two years just to pay for growth in school population, inflation across state services and pension obligations. That doesn’t include additional investments to restore past budget cuts or improve services. But in the context of tens of billions in lost revenue from tax breaks, the dollars it will take to meet our basic needs and to start living up to our potential is not out of reach.
Simplifying our taxes by limiting tax breaks would give us more revenue to invest in the things that make Kentucky a good place to live, work, raise families and do business. On the other hand, the idea that more and more tax breaks make us attractive compared to other states is misguided, race-to-the-bottom logic: in practice, too many tax breaks erode investments in the very building blocks of a strong economy and prosperous communities.
In addition to reducing or eliminating specific breaks that aren’t cost-effective and beneficial to the state as a whole, lawmakers should also routinely evaluate all tax breaks. Renewal should be based on results, instead of the current practice of adding them to the tax code where they remain for good (or bad). The current lack of scrutiny on tax breaks is a double-standard: even though they have the same effect on our budget as direct spending, they aren’t weighed against budgeted priorities like K-12 funding, community mental health centers and aging and independent living supports. That is why we continue to cut budgeted services – 14 rounds of cuts in this state since 2007 – even as tax breaks proliferate.
The tax expenditure report is an important tool. In a sense, it’s a menu of tax reform options at lawmakers’ fingertips. By speaking up about how we do better when everyone chips in, we can encourage Frankfort to clean up the tax code and allow us to better invest in the things that make us strong.
So pick up the report, tell a friend, write a letter and make a call: I want to live in a Commonwealth where we prioritize investments in our shared prosperity over hidden tax breaks that get little or no scrutiny.
Those advocating to scale back Kentucky’s highly-successful Medicaid expansion cite a concern about its cost to the state. One way to help buffer costs would be to raise the minimum wage in Kentucky to $10.10 per hour, which would reduce the state’s spending on Medicaid by an estimated $34 million each year according to research by the Center for American Progress.
An increase of the minimum wage to $10.10 would directly impact an estimated 304,000 Kentucky workers, 16,700 of whom would see their earnings increase to the point that they would qualify for healthcare coverage under the Medicaid expansion and move off of traditional Medicaid. Since the state pays a bigger share of traditional Medicaid than it does for the Medicaid expansion, this shift would save us money: about two percent of Kentucky’s traditional Medicaid spending according to Rachel West, a senior policy analyst with the Center for American Progress. Some of these savings will already be realized because both Lexington and Louisville are in the process of raising each city’s minimum wage to $10.10 and $9.00 respectively.
In 2013, Kentucky accepted a federally-funded increase in eligibility for Medicaid as part of the Affordable Care Act. The state pays for 29 percent of traditional Medicaid spending, which only applies to people who meet several family and work requirements and earn up to 62 percent of the federal poverty level. However, the Medicaid expansion is paid for entirely by the federal government initially—with that share dropping to 90 percent by 2020—and covers everyone up to 138 percent of the federal poverty level.
A bill to raise the state-wide minimum wage has passed the House for the last several years but stalled in the Senate. An increase to $10.10 would affect more than 1 in 4 workers in the state and result in an increase of 1,400 jobs and $420.8 million in economic activity, according to one study. There is also evidence that minimum wage increases help reduce poverty.
Raising the minimum wage in Kentucky would also save federal and state money now spent on other social programs. For example, the Center for American Progress estimates that spending in Kentucky on Supplemental Nutrition Assistance Program benefits (commonly known as food stamps) would drop $97.3 million because people would earn enough to phase out of the program.
With both Louisville and Lexington having recently increased their local minimum wages, an estimated 76,300, or 1 in 4 low-wage Kentucky workers will see their hourly wages tick up. Savings at the state level on Medicaid spending is only one of many benefits Kentucky will see from these changes; expanding this to the whole state would only scale up those benefits.