Level Dollar Approach Shifts Enormous Burden to Upcoming Budget

The proposed level dollar approach to funding Kentucky’s pension liabilities would shift a large burden to our upcoming state budget and ask comparatively little from budgets a couple of decades from now. Especially without any new revenue, the method creates pressure for harsh and unacceptable benefit cuts to retirees and workers along with unnecessarily damaging budget cuts that will further undermine key services.

This proposal to pay down all plans’ liabilities under a level dollar method comes from state consultant PFM. Under the approach, payments would be about the same dollar amount each year until liabilities are paid off. Level dollar is in contrast to the much more common level percent of pay approach Kentucky currently uses, which distributes payments over time as an equal percentage of what employers spend on workers’ salaries.

That change, combined with much lower investment return assumptions, would add a hefty $1 billion in General Fund costs to the state budget in 2019, according to PFM’s report. In total, General Fund obligations for pensions would equal $2.47 billion in 2019 or a massive 23 percent of Kentucky’s General Fund budget.

With a level dollar approach, 15 years later the General Fund contribution for pensions will be roughly the same as in 2019, at $2.29 billion. But the commonwealth’s ability to pay will be higher later due to inflation and growth in the economy in the intervening years.

To illustrate this difference: Over the last 20 years, General Fund revenue has grown by an average of 3.1 percent per year. If that modest trend continues in the future, the state will have 59 percent more revenue in 2034 than it will have in 2019, as the graph below shows. Yet, as mentioned, under the level dollar method the state would be paying no more toward pensions in 2034 than it is in 2019. The level dollar approach heavily front loads costs as a share of spending, squeezing everything else in the budget during the early years. The level percent of pay method, in contrast, aligns contributions with the state’s ability to pay.

In an ideal world, it would be great to pay off debts as soon as possible with much bigger payments up front. But there are trade-offs to doing so — especially when new resources are not available to make those contributions. And as we describe here, there is no strong argument within the systems for using level dollar for Kentucky’s better-funded pension plans like those for teachers and local employees.

Moving to a level dollar approach for all plans would place a major hardship on the budget in 2019 and the years immediately thereafter, even as the General Assembly has not yet put any new revenue on the table to pay for it. These increased contributions will require deeply damaging cuts to investments in education, health and human services, infrastructure and more. Already, Kentucky faces budget gaps ranging from a crisis in social worker caseloads to rising inequity between rich and poor school districts, soaring college tuition and a lack of employee raises.

Kentucky also cannot fund these dramatically higher payments by breaking promises to retirees and workers, such as through PFM proposals to roll back cost of living adjustments and raise the retirement age for current workers. And shifting to 401ks won’t help.

Instead, Kentucky needs a responsible and reasonable plan for paying down its liabilities over the coming decades — one that protects our critical public investments and steps up to meet our obligations to workers and retirees. Simply shifting to the level dollar method for all plans and putting no new revenues forward to pay for it would not meet that test.

New Study Provides More Evidence Harsher Penalties Are Not Solution to State’s Drug Problems

At the same time our state is increasing criminal penalties for heroin, a new analysis further bolsters existing research showing such an approach is not an effective way to address Kentucky’s drug problems.

House Bill 333, which the Kentucky legislature passed earlier this year, increases penalties for low-level heroin and fentanyl trafficking — rolling back the drug sentencing reforms in 2011’s House Bill 463. The new law makes trafficking in heroin in less than 2 grams a Class C felony, with a 5 to 10 year sentence and no eligibility for parole until 50 percent of the sentence is served. This increase is a big jump from the crime’s former classification as a Class D felony with a 1 to 5 year sentence and parole eligibility after serving 20 percent of the sentence. Kentucky’s broad definition of trafficking means those charged with trafficking in these small amounts may be sharing drugs or selling just enough to support their habit, rather than engaging in large-scale dealing.

Despite compounding evidence to the contrary, legislators involved in passing HB 333 cited the need to do something about the state’s devastating opioid epidemic. But the new study by Pew adds to the large body of research showing harsher penalties for drug crimes do not reduce substance abuse.  They are, however, costly to individuals and families as well as the state.

Pew set out to understand “whether and to what degree high rates of drug imprisonment affect the nature and extent of the nation’s drug problems” by comparing publicly available data from law enforcement, corrections and health agencies. If imprisonment was an effective deterrent to drug use and crime, then states with higher rates of imprisonment for drug offenses would have lower rates of drug use among their residents — other things held constant. However, when Pew compared state drug offender imprisonment rates with three important measures of state drug problems — self-reported drug use rates (excluding marijuana), drug arrest rates and drug overdose death rates — no statistically significant relationship was found. These results account for variation in states‘ education level, unemployment rate,  racial diversity and median household income.

According to Pew: “What research does make clear is that some ways of reducing drug use and crime are more effective than others — and that imprisonment ranks near the bottom of the list. Putting more drug offenders behind bars — for longer periods of time — has not yielded a convincing public safety return. What it has generated, without doubt, is an enormous cost for taxpayers.” The increased costs associated with greater imprisonment for drug offenders means less funds for “programs, practices and policies that have been proven to reduce drug use and crime” — which is a net loss for public safety.

Kentucky is clearly heading in the wrong direction with its drug laws — a trend that is especially troubling given recent reports of jail overcrowding, plans to reopen private prisons and a Department of Corrections budget that is $43 million over projections for this year alone, according to the Justice Cabinet.

Kentucky Has the Most to Lose from Senate Health Care Repeal Bill

Kentucky would see its uninsured rate more than triple under the proposed Senate bill to repeal the Affordable Care Act (ACA). According to the Urban Institute, Kentucky’s uninsured population would jump by 541,000 people in 2022 based on the proposed changes to the healthcare system. The primary reason for the coverage losses is a cut in federal funding for Medicaid and premium subsidies on the insurance marketplace of $6.3 billion in 2022, a  58.5 percent reduction. That’s the largest percentage cut of any state.

The coverage losses under the Senate bill come from 704,000 Medicaid enrollees and 17,000 marketplace enrollees losing coverage. The Urban Institute also estimates that 180,000 Kentuckians would gain coverage through their employer, though if Kentucky decides to waive the Essential Health Benefits, these individuals would be enrolled in inferior coverage that would also be subject to annual or lifetime caps.

The percent of Kentuckians under Medicaid who would lose coverage is particularly alarming. In cutting the number of people covered by Medicaid in half, the Senate repeal bill kicks a higher share of Kentuckians off Medicaid than anywhere else. This is such a large share of Kentucky’s population that it essentially strips insurance from 1 in 6 Kentuckians.

The effort to roll back the Affordable Care Act and then permanently squeeze funding for traditional Medicaid does not just take us back to the days before the ACA improved Kentuckians’ health coverage. It sets the commonwealth back even further and jeopardizes the substantial health care gains we’ve made over the past three years. It would also pull billions of federal dollars from our economy, which is still in recovery from the recession. No matter which version of ACA repeal you look at, the results are the same – a catastrophe for Kentuckians’ health and our economy.

How At-Risk Federal Discretionary Funds Are Important to Kentucky

Click to view as PDF.

Similar to President Trump’s initial budget blueprint, or “skinny budget,” his full budget proposal slated for release next week is expected to include cuts to non-defense discretionary (NDD) program funding in order to pay for increased spending for defense and border control — and pave the way for tax cuts for the wealthy. These NDD programs are separate from mandatory federal programs like SNAP (formerly known as “food stamps”) that are also expected to face major, damaging cuts in the president’s plan. 1

Cuts to NDD programs would be harmful to Kentucky as they provide more than $2 billion a year, the equivalent of 20 percent of our state’s General Fund, in critical funding for improving education, supporting children and families, making our communities safer and healthier, providing assistance for the state’s most vulnerable, developing our workforce and economy, and increasing cultural enrichment opportunities. Such federal budget cuts would occur in the context of our state already experiencing declines in federal funding in recent years, and struggling under state budget cuts.

Here are some highlights of what federal NDD funds do in Kentucky and what would be at risk with cuts.

Improvements in Education

Cuts to federal grants that provide funding to improve education would be harmful in Kentucky, where educational attainment levels are not where they need to be and state budget cuts are already being deeply felt. Just half of Kentucky kids are considered to be ready when they enter Kindergarten; achievement gaps persist in our K-12 system; more than 344,000 Kentuckians have no high school diploma or GED credentials; and we are far from reaching our state’s higher education goals. 2

Meanwhile, K-12, adult and postsecondary education are all struggling under frozen funding levels and state budget cuts in recent years. Cuts make it hard for our schools to address achievement gaps, for adult education programs to improve access to a GED credential and for tuition at the state’s public universities to be affordable. 3

Here are some of the NDD programs that provide funding to help improve education in Kentucky:

  • Head Start. This program provides low-income Kentucky children across the state with early childhood education and care that has significant short- and long-term benefits, including improving the likelihood that participants graduate from high school, attend college and receive a postsecondary degree or credential. 4
  • Special Education. Federal NDD funds help to educate children with disabilities — including early intervention services for infants and toddlers, preschool children and older school-aged children.
  • Adult Education. Federal funds support local adult education centers that provide free adult education services across the state. Earning a GED credential improves employment opportunities and more than a third of Kentuckians earning GED diplomas go on to postsecondary education. 5
  • College Work-Study. By providing mostly on-campus jobs for qualifying students, federal college work-study funding helps more Kentuckians be able to afford college — and research has shown work-study students are more likely to graduate than those in non-work-study jobs and more likely to be employed after graduating than students who do not work during college. 6
  • School Improvement Grants (SIGs). These funds help to raise achievement of students in low-performing schools. A SIG grant, for instance, was a critical part of Leslie County High School’s dramatic jump from scoring poorly on standardized tests prior to receiving school improvement funds, to scoring in the 94th percentile in Kentucky a few years later and being designated as a distinguished school 2 years in a row. 7 Twenty-five schools in Kentucky are currently receiving SIG funds. 8
  • 21st Century Community Learning Centers. These federal funds are used to design and implement effective after school programs. They enable schools to provide students with homework assistance and an array of activities that complement their regular academic programs; funding can also be used to offer literacy and other educational services to the families of participating children. As an example, through 21st Century Community Learning Centers funding South Livingston Elementary School offers an after-school computer coding program. 9 President Trump’s “skinny budget” proposal recommended completely eliminating this program.
  • Supporting Effective Instruction. This grant provides funding to increase student academic achievement; improve the quality and effectiveness of teachers, principals and other school leaders; and provide low-income and minority students greater access to effective teachers, principals and other school leaders.
  • Rural and Low-Income Schools Program and Small, Rural School Achievement Program. These two federal programs provide assistance to rural school districts that often lack adequate resources due to a weak local tax base.

Help for Kids and Families

Children and families in our state already face many challenges and additional cuts to federal funding would be detrimental in particular to at-risk children. Our state’s child welfare system is already overstretched and child abuse and neglect is unfortunately on the rise. 10 In addition, Kentucky’s child care assistance program is already relatively weak compared to programs in other states in terms of eligibility limits, parent co-payments, reimbursement rates to providers and how much leeway parents have when looking for a job. 11

These are some of the federal NDD programs that support children and families in Kentucky:

  • Child Welfare Services. The Stephanie Tubbs Jones Child Welfare Services program provides states with funds to provide preventive intervention, to place children in foster care when they cannot stay safely at home and to provide family reunification services to enable the safe return of children to their homes when possible. These funds can also be used for child protective services — including investigations of child abuse and neglect, counseling and emergency assistance. Kentucky received funding in 2016 for protective services, foster care maintenance payments and administrative costs. 12
  • Community-Based Child Abuse Prevention. Kentucky receives funding through this program to develop, operate, expand and/or enhance community-based prevention-focused programs and activities.
  • Healthy Start. This program helps to reduce the rate of infant mortality and improve perinatal outcomes in high-risk communities. In Kentucky, there is a Healthy Start program in Louisville to address high infant mortality rates in several of the city’s zip codes where babies are more than twice as likely to die before their first birthday than in the Louisville Metro area as a whole. 13 The program provides home visits and other outreach methods to make sure women begin getting prenatal care early on and continue to get consistent care through pregnancy and after delivery.
  • Child Care and Development Block Grant. These funds make child care assistance available for low-income families and children. In Kentucky, they are an important source of funding for Kentucky’s popular Child Care Assistance Program (CCAP), which provides important support to more than 26,000 low-income Kentucky families struggling to afford care while they work. 14

Healthier and Safer Communities

Despite important health improvements likely resulting from the Medicaid expansion, Kentucky still ranks toward the bottom on many health indicators compared to other states. Kentucky has the highest rate of cancer and cancer deaths in the nation, and more than one in four Kentucky adults reports having a chronic health condition. 15 Our state has also been hit particularly hard by the opioid epidemic and has the third highest rate of death due to drug overdose, alongside Ohio. 16 In addition, Kentucky faces many environmental concerns, including water pollution that degrades our drinking water, and state budget cuts have weakened environmental enforcement. 17

Federal NDD programs are a critical source of funding for health services in our state, including the following:

  • State-Based Comprehensive Breast and Cervical Cancer Early Detection
  • Mental Health Block Grant
  • Substance Abuse Prevention and Treatment Block Grant
  • Family Planning Services
  • State Offices of Rural Health
  • Universal Newborn Hearing Screening
  • Preventive Health Block Grant, Preventive Health Services, Preventive Health – Rape Prevention and Education

Other NDD programs that improve health and safety in Kentucky include:

  • Black Lung Clinics Program. Kentucky receives grant money to seek out and provide health services to current and former coal miners. There are currently two Black Lung Clinics in our state. 18
  • Office of National Drug Control programs. The High Intensity Drug Trafficking program provides federal funding to address drug trafficking and production in 32 Kentucky counties. 19 The Drug Free Communities Support Program helps prevent and reduce youth substance use/abuse; in 2015, 21 projects in Kentucky received funding through this grant program. 20 In the upcoming budget proposal, the Trump administration is expected to slash funding for the Office of National Drug Control Policy by about 95 percent, eliminating these two federal grant programs, among others. 21
  • Poison Control Center Program. This program provides funding to improve access to quality poison control treatment and prevention services.
  • Environmental Protection Agency (EPA) grants. These funds help provide clean water, pollution control and the safe management of hazardous waste in Kentucky. Currently about a third of the Kentucky environmental protection staff is paid for with federal EPA funds. 22

Assistance to Vulnerable Kentuckians

As a high-poverty state with one of the nation’s fastest growing aging populations, Kentucky has large numbers of people in need of assistance with housing and aging supports. Like other areas of the state budget, these services have experienced cuts in recent years and additional cuts to federal programs that serve our most vulnerable Kentuckians could cause harmful reductions in critical services.

The following federal NDD programs help some of the most vulnerable Kentuckians:

  • Battered Women’s Shelters
  • Developmental Disabilities
  • Enhanced Mobility of Seniors and Individuals with Disabilities
  • Homeless Mental Health
  • Services for Older Blind Individuals
  • Mental Health Block Grant
  • Emergency Food and Shelter Program
  • Public Housing
  • Refugee Assistance
  • Sexual Assault Services
  • Runaway and Homeless Youth
  • Low Income Home Energy Assistance (slated for elimination in President Trump’s “skinny budget”)
  • Community Development Block Grant (can be used to fund Meals on Wheels as well as a wide range of other community development needs, including repairs to a historically African American community center in Mount Sterling) 23
  • Administration on Aging Support Services; Administration on Aging Home Delivered Meals; Administration on Aging Congregate Meals

Workforce and Economic Development

Kentucky also faces serious needs for worker training and job creation. The state’s unemployment rate has improved but is still higher than it was in 2000. The economic challenges are particularly deep in the eastern part of our state. In 62 of the state’s 120 counties the unemployment rate is higher now than in 2007. 24

  • Workforce Innovation and Opportunity Act (WIOA) funds provide employment and training services for adults, dislocated workers and youth through formula grants to states. WIOA also funds adult education and literacy programs and vocational rehabilitation state grant programs that assist those with disabilities in obtaining employment.
  • The Appalachian Regional Commission (ARC) makes important investments in economic opportunities, workforce development, infrastructure, natural and cultural assets, and leadership and community capacity in Kentucky (as well as other states in the region). The “skinny budget” proposed completely eliminating this agency. 25
  • The POWER (Partnerships for Opportunity and Workforce and Economic Revitalization) Initiative has recently provided funding through ARC and a number of other federal agencies and offices to address the economic crisis faced by communities and workers reliant on the coal economy. In 2016, Kentucky received 4 of these grants, totaling around $14.8 million. 26 One of these projects provides training and employment opportunities in Information Technology (IT) careers to young adults who are out of school and older adults who are unemployed, laid-off or underemployed; this workforce development initiative will train 200 new workers, create 160 jobs and bolster sectors that require a skilled IT workforce in 23 eastern Kentucky counties. Another project provides retraining and entrepreneurial assistance to dislocated coal workers, creating 200 new jobs and 100 new enterprises as well as serving 500 existing businesses and bringing $12 million in leveraged financing to a 54-county region in Eastern Kentucky.

The “skinny budget” proposed rolling back funding that benefits coal miners and their communities, which according to a recent policy brief “would stunt economic revitalization where it is needed, and additional cuts to other assistance programs would compound the economic challenges facing coal communities and the families who call them home.” 27

Cultural Enrichment Opportunities

State budget cuts have already limited funding for the state’s libraries and the arts. Additional federal budget cuts in these areas would only worsen the situation.

  • Federal NDD programs include National Endowment for the Arts, National Endowment for the Humanities, the State Library Program and the Historic Preservation Fund.

Upcoming Budget Proposal

President Trump’s previously released “skinny budget” for 2018 proposed cuts to NDD programs — an approximately 15 percent cut in NDD programs outside of Veterans Affairs and Homeland Security — and even the elimination of many programs entirely to offset a $54 billion increase in defense spending. 28 The President’s full budget proposal is expected to be released next week and will likely include funding levels for defense and non-defense programs overall for years beyond 2018. Although some of what was outlined in the “skinny budget” will change, big cuts to NDD funding are expected. Harmful cuts to important mandatory safety net programs are also expected be included in the full proposal, as well as further details on the President’s tax plan, which would give massive tax cuts to the wealthiest Americans.

Click to see a list of discretionary federal grants received by Kentucky in 2015.


  1. Paul M. Krawzak, “Trump Wants $800 Billion, 10-Year Cut in Entitlement Programs,” Roll Call, May 15, 2017, http://www.rollcall.com/news/policy/trump-wants-800-billion-10-year-cut-entitlement-programs.
  2. Kentucky Department of Education, “Readiness Results Highlight Need for Quality Early Learning,” News Release, December 7, 2016, http://education.ky.gov/comm/news/Documents/R16-159%20Kindergarten%20Screener_final.pdf. Prichard Committee for Academic Excellence, “Excellence with Equity: It’s Everybody’s Business,” August 2016, http://prichardcommittee.org/wp-content/uploads/2016/08/2016-Achievement-Gap-Study-Group-Report.pdf. High school diploma/GED attainment data is from the Working Poor Families Project.
  3. Ashley Spalding, “Tuition Ceilings Announced,” Kentucky Center for Economic Policy, March 31, 2017, http://kypolicy.org/tuition-increase-ceilings-announced/.
  4. Diane Whitmore Schanzenbach and Lauren Bauer, “The Long-Term Impact of the Head Start Program,” The Brookings Institution, August 19, 2016, https://www.brookings.edu/research/the-long-term-impact-of-the-head-start-program/.
  5. Kentucky Center for Education and Workforce Statistics, “New Report Shows Benefits of Kentuckians Earning GED Diplomas,” News Release, September 19, 2016, https://kcews.ky.gov/Content/News/New%20report%20shows%20benefits%20of%20Kentuckians%20earning%20GED%20diplomas.pdf.
  6. Judith Scott-Clayton and Veronica Mina, “Should Student Employment Be Subsidized? Conditional Counterfactuals and the Outcomes of Work-Study Participation,” National Bureau of Economic Research, July 2014, https://www.insidehighered.com/sites/default/server_files/files/NBER-workstudy.pdf.
  7. Greg Anrig, “Lessons From School Improvement Grants That Worked,” The Century Foundation, July 23, 2015, https://tcf.org/assets/downloads/Anrig_LessonsFromSchoolImprovementGrants.pdf.
  8. Kentucky Department of Education, “School Improvement Grants (SIG),” http://education.ky.gov/federal/progs/sigi/Pages/default.aspx.
  9. Mike Marsee, “Making Coding More Friendly,” Kentucky 21st Century Community Learning Centers, September 9, 2016, http://ky21cclc.org/.
  10. Deborah Yetter, “Feds Rip Kentucky Child Protection System,” Courier-Journal, February 23, 2017, http://www.courier-journal.com/story/news/politics/2017/02/23/feds-rip-kentucky-child-protection-system/98306250/. John Cheves, “Child Abuse and Neglect up 55 Percent in Kentucky Since 2012,” Lexington Herald-Leader, February 3, 2017, http://www.kentucky.com/news/politics-government/article130535059.html.
  11. Karen Schulman and Helen Blank, “Red Light Green Light: State Child Care Assistance Policies 2016,” National Women’s Law Center, https://nwlc.org/wp-content/uploads/2016/10/NWLC-State-Child-Care-Assistance-Policies-2016-final.pdf.
  12. Administration for Children and Families, “Stephanie Tubbs Jones Child Welfare Services: 2016 Planned Use of Funding by State and Service Category,” https://www.acf.hhs.gov/sites/default/files/cb/cfs101_report_congress_2016_attach_c.pdf.
  13. Louisville Metro Health Start, “Healthy Start,” https://louisvilleky.gov/government/health-wellness/healthy-start.
  14. Kentucky Center for Education and Workforce Statistics, “2017 Early Childhood Profile,” https://kcews.ky.gov/Content/Reports/ECP/ECP_2017_FullReport.pdf.
  15. Kaiser Family Foundation, “Health Status,” State Health Facts, http://kff.org/state-category/health-status/. State Health Access Data Assistance Center, “Final Report: Study of the Impact of the ACA Implementation in Kentucky,” February 2017, https://www.healthy-ky.org/res/images/resources/Impact-of-the-ACA-in-KY_FINAL-Report.pdf.
  16. Centers for Disease Control and Prevention, “Drug Overdose Death Data,” https://www.cdc.gov/drugoverdose/data/statedeaths.html.
  17. James Bruggers, “Kentucky Braces for Big Trump EPA Cuts,” Courier-Journal, March 3, 2017, http://www.courier-journal.com/story/tech/science/environment/2017/03/03/kentucky-braces-big-trump-epa-cuts/98650188/.
  18. Health Resources and Services Administration, “Active Grants for HRSA Program(s): Black Lung/Coal Miner Clinics Program,” 2016, https://ersrs.hrsa.gov/ReportServer/Pages/ReportViewer.aspx?/HGDW_Reports/FindGrants/GRANT_FIND&ACTIVITY=H37&rs:Format=HTML4.0.
  19. National HIDTA Assistance Center, “HIDTA Counties by State,” http://www.nhac.org/news/HIDTA_Counties.htm.
  20. Substance Abuse and Mental Health Services Administration, “SAMHSA – Fiscal Year 2015 Discretionary Funds,” https://www.samhsa.gov/grants-awards-by-state/details/Kentucky.
  21. Alan Rappeport, “White House Proposes Cutting Drug Control Office Funding by 95%,” The New York Times, May 5, 2017, https://www.nytimes.com/2017/05/05/us/politics/white-house-proposes-cutting-drug-control-office-funding-by-95.html.
  22. James Bruggers, “Kentucky Braces for Big Trump EPA Cuts,” Courier-Journal, March 3, 2017, http://www.courier-journal.com/story/tech/science/environment/2017/03/03/kentucky-braces-big-trump-epa-cuts/98650188/.
  23.  Jose A. DelReal, “Trump Asked African Americans What They Had to Lose. For This Rural Kentucky Community, the Answer Is Tangible,” The Washington Post, April 7, 2017, https://www.washingtonpost.com/national/trump-asked-african-americans-what-they-had-to-lose-for-this-rural-kentucky-community-the-answer-is-tangible/2017/04/06/0bf500fe-1a61-11e7-bcc2-7d1a0973e7b2_story.html.
  24. Anna Baumann and Jason Bailey, “The State of Working Kentucky 2016,” Kentucky Center for Economic Policy, August 2016, http://kypolicy.org/dash/wp-content/uploads/2016/08/State-of-Working-KY-FINAL.pdf.
  25. Renee’ Marcum-Losey, “Trump Budget Beats Up on Appalachia,” Courier-Journal, March 17, 2017, http://www.courier-journal.com/story/opinion/contributors/2017/03/17/trump-budget-beats-up-appalachia-losey/99297824/.
  26. The White House, “Fact Sheet: Administration Announces New Economic and Workforce Development Resources for Coal Communities through POWER Initiative,” August 24, 2016, https://www.arc.gov/images/grantsandfunding/POWER2016/POWER2016_Awards_WHFactSheet_8-24-2016.pdf.
  27. Ashley Spalding, “Important Federal Investments in Kentucky’s Coal Communities at Risk,” Kentucky Center for Economic Policy, April 28, 2017, http://kypolicy.org/important-federal-investments-kentuckys-coal-communities-risk/. Luke Bassett and Jason Walsh, “The Trump Budget Cuts Hit Coal Communities and Workers Where It Hurts,” Center for American Progress, April 24, 2017, https://www.americanprogress.org/issues/green/reports/2017/04/24/430842/trump-budget-cuts-hit-coal-communities-workers-hurts/.
  28. Jason Bailey, “Trump Budget Eliminations Would Be Major Hit to Kentucky,” Kentucky Center for Economic Policy, March 21, 2017, http://kypolicy.org/trump-budget-eliminations-major-hit-kentucky/.

Trump Budget Eliminations Would Be Major Hit to Kentucky

President Trump’s proposed budget would be a major hit to the investments that benefit Kentucky’s communities, as federal dollars play a substantial role in our state’s budget and economy. His budget would completely eliminate programs that provided more than $190 million in federal funding to Kentucky in 2016, according to an analysis from Federal Funds Information for States.

Those eliminations alone amount to nearly nine percent of all discretionary federal funding to the state. On top of those eliminations, the president’s budget would reduce funding for a wide range of investments, including those affecting worker training, protection against pollution and improved health.

The table below shows the specific losses to Kentucky from the budget’s total elimination of select programs alone:

Along with deleting these programs, the proposed budget also eliminates seven entire federal agencies that send funding to states. These programs provide investment in economic development; the arts, humanities and public broadcasting; legal protections for low-income people; and opportunities for public and community service:

  • Appalachian Regional Commission (ARC) – $146 million
  • Corporation for National and Community Service – $786 million
  • Corporation for Public Broadcasting – $444 million
  • Museum and Library Services – $230 million
  • Legal Services Corporation – $384 million
  • National Endowment for the Arts – $148 million
  • National Endowment for the Humanities – $148 million

Between October 2015 and January 2017, Kentucky received $31.9 million in ARC funds alone for investment in infrastructure, entrepreneurship, workforce training and leadership and community development.

Coverage for Kentucky Seniors Threatened by House Plan

The House GOP plan repealing the Affordable Care Act (ACA) includes a number of measures that would reduce coverage and affordability for Kentucky’s older adults. If the proposal becomes law, more seniors will fall into poverty or lose access to care.

One element of the plan involves a change in tax credits. The ACA provides credits to help people buy coverage in the insurance marketplaces. These credits are bigger for low-income people and phase out as incomes increase. The House plan changes those credits so they are no longer based on income and makes them a flat tax credit that increases with age but ignores the cost of premiums (and premiums are higher for older people).

The result is cuts to credits for low-income older Kentuckians that greatly reduces their ability to afford insurance. Credits are 30 percent to 70 percent lower across Kentucky counties than the ACA credits, according to an analysis by the Kaiser Family Foundation. Here’s how much annual assistance is reduced for a 60 year old Kentuckian making $20,000 a year in a handful of counties:

  • Pike: -$6,140
  • Pulaski: -$3,220
  • Fayette: -$2,550
  • Logan -$5,800
  • Campbell -$3,390

And a county-by-county breakdown is available here (larger version):

Along with much smaller credits, other aspects of the law will make premiums higher for older adults while increasing their out-of-pocket expenses:

  • The amount insurance companies can charge older people is increased — whereas companies could charge only three times more than younger adults under the Affordable Care Act, they could charge five times more under the new plan.
  • Premiums are also likely to be more expensive for older people because aspects of the plan will lead some healthy people (who tend to be younger) to skip getting covered.
  • Plans will get weaker: the Congressional Budget Office (CBO) estimates the share of medical costs insurers will cover will drop from 87 percent to 65 percent for low-income Americans. This means that people will likely have to pay more in deductibles, co-insurance, co-pays, and other out-of-pocket expenses, ultimately hitting older people harder as they typically need more medical care. And the plan eliminates cost sharing subsidies in the Affordable Care Act that pay for those out of pocket costs for people with incomes between 100 percent and 250 percent of poverty.
  • Adjusting the new tax credits only to the cost of inflation plus 1 percentage point means they will become even less valuable than the ACA credits (which grow as premiums increase) over time.

These changes add up: CBO estimates that a low-income 64 year old would see her net premium increase by $12,900, as premiums rise and subsidies drop.

As if that wasn’t enough, the bill makes other changes that hurt older adults:

  • The plan effectively ends the Medicaid expansion in 2020, denying Medicaid coverage to older Kentuckians who would otherwise qualify.
  • By capping federal Medicaid funding in the future, as the plan does, coverage for seniors is further threatened as dollars are squeezed over time. Medicaid pays for long-term care for low-income seniors, along with coverage for kids, people with disabilities and low-income people.
  • By providing tax cuts for wealthy individuals, the plan takes money from Medicare — speeding up the date when the Medicare trust fund becomes insolvent and likely leading to more cuts to Medicare benefits in the future.

These reasons and more are why AARP opposes the bill.

The impact on seniors is just one of the reasons Congress must reject the House plan, which will dramatically reduce the number of Kentuckians covered, squeeze the state’s budget and economy and set back Kentuckians’ health.

Updated March 15, 2017

Kentucky’s Experience with High Risk Pool Shows Dangers of ACA Repeal

Repeal of the Affordable Care Act (ACA) means going back in time to before the law existed or to some as yet undefined “replacement” plan. Some in favor of repeal suggest a new plan should contain what are called high risk pools, including in the recent “Obamacare Repeal and Replace” policy brief circulated by Republican lawmakers in Washington. But evidence from Kentucky’s former high risk pool called Kentucky Access shows how such ideas fall short of the protections and coverage in the ACA.

What is a High Risk Pool?

Kentucky Access and other high risk pools across the country were created pre-ACA as a way to try assisting some people with serious conditions that made them too expensive to insure. States decided to “pool” people who couldn’t otherwise access coverage into their own insurance group and provide public funds to cover any cost of care above what member premiums paid for.  In theory this made insurance cheaper for healthy people and gave people with preexisting conditions a chance at getting insurance coverage.

How did it work in Kentucky?

Kentucky operated its high risk pool Kentucky Access from 2001 until 2013 when it was no longer needed thanks to provisions in the ACA. Applicants had to meet one of two criteria to participate in Kentucky Access:

  1. Being “medically uninsurable,” meaning two insurance companies had already declined to cover him or her based on a preexisting medical condition, or they were quoted premiums more expensive than what Kentucky Access was offering. This eligibility group made up the vast majority of members.
  2. If a person lost coverage after switching jobs or getting laid off, they would be eligible for membership in Kentucky Access because of the Health Insurance Portability & Accountability Act (HIPAA) of 1996.

This pool was paid for by premiums from members, state tobacco settlement funds and the Guaranteed Acceptance Program (GAP) assessment, which is a fee charged to insurance policies as well as to financial protection products (called stop-loss insurance or reinsurance) purchased by insurance companies. Whereas most other insurance pools’ premiums are enough to cover the cost of its members’ health care, those in high risk pools had conditions so expensive that in order to cover them, revenue beyond premiums was needed.

Source: 2004-2013 Kentucky State Auditor reports for Kentucky Access.

The original idea was people who would otherwise have been denied coverage could pay premiums with a cost capped at 75 percent above the price of comparable private plans. In 2001, annual premiums for Kentucky Access ranged from $1,798 to $11,056 and were meant to make up a small portion of the cost of the program. What happened over time, however, was the average premium rose 22 percent when adjusted for medical inflation between 2004 and 2013, and comprised over half of the total revenue for Kentucky Access by 2012.

Source: 2004-2013 Kentucky State Auditor reports for Kentucky Access, enrollment data from the Cabinet for Health and Family Services, & BLS medical inflation data.

Enrollment in Kentucky Access grew steadily up until 2010, when the ACA created a national high risk pool as a temporary measure before Medicaid expansion and the health insurance marketplaces went into effect. The national high risk pool operated from 2010-2014.

Source: enrollment data from the Cabinet for Health and Family Services.

Coverage was expensive for Kentuckians and covered few people

If the goal was to offer a form of coverage to people who wouldn’t have otherwise been insurable, Kentucky Access worked for a few thousand people. According to the Commonwealth Fund, the coverage it offered was also similar to private plans available to the rest of the public:

However, premiums could cost up to 75 percent more than the average comparable plans, making them out of reach for many low-income Kentuckians. Also, Kentucky’s high risk pool didn’t cover treatment for the conditions that made its members ineligible for private coverage in the first place until they had been enrolled for a full year. This meant that members were on their own dime for treatment to address their preexisting conditions until 12 months after their initial enrollment. Obviously, this was a financial hardship that could contribute to worsened health conditions. Finally, there was a $2 million lifetime cap placed on enrollees. When it comes to expensive, chronic conditions, such caps can leave people right back where they started – uninsured and uninsurable.

ACA covers many more people and gives access to prevent and manage expensive conditions

Expanding Medicaid to cover more low-income people, offering premium subsidies to others and requiring individuals to have insurance or else face a penalty all eliminated the need for Kentucky Access. Instead, with the ACA, people got insurance coverage to a historic degree, immediately becoming eligible for the treatment of conditions that would have made them uninsurable before.

The ACA also contains a popular provision that requires insurers to offer insurance to everyone, regardless of whether or not he or she has a preexisting condition, known as “guaranteed issue.” One estimate puts the number of Kentuckians with a preexisting condition protected by the guaranteed issue provision at 1.9 million, which far exceeds the 4,700 people covered through Kentucky Access at its peak.

The ACA not only covered more people, but also required insurers to offer free preventative services. This measure is helping prevent ailments from worsening over time, and in some cases preventing them from becoming chronic. This saves money over the long run. So while there was an initial jump in costs for insurers as people started utilizing their coverage for conditions that had not been treated adequately, over time shocks like that won’t be as large.

High risk pools a huge step backward in coverage and prevention

When the health insurance market relied solely on premiums to pay out benefits, insurers were unwilling to cover people who required costly care. But under the ACA, since everyone is required to get health insurance (particularly young and healthy people) insurance pools can once again balance the costs across enrollees. Further, expanding Medicaid and subsidizing insurance for low-income Kentuckians, many of whom had not been insured for years prior, helps people get and stay healthy, lessening the population’s need for costly care over time.

Some of the proposals to “replace” the Affordable Care Act include high risk pools as one component. However, experience has shown that Kentucky Access was expensive and offered insufficient coverage to very few people compared to how the ACA currently operates. Segregating people who need care the most into inadequate insurance plans is not an acceptable alternative to the many ways Kentucky benefits from the ACA.

A County-by-County Look at Kentuckians at Risk if Congress Rolls Back Health Coverage

Nearly one in three Kentuckians has health insurance either through Medicaid or with a federally subsidized Qualified Health Plan (QHP) from the health insurance marketplace (formerly Kynect). If Congress moves forward with repealing the Affordable Care Act (ACA) and making big structural changes to the traditional Medicaid program, Kentuckians across the state are at risk of losing coverage or having it weakened. We’ve previously described how an ACA repeal would hurt state-wide, but county and regional impacts would vary.

The map below shows the share of Kentuckians that have insurance through Medicaid or QHPs. Medicaid enrollment includes low-income adults as well as children, the elderly in nursing homes and Kentuckians with disabilities.

See a larger version of map here.

Around a third of Kentuckians with Medicaid would lose coverage with a rollback of Medicaid expansion (here’s a county-by-county look at them, specifically). The rest could have their health insurance threatened by harmful changes to the structure of Medicaid through either a block grant or a cap on federal spending per Medicaid enrollee. Such proposals would erode federal funding for the healthcare program over time and force states to reduce provider payments, limit who or how many can be insured, or roll back benefits. Medicaid would be further weakened through a repeal of improvements to the program in the ACA. The push to enact either a block grant or per-capita cap would extend beyond even what the ACA changed, and erode safeguards established during the 1960’s.

Those with QHPs are also at risk of losing coverage. Elimination of the premium tax credits would make insurance unaffordable to many of the 83,000 Kentuckians who are currently benefitting from such plans. Even if the help paying for coverage isn’t completely revoked, there’s evidence  insurance companies may still choose to pull out of the health exchanges altogether.

When looking at insurance coverage through Medicaid and QHPs at the county level, the percent of the population falling into this category ranges from 13.2 percent in Oldham County to 67.5 percent in Owsley County. Although most counties have less than half of their population covered through Medicaid or QHPs, 5 counties have Medicaid/QHP coverage rates at or above 60 percent:

  • Owsley County: 67.5 percent.
  • Wolfe County: 62.5 percent.
  • Breathitt County: 62.2 percent.
  • Perry County: 61 percent.
  • Clay County: 59.9 percent.

Differences between regions in the state stand out as well. As shown in the table below, the far western 1st Congressional District and far eastern 6th Congressional District in particular benefit from Medicaid and QHP coverage.

Repeal of the ACA would likely triple the uninsured in the Commonwealth, cause chaos in the insurance market and further harm Kentuckians. Replacement proposals that include reaching beyond the ACA would erode Medicaid, and reduce or eliminate health insurance coverage for one in three Kentuckians. Congress should improve the ACA, and any healthcare program, so that more Kentuckians have quality, affordable health insurance, and Kentucky’s representatives in Washington should be aware of what damaging changes like these would mean back home.

Prevailing Wage Repeal Would Worsen Job Quality, Harm Kentucky Economy

Good-paying jobs like those in construction are the foundation of a healthy middle class and growing economy, and a skilled construction workforce builds the high-quality physical infrastructure necessary for  growth. According to a new research report, Kentucky’s prevailing wage law strengthens this important industry, and its repeal would have negative repercussions for job quality, workforce development and local economies in the Commonwealth.

Repeal Would Reduce Job Quality for Construction Workers

Kentucky’s prevailing wage law requires construction workers on state and local public projects costing more than $250,000 to be compensated, in terms of both pay and benefits, according to local industry standards measured by the state Labor Cabinet or the U.S. Department of Labor. The law therefore puts a floor on how low a contractor can bid labor on schools, highways and other public jobs, and also helps maintain wage standards for the entire industry in Kentucky.

A repeal or significant weakening of Kentucky’s prevailing wage law (for instance, exempting schools) would lower wages and benefits for workers and increase poverty and reliance on public assistance. The study’s authors estimate:

  • Construction worker income would drop by 10 percent.
  • 6,100 workers would lose employer-provided health insurance.
  • 10,300 would lose employer-provided pensions.
  • About 5,700 would become newly eligible for food stamps/SNAP and the Earned Income Tax Credit (EITC) for low-income workers.

Because people who have previously served in the military are more likely to work in construction than non-veterans, a repeal would disproportionately impact this group, draining an estimated $80 million in total wages and salaries from veterans in Kentucky.

Work would also become more dangerous for construction workers under a repeal of prevailing wages. That’s because the law creates an incentive for contractors to train workers in formal apprenticeships. More training leads to less accidents, preventing both injuries and fatalities. Research shows states without strong prevailing wage laws have higher injury and fatality rates.

Repeal Would Weaken Workforce, Local Economies

Prevailing wage laws are designed to support a skilled workforce, in part by not encouraging use of the lowest-paid workers. These laws are also designed to improve skills: contractors can pay apprentices less than senior “journeymen” on prevailing wage jobs, which leads to increased use of apprentices – and as a result, significant investment in worker training – in states with strong prevailing wage laws. Research shows a steep decline in training after states repeal prevailing wages (in the range of 38 to 42 percent less apprenticeship training) and a 6 to 8 percent difference in apprenticeship enrollments between states with and without prevailing wages.

Weakening labor standards will also lead to fewer opportunities for local construction workers and job loss. According to the report, Kentucky would lose a total of 1,800 construction jobs under a repeal of prevailing wages to out-of-state competitors. Kentucky still has 10,900 fewer construction jobs than it did before the Great Recession and a repeal of prevailing wages would make matters worse.


Source: Economic Policy Institute analysis of Current Establishment Survey data.

And when construction workers lose employment due to out-of-state competition, local economies suffer too. That’s because workers spend their paychecks patronizing local businesses, buying groceries and improving the value of their homes, for instance, creating an economic multiplier effect. Kentucky would lose an additional 1,100 jobs in other industries due to the loss of construction worker spending, according to the report, and an associated $12.5 million in state and local tax revenue. These figures do not include the additional economic consequences of a repeal caused by erosion in construction wage standards.

Repeal Not Associated with Savings for State and Local Governments

Despite lowering wages for construction workers, a prevailing wage repeal is unlikely to save governments and school boards money. The report notes that 13 out of 17 (76 percent) peer-reviewed studies since 2000 suggest prevailing wages are not associated with higher public construction costs. The research shows increased wages are offset by other factors such as higher productivity due to a more skilled workforce. Because labor is a small and decreasing share of total construction costs (23 percent, nationally), small increases in productivity or decreases in other costs offset higher wages. In states with prevailing wage laws, contractors spend less on materials, fuel, and equipment, take home smaller profits, and find other efficiencies to remain competitive while still paying good wages.

Research that claims savings to the public sector from repealing prevailing wages typically does not take these factors into account. So-called “wage differential” analyses, such as Kentucky’s Legislative Research Commission (LRC) 2016 fiscal note for SB 9, estimate the difference between prevailing wage and non-prevailing wage labor costs and assume the difference, multiplied by labor’s current share of total construction costs, is passed onto government. These analyses do not look at differences between total construction costs on prevailing and non-prevailing wage jobs, meaning they ignore the offsets described above. SB 9 proposed exempting school construction projects from prevailing wages, a significant weakening of the state’s law.

A summary of the report is available here.

What the Research Says about “Right-to-Work” Laws, Employment and Wages

As several Kentucky counties have passed or are considering local “right to work” (RTW) laws, serious research calls the benefits of such laws into question. The best evidence suggests that RTW fails to result in stronger job growth including in manufacturing while resulting in lower wages and benefits for workers in RTW states.


RTW laws prohibit unions and employers from including a provision in contracts that requires employees who benefit from union representation to pay their fair share toward those costs. In becoming RTW, Kentucky counties including Warren, Todd and Boone are the first local governments in the nation to join the 25 states with RTW laws, including most recently Indiana and Michigan in 2012 and Wisconsin in 2015. Despite its name, RTW does not increase or enhance access to jobs, nor does it ban forced union membership, as such is already illegal under federal law.

Proponents are making bold claims about the potential of RTW to boost Kentucky’s economy, in particular that it will grow manufacturing jobs as existing companies expand and new ones locate here. But studies that use careful statistical techniques to analyze the experience of states do not support claims of the economic benefits of these laws, while pointing out potential harm to workers in terms of job quality.

What the Research Says about “Right-to-Work” Laws