The 2021 session of the General Assembly gaveled in on January 5. Legislators lost no time in getting down to business. Ceremonial formalities such as the swearing in of members, election of constitutional officers, and adoption of rules of procedure were quickly dispensed with on the sessions first day. The impact of the COVID pandemic was evident in each chamber’s rules, their deliberate approach to legislating in the sessions first week, and the topics of each chamber’s priority legislation. But before we delve in on this week’s action, first a word on the sessions most important bill and the focus of this week’s legislative action: the budget.

Governor’s Budget

Due to COVID the General Assembly only passed a one year budget in the 2020 Session, so legislators are forced to tackle the second year of the budget this session. The first step in the budget process is the Governor’s Budget Address, which was postponed until January 7th, because of the turmoil in Washington DC. The text of the Governors address can be seen HERE.

On the 8th, the House and Senate Appropriations and Revenue Committees met jointly to hear State Budget Director John Hicks present, using this slide presentation, on the Governor’s budget proposal. The proposal includes three pillars – “Immediate Relief to Small Business and Individuals. Investment in Our People, and Bold Investments in our Future”. Hicks explained that the Governor’s intent with this proposal is to deploy a large amount of one-time money for non-recurring uses that gives relief and provides strategic investments.

The budget bill, HB 192, includes a total of $613M in one time money for non recurring use. The funds came from the following sources:

• $49M – FY 21 ending balance
• $126M – increase in the revenue estimate
• $319M – Freed up CARES Act funds for state government expenses
• $119M – Higher federal Medicaid share

With the $613M the Governor’s proposal includes the following:

• $220M for small business relief
• $20M in non-profit aid
• $100.9M to repay the Unemployment Insurance loan
• $48M in CARES Act funds for one-time payments to UI claimants
• $100M for school building renovation and replacement
• $50M for the Broadband Deployment Fund
• $22M for a newly established Emerging Industries Fund
• $100M in the Budget Reserve Trust Fund

Other highlights of this budget bill include:

• $1000 Teacher and Classified employee salary increase
• 1% SEEK per pupil increase
• Elementary and Secondary School Emergency Relief Fund – $928M through FY 2022 (New Federal Relief Bill)
• Higher Education Emergency Relief Fund – $261M through FY 22 (New Federal Relief Bill)
• 2% increase for postsecondary institutions
• Better KY Promise Scholarship Fund – $16.4M (from Lottery funds) to expand the Work Ready Scholarship program to include all Assoc. degree and certificate seeking students
• Fully funds Medicaid and increases waiver slots
• $1M to Medicaid to leverage federal dollars on an initiative to fully enroll underrepresented populations
• Additional $12M to local health departments
• 76 new social worker positions
• $47.5M to replace the UI system, as well as funding to restore 90 staff positions
• $72M to allow quasi governmental agencies to pay the full pension contribution rates
• 1% salary increase for state employees and an increase for KY State Police
• Funding to address deficits at state parks, the State Fair Board and the KY Horse Park
• $30M in bond funds for three economic development programs
• $400,000 for the Louisville Waterfront Development
• $8.4M for public transportation to replace the loss of toll credits

Legislators expressed concern at the level of spending and suggested it might be more prudent to take a conservative approach to protect against future economic decline. Also of interest, In response to a question, Hicks shared that of Kentucky’s CARES Act funding allocation, currently $10M remains uncommitted. He also shared that the Unemployment Insurance loan balance is currently $507M and will increase until Spring when employers begin making payments.

The budget is expected to move quickly through the legislative process over the next several days so that House and Senate leaders can work in a conference committee to begin putting together their changes to Governor Beshear’s proposal. We expect the conference committee to work through the January Recess break, which will begin later this week.

Weekly Action Recap

Looking back at last week we saw significant rule changes, a quick pace, and several priority bills move through the process.

Rules

The Rules changes adopted by the two chambers were significant and reflect measures meant to deal with legislating in the time of the COVID pandemic. Both chambers adopted rules to allow remote participation, with the House rules permitting remote voting in both committee and floor action from legislators’ annex offices. More significant were the rules changes that strengthen the ability of majority leadership to control the movement of bills. Under rule changes adopted in each chamber this year, both the Rules Committee and Committee on Committees can hold bills indefinitely without referral or movement.

Pace & Calendar

For only the second time since odd year sessions began in 2001, significant legislation moved during the organizational session and for the first time ever a short session will extend into the second week in January when the chambers go back into session on Monday. This is due to the General Assembly’s amending of the Legislative Calendar this week to go into session on Saturday, January 9th and Monday-Wednesday of next week January 11-13 instead of the original calendar ending the organizational session on Friday, January 8th. The amended calendar will utilize 8 of the sessions 30 legislative days.

Bill Actions

The House and Senate priority legislation was filed and has moved early with a focus to respond to the Governor’s actions on COVID-19. For example HB 1 is intended to provide relief to businesses and schools to open under CDC or state guidelines whichever is less restrictive; and SB 1 will limit the emergency powers of the Governor requiring emergency orders to expire after 30 days if not approved by the General Assembly. Various other bills addressed employer liability due to COVID and restricted the emergency administrative regulation power of the Governor. By adjournment on Saturday, January 9, House Bills 1-5 and 10 were either on the Governor’s desk or out of the House. Similarly, Senate Bills 1-3 and 9 were either on the Governor’s desk or out of the Senate.