Lexington budget vetoes stand, let's keep moving

The Lexington city council decided not to override Mayor Jim Gray's line item vetoes that helped to curb wasteful spending in Lexington. Read the Herald-Leader's report here.

We wrote quite a bit about this and applauded the mayor for fighting for spending cuts BUT this should be viewed as just the first step. There are many other financial issues that must be tackled so that Lexington can get on solid footing for the future. Public pension reform, privatizing city owned golf courses, etc... The list goes on and on...

I encourage all Lexingtonians to contact their council member and urge them to not rest now, to keep fighting for reductions in wasteful spending!

Lexington mayor vetoes spending increases

Stands up for fiscal responsibility in tough economic times

We have been following the budget process in Lexington for the past couple of weeks. Today, mayor Jim Gray stood by his belief that the city should not make its financial situation worse by allocating funds for new frisbee golf courses, lacrosse fields and hiring more employees onto the city payroll.

According to Kentucky.com, using his line item veto power, Gray rejected $889,612 in spending increases  recommended by the city council. The council can still override the veto if nine of the 15 members vote in favor of the budget.

Contact your Lexington city council member and tell them how you feel about wasteful spending in tough economic times.

"We've got to live within our means."

"We've gotta be just like the private sector in government. We must be responsible. We've got to live within our means."

-Jim Gray - Lexington's mayor regarding recent budget discussions

Trust me, disc golf is not an essential service

I wrote yesterday about the "Frisbee-golf" spending in the recently proposed Lexington city budget. Brenna Angel from WUKY is reporting that the city council has accepted that budget however there were some dissenting votes.

Council member Dianne Lawless voted against the senseless spending additions in the budget and was quoted as saying:

"There are many things in here that are not essential services. And that's where we are right now."

According to the article, mayor Jim Gray plans to use his line item veto power with regards to the budget.

I commend those who can make tough budget decisions in tough times.

 

The real picture of entitlement spending

While Washington continues to battle over the budget, the forecast for entitlement spending grows more grim.

This graph by The Heritage Foundation's lead budget analyst, Brian Riedl, shows the trajectory of entitlement spending in the US budget.

Riedl's estimates reveals an increasingly problematic trend. From 2008 to 2020, he projects entitlement spending (Social Security, Medicare and Medicaid) to increase $909 billion.

The question we should be debating is not whether or not we should reform entitlements but how. Entitlement spending continues to drive up the debt, and the problem is only getting worse.

This projection certainly has significant implications for Kentucky, particularly as the commonwealth continues to struggle with its Medicaid budget. As a joint state and federal program, the forecast for increasing federal Medicaid spending will not leave Kentucky's program untouched.

'The Path to Prosperity' includes block grant for Medicaid

Today, House Budget Chairman Paul Ryan released his 2012 budget proposal--"The Path to Prosperity." Ryan's proposal outlines a path to cut spending significantly. He also takes on entitlement reform. Economists and commentators have already begun to debate the plan--some on the right arguing that his budget does not go far enough and others on the left concerned with the size of his proposed cuts.

One reform in particular could be significant for the commonwealth. Ryan proposes a block grant for Medicaid. The block grant would cap the amount of federal aid states receive, and in turn, states would gain greater flexibility to run their individual Medicaid programs without oversight by the federal government.

For a state like Kentucky, Medicaid budgetary problems are not a secret, as we watched in this year's legislative session. The Bluegrass Institute has argued that increased federal funding will only hurt the state and will not solve our economic crisis.

When states limit federal funding and gain greater control, they have the opportunity to create and manage sustainable programs. Rhode Island has already proven this with its Global Consumer Choice Compact Waiver. The waiver capped spending, gave the state greater flexibility, saved the state over $100 million and even led to a budget surplus in the midst of the recession.

The debate for the 2012 budget is far from over, but a block grant for Kentucky's Medicaid program could make a substantial impact.

There ain't no such thing as a 'free lunch'

For two weeks in a special session, Kentucky legislators have been debating what to do about the Medicaid budget shortfall. The Governor proposed borrowing money from next year's budget, not only to plug the budget hole but also so the commonwealth can reap more federal funding with the higher Federal Medical Assistance Percentage (FMAP) before the higher match rate from stimulus funds runs out in June of this year.

There are two problems with this approach.

For starters, borrowing money from next year's budget to fill a gap this year is a bad business move for anyone. Most Kentucky businesses and residents, like state government, have experienced the hardships of the economic recession. As a result, we've made due with less. We've trimmed our budgets, cut out excess spending, and worked to find more ways to save. Scaling back is not easy and often it's unpleasant, but it's reality. The commonwealth should take the same approach.

But beyond that, increased federal funding does more harm than good for state budgets. Yesterday, the Texas Public Policy Foundation released a paper analyzing just how damaging increased federal funds are to states. Increased funds not only lead to greater control of state programs by the federal government, but they also bloat spending to unreasonable and unnecessary levels.

By expanding programs with one-time funds that will run out, we are laying the groundwork for an economic disaster in the commonwealth.

Governors ask Washington for Medicaid relief

On January 7, 33 Republican governors and governors-elect sent a letter to the White House with a clear message: repeal Obamacare's Medicaid provisions.

One of the major provisions of the Affordable Care Act will expand Medicaid eligibility by 2014 and requires states to maintain eligibility or lose federal funding--which accounts for at least half of every state's Medicaid budget. In order for states to comply with the required Medicaid expansion, they must consider raising taxes or significantly cutting other programs, most notably education.

Governor Rick Perry of Texas wrote, "The one-size-fits-all approach to healthcare adopted last year does not work in the states and imposes unnecessary financial burdens on already strapped state budgets. Now is the time for the federal government to restore states' flexibility to craft Medicaid programs tailored to their specific needs."

Every state's population is unique, and each needs the flexibility to run its own programs in order to serve the needs of its citizens. The federal government's continued over-involvement in Medicaid is another example, as Gov. Perry points out, of a one-size-fits-all approach that does nothing to help the very people the program is intended to help.

Kentucky currently faces a $100 million Medicaid budget shortfall. The Heritage Foundation estimates that Medicaid expansion will cost the state over $500 million to expand the program by 2014.

While Kentucky was absent from the states represented in this letter, the commonwealth is experiencing the same impending challenges to this state program already in crisis.

Maybe more than rhetoric in possible spring session?

Kentucky Governor Steve Beshear has announced that he plans to call a special session later in spring to deal with the current lack of a budget.  In addition he is doing a of campaigning to discuss what life would be like without a state budget: a government shutdown.

Beshear recommended to lawmakers that they not raise taxes as well as not increase state debt.  This sounds like a desire to be accountable and fiscally responsible.  I can only hope that this rhetoric carries through to action in the special session.

Charter school legislation is also a possible topic of discussion for a special session making this a potentially interesting spring in Frankfort. Let's hope the state legislature can do it's constitutionally mandated job this time as we pay them more money since they couldn't get it done during the regular session.