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KCTCS Budget Process

 

Overview

Statewide/State Budget Level
Postsecondary Education Level
Kentucky Community and Technical College System Level
Budget Development Process

Overview

The budget process in Kentucky state government is multi-leveled and biennial in nature. The description which follows identifies features of the process from three perspectives: 1) the statewide/state budget perspective; 2) the postsecondary education perspective of the Council on Postsecondary Education (CPE); and 3) the institutional perspective of the Kentucky Community and Technical College System (KCTCS).

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Statewide/State Budget Level

Constitutional Provisions

Kentucky's Constitution vests the exclusive power and duty to tax and spend public money in the General Assembly. The only bills the General Assembly must pass are the biennial budget bills (for the three branches and for which there is a balanced budget requirement). The budget is the state’s financial plan for spending money for both specific and general purposes for individual sources of public funds, i.e., the General Fund, the Road Fund, etc. Enacting the budget is the constitutional means by which the legislative branch addresses public policies and establishes public priorities.

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Budget Process Statutes

A number of specific statutes address the budget process.

 

     

  1. The Kentucky Revised Statutes (KRS) Chapter 7 directs the Legislative Research Commission (LRC) to study, examine, and generate information to help determine the fiscal needs of state government.

     

  2. KRS Chapter 48 establishes, in some detail, the Kentucky budget process at the statewide level and, among other things, describes the duties and functions of each area of state government during the development, enactment, and implementation of the Commonwealth's biennial budget. Major features of Chapter 48 include the following:

     

  3. KRS 48.040 directs the LRC to prescribe budget preparation instructions and forms;

     

  4. KRS 48.050 directs that branch budget requests be transmitted to both the Governor's budget office and the legislative branch;

     

  5. KRS 48.300 establishes a Budget Memorandum to convey legislative intent;

     

  6. KRS 48.130 and 48.600 provide for a budget reduction plan;

     

  7. KRS 48.400 and 48.630 direct that the Interim Appropriations and Revenue Committee receive information on budget revisions; and

     

  8. KRS 48.705 creates the state's Rainy Day Fund (the Budget Reserve Trust Fund).

 

Note: The voters of Kentucky approved a constitutional amendment in November 2000 adopting annual sessions.

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Features of the Budget

The Kentucky budget system employs an omnibus approach to the appropriations process, but with separate bills for each branch of government. The Commonwealth's budget is a complete financial plan for the expenditure of all public funds and the budget bill is law for the duration of a fiscal biennium. Provisions of a budget bill may modify or suspend, for the duration of a biennium, any state statute which is germane to the broad subject of state government finance.

Budget fund classifications in the operating budget consist of the General Fund, the Road Fund, the Federal Fund, and the Agency (restricted) Fund. These fund sources, combined with proceeds from highway bond issues, comprise the operating budget of the Commonwealth.

The capital budget lists line-item capital projects and associated appropriations by fund source. Capital budget projects are defined as the acquisition of buildings and land estimated to cost $600,000 or more, acquisition of major items of equipment or systems estimated to cost $200,000 or more, leased space costing $200,000 or more, or computing/telecommunications systems costing $600,000 or more. State law requires projects meeting these thresholds to be authorized through line-item appropriations.

Budget information is organized and reported in various budget documents at the budget-unit level and is summarized by major budget function or cabinet. Appropriation information in the appropriations bill is organized at the agency level and summarized by major budget functions. Operating budget expenditure classifications include the following: personnel costs, operating expenses, grants/loans/benefits, debt service, and capital outlay.

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Preparing and Submitting the Budget

Budget instructions are issued by the legislative branch in July of every odd-numbered year and state agencies are directed to submit their budget requests in October of every odd-numbered year. Agency budget requests are typically organized according to two levels of budget information: current services and additional funding. Historical expenditure information is submitted on the two most recent fiscal years. These two historical years, the current year revised budget, and the request for the next two fiscal years comprise the typical budget request display.

Preliminary General Fund and Road Fund revenue forecasts for the current fiscal year and the next two years are developed by a Consensus Forecasting Group in October of every odd-numbered year. Final revenue forecasts accompany the introduction of the Executive Budget in January of every even-numbered year. State agencies are responsible for forecasting estimates of agency receipts and federal funds.

The Governor's budget recommendation, styled the Executive Budget, is due for introduction no later than the 15th legislative day for regular sessions following gubernatorial elections or the 10th legislative day for mid-term sessions.

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Enacting the Budget

A draft appropriations bill and a series of individual documents, collectively known as the Executive Budget, are submitted to the General Assembly. Customarily, the Governor's Executive Budget includes the following individual documents: Revenue Estimates, Budget-in-Brief, Executive Budget, Historical Information, Capital Financing Analysis, and Highlights and Priorities.

The draft appropriations bill contains appropriations for the operating budget, capital budget line-item appropriations, general provisions governing statewide fiscal policies, state compensation and employment provisions, and special provisions.

The budget, once introduced, is reviewed by the Appropriations and Revenue Committees and Subcommittees in both the House of Representatives and the Senate in a lengthy series of public hearings normally lasting over two months. Once each chamber has enacted its version of the budget, differences between the two chambers are worked out in a Joint House-Senate Conference Committee.

Once the budget is passed by the General Assembly, it is presented to the Governor who has the constitutional authority either to sign, allow to become law without his/her signature, or veto distinct items in the budget bill or the entire budget. A constitutional majority of the membership of both the House and Senate is required to override a gubernatorial budget veto.

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Budget Execution and Oversight

After the Session has adjourned, the Governor's budget office publishes an enacted budget document, which includes all legislative changes, and is called the Budget of the Commonwealth. The Finance and Administration Cabinet, at the direction of the Governor's budget office, then proceeds to establish an allotment schedule for distributing enacted appropriations over the fiscal year period. Authorization is provided in the budget bill for executive agencies, with the approval of the Governor's budget office, to establish appropriation revisions, upon review by the Interim Appropriations and Revenue Committee. These revisions typically involve an expenditure plan for additional agency funds or federal funds above the amounts for those fund sources contained in the enacted budget. Institutions of higher education, however, have historically been exempt from the budget revision approval process, although they have traditionally reported appropriation increase information to the Interim Appropriations and Revenue Committee. When unbudgeted appropriations are to be expended, the Interim Appropriations and Revenue Committee reviews those plans as part of its legislative oversight function.

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Postsecondary Education Level

The Council on Postsecondary Education has the statutory responsibility to make a biennial budget request to the Governor and General Assembly with regard to specific funding amounts to be appropriated: 1) to the budgetary base of the institutions, systems, agencies, and programs; 2) to each individual trust fund in the Strategic Investment and Incentive Funding Program; and 3) for all capital projects to be appropriated from each individual trust fund in the Strategic Investment and Incentive Funding Program. Additionally, the CPE has the statutory responsibility to determine tuition rates for each postsecondary institution.

In developing the biennial budget request to the Governor and the General Assembly, the CPE works with the institutions, as necessary, to develop information to support the funding request for postsecondary education. Based on the Kentucky Postsecondary Education Improvement Act of 1997 , beginning with the 1998-2000 biennial budget process, the CPE advises the Strategic Committee on Postsecondary Education—with members from the CPE, executive and legislative branches—as to how the postsecondary education funds projected to be available should be allocated, based on priorities and projected resources.

The Strategic Investment and Incentive Funding Program referenced above includes six trust funds: 1) a Research Challenge Trust Fund; 2) a Regional University Excellence Trust Fund; 3) a Technology Initiative Trust Fund; 4) a Physical Facilities Trust Fund; 5) a Postsecondary Workforce Development Trust Fund; and 6) a Student Financial Aid and Advancement Trust Fund. As of November 15, 1997, (and biennially thereafter) the CPE presents a biennial budget request to the Governor and General Assembly which provides for: a) an annual current services budget for each postsecondary institution; b) a requested funding level for each trust fund in the Strategic Investment and Incentive Funding Program; and c) an indication of the eligibility criteria for each trust fund.

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Kentucky Community and Technical College System Level

Budgetary Policies

As identified in KCTCS policy, the KCTCS President is responsible for the development and implementation of systemwide budget policies and procedures. Responsibility has been delegated to the Vice President primarily responsible for Finance for the development and submission of the system’s budget requests in alignment with the strategic plan and for the evaluation of the effectiveness of budget implementation in coordination with the achievement of program objectives. The Office of the President coordinates the submission and justification of the annual operating budget to the Board of Regents. The Office of the President and the Vice President also coordinate the submission of the biennial budget request in alignment with the strategic plan to the Board of Regents, the CPE, and the executive and legislative branches of state government.The budget of the Commonwealth is developed prior to each biennial session of the General Assembly. In previous biennia, postsecondary institutions submitted budget (appropriation) requests to the CPE for approval prior to submission to the Office of the State Budget Director (OSBD) and the Legislative Research Commission (LRC). In complying with expectations in the Act, the CPE, in conjunction with the OSBD and LRC, developed a new process for the submission of the postsecondary education appropriations request beginning with the FY 2000-2002 biennium. Conceptually, the new process relies on the selection of out-of-state benchmark institutions for each Kentucky institution. This redesigned process applies to all public postsecondary education institutions and addresses KCTCS as a total system, rather than individual colleges. Thus, individual college requests are not considered at the state level.

After the General Assembly passes the appropriations bill containing the funding amounts for KCTCS, the colleges' operating budgets are finalized and approved by the KCTCS Board of Regents. The state's redesigned appropriations request process assures that KCTCS' funding request is consistent with its mission and programs.

Responsibility for management of KCTCS funds, (including contingencies) rests with the President of KCTCS. Budget authority is delegated to the college presidents for funds allocated to the college. Responsibility for management of each college's funds, (including contingencies) rests with the president of the college. Although the KCTCS President may delegate authority for systemwide specific fund management, the ultimate responsibility for the system remains with the President of KCTCS.

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College Biennial Budget Request

Each college, through appropriate internal processes involving consultation with faculty, staff and college administrators, is responsible for the preparation of a biennial request that reflects the college mission, the needs of the service area, and the high priority goals and objectives identified in the state, CPE, and college strategic plans. College biennial budget requests are developed in accordance with guidelines drafted for KCTCS and its individual colleges by the Office of the KCTCS President. Colleges may apply through KCTCS for financial assistance from four of the six Strategic Investment and Incentive Trust Funds: the Technology Initiative Trust Fund, the Physical Facilities Trust Fund, the Postsecondary Workforce Development Trust Fund, and the Student Financial Aid and Advancement Trust Fund.

Allocations of State Appropriations to Colleges

After the passage of the Kentucky Postsecondary Education Improvement Act of 1997, the 1998 General Assembly began the process of appropriating funds directly to KCTCS, effective July 1, 1998.

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College Annual Budget Process

Each KCTCS college, following guidelines developed by the KCTCS Board of Regents and the KCTCS President, is responsible for preparation of an annual operating budget. The budget is developed under the leadership of the college president and chief financial officer in consultation with faculty, staff, and other college administrators. After completion, the college budget request is submitted to the KCTCS Board of Regents (through appropriate KCTCS processes) for approval for compliance with its guidelines.

 

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BUDGET DEVELOPMENT PROCESS

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