12

portion, on average over 20%, of their state General Fund support should the stop loss and hold harmless provisions be allowed to sunset. Other KCTCS institutions could also be negatively affected.

It was not the intention of Postsecondary Education Working Group (PEWG) members for Kentucky institutions to have to contend with fiscal cliffs like the ones facing KSU and MoSU. In fact, in a Goal and Guiding Principles document produced by a Funding Strategy Steering Committee of the working group, committee members agreed to a set of principles to guide funding model development, which included an imperative for the distribution mechanism to be “Reasonably Stable” and “not permit large annual shifts in funding to occur” (Report of the Postsecondary Education Working Group to the Governor and Interim Joint Committee on Education, Appendix B, December 2016).

In their final report to the Governor and Interim Joint Committee on Education, working group members did not recommend that hold harmless and stop loss provisions should sunset after the three-year phase-in period. In fact, there was discussion in work group meetings regarding whether or not to establish a perpetual stop loss provision, but members decided the issue could be addressed three years down the road, when the working group was scheduled to reconvene.

In summary, unless the General Assembly takes action during the 2020 budget session to extend the stop loss provision in fiscal 2021-22, KSU, MoSU, six KCTCS institutions and potentially other institutions could lose more than 2.0% of their adjusted net General Fund. For this reason, there is unanimous support among Council members, campus presidents, chief budget officers, and CPE senior staff for the Governor and General Assembly to take action and extend the stop loss provision.

As indicated above, at the advice of LRC Budget Review and OSBD staff, only funding for mandated programs has been included on the A-Forms for 2021-22, though the institutions and the Council strongly recommend that the Governor and General Assembly continue a 2% stop-loss into the second year of the biennium.

The Council defines mandated programs as research or public service activities that have an external legal mandate—through statute, resolution, budget bill language, or executive order—and receive appropriations greater than $450,000 per program at the research universities or greater than $200,000 per program at the comprehensive universities and Kentucky Community and Technical College System institutions. Programs must also meet additional criteria to achieve mandated program status, including that the program or activity is not integral to the “instructional” mission of the institution, is relatively unique among institutions, is “program-funded” or line-itemed in appropriations bills, could be operated by an agency or organization other than a college or university, and is funded primarily with state General Fund appropriations.

Most mandated programs receive the lion's share of funding they need to conduct research or support service activities through direct General Fund appropriations to postsecondary institutions. Program funds are typically imbedded in an institution's