House Passes Budget, Senate Discusses Pension Reform Legislation
The House passed a budget—a first for the new Republican leadership— including funding for teacher and public employee pensions as well as an increase in funding for K-12 education. The House budget reverses many of the draconian cuts included in Governor Matt Bevin’s budget proposal.
In order to fund these efforts, the House passed a 50-cent increase in the cigarette tax and a 25-cent tax on all doses of opioids at the wholesale level. The revenues from these proposals mean that the House budget found enough funds for certain projects in the wake of lower-than-expected revenues.
The Senate also held a hearing on
SB 1
, the pension reform bill. Teachers packed the halls of the legislative annex to hear the discussion of the legislation. Senate State and Local Government Chair and bill sponsor Joe Bowen (R-Owensboro) announced that there would be a new draft of the reform legislation that would need to be scored, which takes time.
Now is the time of year when House and Senate members hunker down to work as the days left in the session are dwindling.
Tax Reform Legislation Introduced by House Republicans
Tax reform has been a priority talking point for the new House Republican majority, but major reform legislation hadn’t been filed until this week. Two separate bills were introduced by Republican legislators proposing comprehensive changes to the tax code. With a budget shortfall and growing pension debt in the state, all legislators have noted the need for tax reform and potential revenue-increasing language. The House has taken the first step to increase revenue by passing a 50 cents tax increase on cigarettes and a 25 cents per-dose tax increase on opioids at the wholesale level. These revenue-generating measures passed as part of a comprehensive revenue bill that accompanied the House budget proposal.
House Bill 599
, filed by
Representative Jason Petrie (R-Elkton),
proposes sweeping reforms to the state taxing code. Petrie lives on the Kentucky/Tennessee state line and introduced the bill modeled after Tennessee’s tax law. Petrie expressed concerns with how Kentucky is out-of-line with its southern border neighbor by having a higher individual income tax. The goal of the bill is to reduce the corporate and individual income tax by raising the state sales tax and removing certain tax credits. Under this proposal, the sales tax would increase from 6 to 8 percent. This proposed change raised major concerns with KRF’s government affairs team and Petrie noted that he wasn’t “married” to the increase, but just wanted to put an idea out there to spur discussion on tax reform. Petrie has already drafted a committee substitute that would make changes to his proposed bill but that language has not been shared at this point. House Appropriation and Revenue Committee Chair Steven Rudy (R-Paducah) referenced Petrie’s bill in committee as a starting point for tax discussion in the 2018 regular session. Rudy expressed the need to address tax reform sooner rather than later and noted he was fully committed to passing tax reform legislation this session.
The Senate has commented they will not address tax increases as stand-alone legislation but acknowledges the need for comprehensive tax reform. The Bevin administration has stated the need for comprehensive tax reform to occur in a special session, rather than piecemealing tax changes. Now that the House has passed a revenue bill proposing tax increases, the ball is in the Senate’s court to decide how to move forward this session.