By TOM LATEK, Kentucky Today
FRANKFORT, Ky. (KT) – The state spending plan for the next two years that includes a $480 million tax increase is on its way to Gov. Matt Bevin after winning approval from both the House and Senate on Monday following a report from the conference committee.
First up in the Senate was House Bill 366, the funding mechanism for the budget. It included some tax reform items, including raising the cigarette tax 50 cents per pack, a provision included in the House version but removed by the Senate.
It caps deductions on federal income tax at $10,000, while reducing the state income tax rate on individuals from 6 percent to 5 percent and setting the corporate income tax rate at 5 percent as well. It also reduces the exemption on pension income from $41,110 to $31,110.
Other deductions that will no longer be allowed are medical expenses and health insurance; casualty and theft losses; and interest expenses on investments.
The 6 percent sales tax will be added to some services, including auto repair, installation and maintenance; fitness center services; landscaping, janitorial and veterinarian services for small animals; golf courses and country club fees; overnight trailer campgrounds and bowling centers, among others.
Democrats objected to having to act on the bill only a short time after receiving a copy of it. Among them was Sen. Robin Webb, D-Grayson, who said, “This bill is so transparent you can’t see it.”
HB 366 passed by a narrow 20-18 margin, with seven Republicans joining the Democratic minority in voting against the measure. In the House the margin was not quite as close, 51-44.
Next up was the budget bill itself, HB 200, which after little discussion passed the Senate 25-13, with two Republicans joining the Democrats.
“I think it is a good budget, a solid budget,” said Senate President Robert Stivers, R-Manchester. “This is the first structurally balanced budget in my 22-year career, and the first time we are not using the savings accounts to pay for reoccurring expenses.”
He says the new tax package will generate $238 and $248 million dollars, during the next two fiscal years. “I don’t particularly care to be passing tax increases, it’s not part of my make-up,” Stivers told reporters after the vote. “But for us to have a change, we had to.”
It cleared the Senate 25-13. After similar debate in the House it passed, 59-36.
One person happy to see the budget approved was Supreme Court Justice Michelle Keller, since they funded the programs Access to Justice and Civil Legal Aid, which had been removed by Gov. Matt Bevin and was not included until the conference committee report.
“I am extremely grateful the House and Senate were able to restore the funding to those programs which help the poor, because it’s the moral and right thing to do,” Keller said. “I also recognize how difficult this time is for all Kentuckians.”
Since Gov. Bevin has line-item veto power on budget bills, Keller says she will be watching until the legislation is signed, adding, “I honestly believe the Governor’s office is very aware of the good work we do for veterans, victims of domestic violence, victims of elder abuse and violence, children and families in need.”
Lawmakers also gave final approval to the budgets for the judicial and legislative branches by wide margins.
With thousands of protesting teachers making their prescence known inside and outside the Capitol, the two-year plan puts $3.3 billion into the pension systems, boosts SEEK classroom funding to $4,000, and fully restores all of the Governor’s cuts to school transportation and retiree health insurance.
It also restored the proposed cut to Family Resource and Youth Service Centers, while also increasing their funding. It provides no funding mechanism for charter schools over the next two years.
Gov. Bevin issued a statement that hints he will use his line-item veto power.
“Kentucky is poised for greatness, but future successes are very much dependent on a competitive tax structure and a budget that is fiscally responsible,” he said. “A fiscally responsible budget does not include unfunded mandates and does not intentionally create budget shortfalls in the future. A fiscally responsible budget does not put the obligation for today’s spending on the backs of our children and grandchildren.
“I am very concerned that the current proposals from the General Assembly may not meet these basic standards of fiscal responsibility.”
The Governor said there is still time in the legislative session to ensure that any budget and tax changes put Kentucky on a stronger financial foundation.
Lawmakers will be in recess until Friday, April 13, when they return to consider overriding any gubernatorial vetoes.