State lawmakers put the finishing touches on the General Assembly’s 2018 session this week by overriding gubernatorial vetoes, most notably on the state budget and tax reform legislation, and passing bills right up to the session’s final hours.
House Speaker Pro Tem David Osborne joined the applause shortly after he brought down the gavel to adjourn the House for the final time in the General Assembly’s 2018 Regular Session (provided photo).
By overriding vetoes this week, lawmakers ensured that their preferred versions of the budget and tax measures become law.
The tax reform measure, House Bill 366, will increase state revenues which, in turn, allowed lawmakers to craft a state budget that avoids some, but not all, of the budget cuts that were contained in the governor’s original budget proposal.
Highlights of the tax plan – which is expected to generate nearly a half of billion dollars in additional revenue for the state over the next two fiscal years – include a cigarette tax increase of 50 cents per pack and an expansion of the state sales tax to some services, such as landscaping services, janitorial services, veterinarian services for small animals, fitness and recreational sports centers, commercial laundries, golf courses and country clubs, dry cleaning, pet grooming, weight loss centers and campgrounds.
The tax reform plan will allow the vast majority of working Kentuckians to see their income taxes go down. Most working Kentuckians currently have at least 5.8 percent of their pay go toward income taxes. But, starting this summer, that rate will go down to a flat 5 percent for everyone.
The corporate income tax rate will also go to a flat 5 percent.
Proponents of the tax plan say that it does what many say good tax policy should strive to do: broaden the tax base while lowering rates. They also note that the plan moves the state toward a consumption-based tax system. Critics of the plan say the tax changes disproportionately benefit the wealthiest Kentuckians.
As a result of the tax plan, budget cuts are less severe than some expected. The spending plan includes 6.25 percent baseline cuts for most state agencies, although some agencies are spared. Agencies that will avoid cuts include the Department of Veterans’ Affairs, Kentucky State Police, and local school-based Kentucky Family Resource and Youth Services Centers.
The budget fully funds the state’s main public pension systems at the levels recommended by actuarial analysis.
It also boosts base per-pupil funding for K-12 education to a record level of $4,000 per student in each fiscal year. It would also increase school transportation funding to $127.8 million in each year of the budget cycle.
The budget plan includes more than $60 million in new revenue to help implement newly approved adoption and foster care reforms, including more than $23 million for placement of foster children with relatives, and tens of millions of dollars to hire more social workers and increase social worker salaries.
In a separate action this week, lawmakers also overrode a gubernatorial veto to House Bill 362, a pension “phase in” bill for local governments. The legislation will allow city and county government to phase in increased contributions to their pension systems while allowing local governments to receive financing at zero percent interest when leaving the system.
Also this week, lawmakers sent a bill to the governor’s office aimed at reducing criminal gang activity. House Bill 169 will make gang recruitment a felony instead of misdemeanor for adults and make minors involved in such activity face felony charges in certain cases.
Although the legislative session has now ended, citizens are still encouraged to contact their representatives and senators to voice their opinions about issues of interest. If you’d like to share your thoughts and ideas with state lawmakers, please call the General Assembly’s toll-free message line at (800) 372-7181, or find contact information for individual legislators at www.lrc.ky.gov.
Legislative Research Commission
