Politics & Government

‘Stopgap’ budget, tax bill heads to Ky. Senate. Will it be enough to salvage pensions, education?

Rep. Steven Rudy, R-Paducah, sponsored the budget and tax bill that was approved Thursday by the Kentucky House. “This is a stopgap,” Rudy said, pledging that comprehensive tax reform would follow.
Rep. Steven Rudy, R-Paducah, sponsored the budget and tax bill that was approved Thursday by the Kentucky House. “This is a stopgap,” Rudy said, pledging that comprehensive tax reform would follow.

The Kentucky House of Representatives easily passed a budget bill Thursday that would increase taxes in Kentucky while funding retiree pensions and education.

But the fate of the bill, especially the tax increases, is uncertain in the Senate.

“I’m sure that they will put their touches and their ideas on it,” said House Speaker Pro Tempore David Osborne, R-Prospect.

Senate President Robert Stivers offered little additional insight to what his legislative body will do. He said he doesn't know how the Senate will handle the House tax plan but he prefers a comprehensive tax plan.

“If you are going to do taxes, you need to do it in broad-based tax reform,” said Stivers, R-Manchester.

The bill relies on three taxes — a tax on prescription opioids, an increase to the state’s cigarette tax and the elimination of an individual income tax credit — to raise around $500 million in revenue over the next two years.

That made the vote difficult for Republicans, many of whom have consistently pledged that they won’t vote to raise their constituents taxes. Despite those pledges, the tax increase passed 68-25 with only seven of the 63 Republicans voting against it.

“Not a member of our caucus is excited about voting for a tax increase, but we’re here to make adult decisions,” Osborne said. “And sometimes that requires very, very difficult decisions.”

Like Stivers, Republican lawmakers have consistently said that they do not support raising taxes unless it comes with comprehensive tax reform. State Sen. Dan Seum, R-Louisville, said there is no need to raise taxes in Kentucky when the state could approve casino gambling, cannabis or sports betting.

To appease House Republicans, the vote Thursday came with a pledge from the bill’s sponsor, Rep. Steven Rudy, R-Paducah, that comprehensive tax reform would follow.

“This is a stopgap,” Rudy said. “I make no doubts about it and as I committed last night in committee and I commit again today on this floor, this is just to get the ball rolling to get it down to the Senate.”

But with only six weeks left in the legislative session, and a pension bill that still hasn’t been voted out of the Senate, any comprehensive tax reform in the regular session looks like a long shot.

Democrats seized on the fact that the tax increases weren’t accompanied with wider reform. Rep. Jim Wayne, D-Louisville, who has been vocal for several years about his desire to raise revenue in Kentucky, said the Republican attempts to increase revenue were not enough.

“If you’re going to have the courage to raise taxes, I think we should take a serious look at it,” Wayne said.

The House budget is more generous than the one proposed by Republican Gov. Matt Bevin in January. It increases the main funding formula for K-12 schools, known as SEEK, and it provides $127.8 million per year for school transportation costs.

But it still makes several cuts. Most state agencies will experience a 6.25 percent budget cut and several programs, like the University Press out of the University of Kentucky and the Kentucky Coal Fields Endowment will lose funding.

Stivers said he wants more analysis and review of the House’s tax increases “before I say it is something that will be considered or should be considered.”

Daniel Desrochers: 502-875-3793, @drdesrochers, @BGPolitics

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