The Kentucky General Assembly on Friday voted to override vetoes by Gov. Matt Bevin on three key bills: the two-year, $22 billion state budget; changes to the tax code expected to generate several hundred million dollars in new revenue; and a measure that will give pension relief to local governments.
Although the House and Senate are overwhelmingly controlled by Republicans, lawmakers said they wanted to show their independence from the Republican governor, who early in the day criticized their budget and tax bills on Twitter.
“If you think siding with the governor and giving him the authority to control this budget is a good idea, then vote ‘No,’” Sen. Brandon Smith, R-Hazard, told his Senate colleagues, urging them to vote for the veto override on the budget bill.
Lawmakers return to the Capitol on Saturday for the last day of the 2018 legislative session. They said they expect to pass one or more measures to “tweak” inadvertent errors in their hastily assembled tax bill and deal with other problems brought to their attention in the past two weeks, including additional money needed for the statewide Kentucky Wired internet broadband project.
Most of Friday’s veto override votes were not close.
The House voted 57 to 40 on the tax bill, 66 to 28 on the budget bill and 94 to 2 on the pension relief bill, which allows a gradual phase-in on pension cost increases for local governments for a 10-year period. The Senate voted 20 to 18 on the tax bill, 26 to 12 on the budget bill and 34 to 4 on the pension relief bill.
Bevin tried to thwart the override votes by recommending in a series of tweets that lawmakers agree to a special legislative session in coming weeks where they could spend more time deliberating with him on tax and spending plans.
“I am stating publicly that not only will I call a special session to pass a transparent and properly balanced budget, but that we will also pay for it in ways that are not arbitrary & complicated,” Bevin tweeted as the lawmakers started their day. “We have time to do this correctly. The people of Kentucky deserve nothing less.”
Bevin’s office also released a message from state budget director John Chilton, who said the vetoed tax bill contained a perilous revenue shortfall.
“My team and I have spent the past ten days with tax experts, as well as legislative leaders and staff, analyzing, scoring and attempting to correct House Bill 366, the revenue bill that Governor Bevin vetoed,” Chilton wrote.
“It is now evident that bill, as it was written, overestimated the revenue that would have resulted from it by as much as $87 million,” Chilton wrote. “This would have put the budget out of balance and would have required a budget reduction order early in the fiscal year. If the legislature overrides the budget but fails to override the veto of HB 366, $480 million will need to be raised to make things balance.”
But lawmakers disputed Chilton’s assessment.
Senate budget Chairman Chris McDaniel said the legislature budgeted $96 million in “excess funds” — in other words, more income than spending — and added $50 million more to the state’s “rainy day” reserve fund. All of this should be adequate to cover the shortfall that Chilton is alleging, McDaniel said.
“The budget and revenue bills are balanced, and there are excess funds to ensure that they will remain balanced,” McDaniel, R-Taylor Mill, said in a Senate floor speech.
In debates on their chamber floors, Republicans painted the tax bill as the only way to pay for the extra education funding they provided in the final budget, compared to more austere versions of the budget seen earlier in the session: fully funding teacher pensions, restoring funding for transportation to K-12 schools and raising the amount schools receive per student through the so-called SEEK formula.
“We said let’s send a message and let’s fund SEEK at the highest level it’s ever been funded,” said Rep. Jason Nemes, R-Louisville. “If you push that red button, you are not funding education.”
Outnumbered Democrats pushed back. Although the Kentucky Education Association — which spent $95,000 supporting Democrats in the 2016 election — urged them to override the veto, Democrats said it didn’t do enough to fund education and would hurt the poor.
Even the additional SEEK funding is still less than 2008 levels when adjusted for inflation, so Kentucky schools are losing ground, they said. And the tax cuts and tax hikes in the revenue bill disproportionately favor the wealthy over the working class, they said.
“Of the $550 million in giveaways most of that is going to the top 1 percent, the millionaires in this state,” said Rep. Jim Wayne, D-Louisville. “This, ladies and gentlemen, is what we call a regressive tax bill. And that, ladies and gentlemen, is immoral.”
Among other things, the tax bill will lower the state income tax for most individuals and corporations; tax pension incomes as low as $31,110, compared to the current pension threshold of $41,110; apply the 6 percent sales tax to 17 services, including auto repair, dry cleaning, gym membership and small animal veterinary care, and increase the cigarette tax from 60 cents a pack to $1.10.
The budget bill cuts much of state government by 6.25 percent, including universities, on top of previous rounds of spending cuts since the 2008 recession. It funds some — though not all — of the 70 programs that Bevin had proposed cutting in his budget plan, including the Kentucky Mesonet, the state’s civil legal aid program and partial funding for the Robinson Scholars program at the University of Kentucky.