Kentucky lawmakers pass budget; It and tax plan head to governor

The House has approved the budget, 59-36 and the revenue bill 51-44. Both bills now head to the desk of Governor Bevin.

Lawmakers debated the revenue bill for more than three hours in the House and the budget bill for another hour.

Democrats on the House floor equated the revenue bill to "corporate welfare."

"This is not tax reform, this is a tax shift to those least able to pay," Minority Floor Leader Rocky Adkins said.

House Democrats also complained about a lack of transparency, calling the total process irresponsible.

House Republicans acknowledged it isn't perfect, but praised the budget for being committed to schools and fully funding the state's pension systems.

"We listened very loudly to the concerns and the areas from the people across the Commonwealth and tried to craft the best document," Republican lawmaker Steven Rudy said.

Republicans also called the plan courageous, saying it's a step forward, and a much-needed reform to the state's antiquated tax code.

"We've heard all along from our teachers, because they know what we need to be doing," Republican lawmaker Jason Nemes said. "We need to find funding and that's what we've done in the House of Representatives."

The House Republican Caucus issued this statement on Monday evening about the passage of the bills:

The Kentucky House of Representatives has finalized a two-year state budget that pours $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.

The budget bill is also notable for getting to the Governor before the ten day veto recess, preserving the Legislature’s ability to override any vetoes that he may issue. House Bill 200 was the first budget in modern memory to get to the Governor’s desk before the veto period.

“This budget makes the necessary investments in public education to prepare our next generation for the workforce, while also refusing to kick the can down the road like in the past by fully funding our pension systems,” said House Speaker Pro-Tempore David Osborne.

The measure restored the proposed cut to Family Resource and Youth Service Centers (FRYSC’s), while also increasing their funding. It provides no funding mechanism for charter schools over the next two years.

In addition to education, the budget also provided full funding for the Commonwealth’s woefully underfunded pension systems, meeting the ARC (Actuarily Required Contribution) while also not funding the Legislative Retirement Plan. Funding originally proposed for that plan was rerouted to our dedicated servants in the State Police Retirement System Fund, which faces a perilously large unfunded liability.

The budget prioritizing pension and education funding was made possible by a tax reform measure that raised revenue by modernizing Kentucky’s tax code, broadening Kentucky’s tax base while also lowering rates for Kentucky families.

After passing the Senate earlier in the day, the document now heads to Governor Bevin for approval.

The University of Kentucky also issued a statement late Monday night about the passage of the bills:

Dear Campus Community,

On Monday evening, the General Assembly passed a Biennial Budget that now goes to the Governor for his review. For the 2018-19 fiscal year, the state budget includes a reduction of $16 million in our base appropriation but does provide a performance funding pool of $31 million for postsecondary education institutions. We likely will receive between $8 million to $10 million from this pool, which will yield a net reduction in our base appropriation of approximately three percent.

The Biennial Budget retains funding for essential mandated programs across our campus. The budget proposal also includes $20 million of state bonds in each of the next two years to provide substantial support for the research we do that aims to treat and solve the health maladies that too many Kentuckians face through too much of their lives. This substantial investment in our research enterprise (and the confidence in and commitment to our work it represents) will allow us to better leverage our new research building to be opened in August 2018 and the federal government’s expanding financial investment in health-related research. The General Assembly has chosen not to fund the University Press of Kentucky. We received $672,000 in the current fiscal year; and we will be working with our partner institutions to identify ways to sustain the financial viability of the Press over the long term. Additionally, the General Assembly has chosen to no longer fund the annual appropriation of $1,053,000 to UK HealthCare for hospital direct support.

The Biennial Budget also includes language regarding tenure and how colleges may respond to financial exigencies. The University of Kentucky’s administration has been clear throughout the budget negotiations in Frankfort that our Governing Regulations provide a process for the removal of faculty and we will abide by the due process requirements of our Governing Regulations and the Constitution. If the current language remains intact, we will determine whether changes to our Governing Regulations are required. If so, the administration and faculty leadership, including the University Senate, will work together to develop changes to the Governing Regulations that would require review and approval by our Board of Trustees. Any changes will maintain our long-shared commitment to academic freedom; and we will ensure that our faculty tenure and retention policies and procedures are transparent and fair, retaining and providing all due process as required by state and federal statutes and the Constitution. Tenure is a vital element in the search for truth and interwoven into the fabric of our University’s work to create and expand knowledge; educate our students; and improve lives in Kentucky and beyond. Our Governing Regulations will continue to embrace that fundamental understanding.

The budget passed today makes all the more urgent the work we are doing together to develop a financial strategy that will position our campus for success over the long term. This initiative - known as “Our Path Forward” - represents our intention to take even greater control of our financial future, not by cutting programs and reducing payroll, but by methodically and objectively reviewing how we do our current work more effectively and how we seek new areas of growth and opportunity. This effort has generated input throughout the campus and is led by a series of workgroups that include faculty, staff, and students. We will continue to provide updates and seek feedback from the campus as we go forward together.

Eli Capilouto David Blackwell Katherine McCormick

President Provost Senate Council Chair

Kentucky Republican lawmakers revealed their plan for the state's two-year budget, including tax increases and other revenue measures on Monday.

Lawmakers discussed elements of House Bill 200, the budget bill, along with House Bill 366, a revenue bill, in a conference committee Monday morning. As many teachers listened to the committee discuss the bill, lawmakers highlighted several education funding strategies.

The Senate narrowly passed HB 366 with a 20-18 vote, while the budget passed with a 25-13 vote. The bills now go to the House.

The budget fully funds retired teachers' health care with general funds in the first year, while excess funds will support the second year. This means no retired teachers will have an increase in premiums or a decrease in coverage.

The budget increases funding for certain programs, including the Support Education Excellence in Kentucky (SEEK) program, which allocated state funds to local school districts. The program would provide $4,000 per pupil each fiscal year.

House Minority Leader Rocky Adkins, D - Sandy Hook, expressed concerns over the model used to distribute performance-based funding to public universities. He also believes the process used leading up to the proposed budget has kept Democrats in the dark.

The Kentucky State Police will receive an additional $1 million for an increase in salaries at the crime lab, and no private prisons will be allowed without the approval of the General Assembly.

The conference committee also received an overview of House Bill 366, which also addressed a couple high-profile educational issues. Lawmakers removed any language regarding charter schools, and the Kentucky Teachers' Retirement System will not be moved to a merit-based system.

HB 366 also includes some changes to the tax system. The bill would lower individual and corporate income tax rates to a flat five percent. This would result in a net loss of $194.1 million in revenues over two years according to the committee's report.

The bill does including multiple tax increases, including a 50 cent per pack cigarette tax and a sales tax on various services. It also calls for a tax on electronic cigarettes at the same rate as other tobacco products (15 percent).

The veterinary care sales tax only involves small animals. Livestock and horses are excluded from the sales tax.

The bill also calls for the suspension of three tax incentives. Those three are the Industrial Revitalization, Investment Fund and Angel Investor tax credits.

Rep. Steven Rudy, R - Paducah, claims HB 366 will bring in $230 million in new revenue per year for the state when it factors in the revenue streams.