#KYGA22 Update: budget, tax reform, and charter school funding bills all heading to governor
The General Assembly has finished the bulk of their work for the 2022 legislative session. We are now in a 10-day period (excluding Sundays) Gov. Andy Beshear will review the bills passed and either sign or veto them. After the veto period, the legislature will reconvene on April 13 and 14 to vote on override vetoes.
Final Passage of Budgets
This week, legislators sent their transportation budget along with their executive, legislative and judicial branch budgets to Beshear’s desk. Of note is an 8% salary increase for executive and legislative branch employees, a $2,000 salary boost for non-elected judiciary branch employees, an increase in state funding for education across the board, funding for full-day kindergarten, a huge increase in payments for the Kentucky Retirement Systems and, at the urging of the Bluegrass Institute, a historic investment in the state’s Budget Reserve Trust Fund, also known as the rainy day fund.
School Choice Bill moves on to Governor’s Desk
Another historic moment was the passing of charter school legislation requiring Northern Kentucky and Louisville to open the commonwealth’s first public charter schools. Despite passing a law five years ago to allow charters schools in the state, the General Assembly failed to provide funding for the schools. The new law, once signed by the governor or upon a veto override, spells out that SEEK funding - the money the state gives to local school districts for per pupil spending - would follow children to charter schools. This has been a huge win for not only the Bluegrass Institute but also for the Kentucky Pastors in Action Coalition, a group of Black pastors in West Louisville who are looking at charters schools to help transform their area. And, of course, this is a huge win for Kentucky’s students and their families.
Changes to Tax Reform Bill rushed through the Legislature
Also heading to the governor’s desk is a tax reform bill that would expand industries subject to state sales taxes in order to lower the personal income tax rate slowly over time as certain conditions are met. The bill originally was developed in the House and it reduced the state’s current income taxes from 5% to 4% beginning in 2023 and had automatic triggers set in place to further reduce the income tax based on state revenue growth.
However, the Senate made significant changes to the formula. Their version of the bill lowers the income tax rate if the balance in the Rainy Day Fund is equal to or greater than 10% of the General Fund revenues for that fiscal year and if those revenues exceed the expenses incurred plus the individual income tax rate equivalent for that fiscal year. If these conditions are met and the legislature gives final approval, the Kentucky Department of Revenue will reduce the current tax rate by five-tenths of one percent (0.5%). The Senate version keeps most of the sales tax expansion outlined by the House but also includes taxes on electric vehicles beginning in 2024.
Because the Senate took the simple House formula and made it much more complex, members complained they had little time (in many cases no time) to review the changes before voting on the updated bill.
Legislators also complained about the lack of time to review the final Executive Branch budget. However, Senate President Robert Stivers, R-Manchester, took to the Senate floor to remind members of how the process has improved in recent years with increased bipartisan input in both chambers.
Rural Hospital Relief
Another bill heading to Beshear’s desk establishes a rural hospital revolving loan fund for counties with a population of less than 50,000. When first passed through the House, the legislation would have allowed up to 50% of the loan amount to rural hospitals to be forgiven with a maximum amount of $20,000 for each job retained or each new, full-time job created. With Senate changes, the bill now helps struggling rural hospitals by providing them loans up to $1 million.
Regulating Regulations
Also making its way through both chambers of the General Assembly is legislation requiring the Executive Branch to provide a new type of cost analysis when issuing regulations. Currently, when the Executive Branch creates a new administrative regulation, the only analysis of its price tag is the cost to state and local governments. This new legislation would require adding a cost analysis to the regulated entity. This will provide greater transparency, oversight and an understanding of the impact of regulations on our businesses and communities.
With only two legislative days left for the General Assembly to meet next month, we expect some last-minute bills slipped in when the veto days are over.
The legislative update is comprised by Sarah May Durand, director of government affairs for the Bluegrass Institute for Public Policy Solutions. She can be reached at sarahmaydurand@freedomkentucky.com.