Session Update: 2 days left!

When it comes to the state budget, which the General Assembly overwhelmingly approved on Wednesday, it can be easy to get lost in the numbers. No other legislation, however, better determines our priorities. It is, as one legislator said, our moral document.

I voted for it because I think it moves Kentucky in the right direction, a decision made even easier by the fact that it’s the first budget in 16 years not needing any cuts. At the same time, there are areas where I think improvements should have been made.

There are actually several budget bills, with one for each branch of government and others for transportation. Overall, they total about $118 billion, which includes state and federal revenues and restricted funds like college tuition that have to be spent where they’re generated.

About 90 percent of that money goes to four things: education, health and human services, criminal justice and capital projects like new buildings and repaved highways.

Since the start of the pandemic a little more than two years ago, the budget has benefited greatly from several federal stimulus packages, and one of the most sizable is the American Rescue Plan Act that became law in early 2021.

The General Assembly spends about $1.16 billion of our remaining ARPA funds in the upcoming budget, and within that total are $250 million for water/wastewater improvements; $242 million to help repay the federal loan used to cover unemployment insurance benefits at the height of the pandemic; $169 million for schools with urgent facility needs; and $75 million apiece to help non-profits and to boost tourism in the commonwealth.

Other big-ticket items scattered in the budget are $200 million to overhaul the state fairgrounds in Louisville; $170 million to do the same for many of our state parks; and $250 million for our already sizable “Rainy Day” fund, which is nearing $2 billion, a number far higher than it ever was pre-COVID.

I certainly support having strong reserves to cushion any future economic downturn, but I believe much of this additional deposit could have been better spent drying up the numerous rainy days we’ve already had. That’s especially true with monthly state revenues continuing to easily outpace projections.

Educators, for example, weren’t given raises at all in the budget, even as state workers are set to get an 8 percent salary increase next fiscal year and another as high as 12 percent in the budget’s second year. There are also additional, and deserved, salary bumps for social workers, Kentucky State Police personnel and Judicial Branch employees.

Republican leaders said schools could provide raises through the additional money the state is sending them, but given inflation and other costs, there’s no guarantee that this will happen. I believe the previous Republican House Speaker was correct when he tweeted this past week that not providing a much-deserved raise for teachers is “the biggest smackdown and slap to public education in history.”

State government retirees also won’t get a cost-of-living allowance – their last one was in 2011 – and first responders and frontline essential employees won’t get COVID-related bonuses that other states and communities have awarded.

In education, the budget continues funding all-day kindergarten, something that began in August. The state only paid for half-days before then, although most school districts covered the rest.

In addition to that extra money for kindergarten, per-pupil funding will rise from the current $4,000 to $4,100 next year and then $4,200 the year after that. On the downside, there is still no money for universal pre-K for four-year-olds, and schools also don’t have money for things like textbooks and professional development.

Under the broad heading of health and human services, the budget authorizes 100 additional slots for two programs that help Kentuckians with intellectual or developmental disabilities live more independently. This is definitely good news, but it is nowhere near enough to address waiting lists measuring in the thousands.

Other programs getting a sizable boost in the new budget are schools’ family resource and youth services centers, public health departments and employee-based childcare.

In transportation, the state’s Road Fund makes progress toward expanding the Mountain Parkway and building new Ohio River bridges in Northern and Western Kentucky.

Looking ahead, the General Assembly has approved a tax reform plan that’s similar, but less extensive, than what the state House originally proposed earlier this year. Assuming the current plan is enacted, the state’s flat five percent personal income tax rate is scheduled to drop by a half percentage point in 2023. To help fill in part of that gap, the 6 percent sales tax will be extended to an array of services, including most paid parking; ride-share programs like Uber and Lyft; photography services; renting spaces for events like weddings and conventions; and cosmetic surgery.

Over the long term, Republicans want consumption-based taxes to be the primary source of state revenues, and their tax-reform plan will move further in that direction if spending targets are met and legislators approve.

It is worth pointing out, however, that our current mix of sales, income and property taxes and lottery revenues has provided one of the most stable systems among the states this century, and that has insulated us during wide economic swings.

States without an income tax also have much higher sales taxes than ours on average, and they have built-in advantages, too. Alaska and Texas can rely on sizable energy reserves, while Florida and Tennessee have much larger tourism industries than ours.

There were of course many other bills approved by the General Assembly this year, and like the budget, they, too, will have a major impact on us going forward. I will cover those more in-depth in the next few weeks.

At the moment, other legislators and I are back home for what we call the veto recess. When we return to the Capitol on April 13th and 14th, we’ll review what bills have been vetoed by the Governor and decide whether any remaining ones should also become law.

I want to thank those who have reached out during this legislative session, and encourage you to keep letting me know your thoughts and concerns. My email is Nima.Kulkarni@lrc.ky.gov, and the toll-free messenger line is 1-800-372-7181. It’s open during normal business hours around the year.

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