February 13, 2016

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Legislature gets ready to take up tax reform

Published 10:06 am Wednesday, February 6, 2013

As Kentucky lawmakers look ahead to the upcoming tax reform debate, Lt. Gov. Jerry Abramson and Cabinet Secretary Mary Lassiter said the existing tax structure should be adapted to match an evolving economy.

Lassiter shared figures with the Senate and House appropriations and revenue committees showing the cumulative impact of some $1.6 billion in budget cuts since 2008 and lagging growth in personal income for Kentuckians.

Without systematic changes, Lassiter said the structural imbalance in the state budget could reach $1 billion by 2020.

If you keep doing what youve always done, youre going to keep getting what youve always got, Lassiter said, and thats kind of what weve always done with taxation in Kentucky.

Weve had 12 studies that say we need to change. Weve made some changes, but the fundamental changes to help our taxes grow with the economy, we really havent.

Budget cuts since 2008 have negatively impacted K-12 funding per pupil, afterschool programs, money for new textbooks in K-12 schools, and agencies like Kentucky State Police, local health departments, public protection and community based services, Lassiter said.

The projected revenue growth, of $238-$280 million, will be surpassed by some $300 million in anticipated budget items in the upcoming biennium, she said.

Abramson led Gov. Steve Beshears Blue Ribbon Commission on Tax Reform, which recommended 54 proposals estimated to bring in about $650 million annually in new tax receipts.

He went over those proposals, but not all will be considered in upcoming reform talks, likely in a special session since raising taxes requires a super majority in odd-year, 30-day sessions.

Our hope is that over this session we can get some discussion, we can create an opportunity for people to ask questions, interact with us, and then ultimately at some point in time make a decision as a General Assembly and move the revenue curve on an upward trajectory, Abramson said.

A tax reform bill backed by Beshear has not been filed, but Abramson said the governor hopes to find common ground on options with House and Senate leaders.

Rep. Steven Rudy, R-Paducah, questioned Beshears leadership on the tax reform issue since theres no specific bill before the Legislature.

Is this really it, just kick it to the General Assembly and let us decide? he asked Lassiter, who said thats not the governors message.

The message is that the governors door is open, she said, noting the tax reform commissions proposals are a starting point for Beshear and the General Assembly.

The governor is working very hard on this issue. He spent the last year studying the issue in the format of a commission.

Some lawmakers have seen tax reform as a possible way to better finance the Kentucky Retirement Systems, which faces more than $18 billion in unfunded liabilities.

Rep. Derrick Graham, D-Frankfort, said lawmakers should pass pension reforms after finding a viable way to pay the states actuarially required contribution to KRS. Thats a key part of Senate Bill 2, a pension reform bill introduced Tuesday, which could cost the state about $120 million in General Fund dollars next fiscal year.

If we cannot generate the amount of money that is required for us to sustain the pensions and if we do not generate additional revenue, then were putting the cart before the horse if we go with the pension plan first, Graham said during the committee meeting.

Rep. Rick Rand, a Bedford Democrat and chair of the House Appropriations and Revenue Committee, said he firmly believes Kentucky is at a crossroads.

Its time for us to have a serious discussion about where we want to be as a state, Rand said.