Gov. Steve Beshear used his State of the Commonwealth speech Tuesday night to push the General Assembly to consider “reinvesting” in the state’s public education system with more revenue.
But some philosophical divides must be bridged before that proposal can become reality.
Continuing Kentucky’s progress in education was a central cog in Beshear’s pitch for additional revenue, which he said could be achieved by a constitutional amendment allowing expanded gambling in Kentucky and reforming the state’s “archaic” tax structure.
But Senate President Robert Stivers and House Speaker Greg Stumbo remain split on whether Kentucky’s education system needs more money at all.
“Before you get to the question of do you need more resources, it becomes a question of where you have placed your resources,” said Stivers, R-Manchester. He said the state should implement systems to ensure recipients of state-administered kinship care subsidies or free and reduced-price lunches are eligible “before we start talking about what we need.”
Stumbo, however, said the need for a better-funded public school system is obvious.
“If you believe that education human services and the funding to a level that would provide, for example, re-establishment of the childcare program that was abolished because of lack of funding, if you believe that there’s a need for more textbooks across the commonwealth and kids ought not to have to wait and use 5-year-old books that are torn and tattered in today’s world, that there ought to be opportunities for new learning through technology in the classrooms of Kentucky, then yeah, I think you would believe that there’s a need for new revenue,” said Stumbo, D-Prestonsburg. “I happen to believe that.”
In his speech before members of both chambers, Beshear mentioned a $44.3 million Race to the Top grant awarded in December to improve early learning programs, a 10.2 percent jump in the average high school graduation rate statewide from 2000 to 2010, and a 20 percent increase since 2010 in the number of Kentucky high school graduates prepared for college or a career.
However, the governor lamented the lack of growth in Support Education Excellence in Kentucky funding since 2008 during the recession. Kentucky schools also face $28 million in federal reductions this year because of the sequester, with the same outcome possible next year.
Reinvesting in education will be a top budget priority for Beshear, he said, even if that means cuts to state agencies that have already weathered 13 rounds of reductions totaling $1.6 billion.
“If we continue to cut or freeze education funding, our schools face the prospect of laying off significant numbers of teachers, greatly increasing classroom sizes and letting technology and equipment grow more outdated and useless,” Beshear said.
“We are in danger of losing all of the positive momentum which has been built up, and I am not going to allow that to happen.”
Modernizing Kentucky’s tax structure will not only provide funds for programs like education, it will also improve the state’s ability to attract businesses, Beshear said.
The governor gave few specific recommendations, only mentioning his proposal will include a constitutional amendment allowing local option sales taxes for specific projects, which appears to have a slim chance in the Republican-led Senate.
He also touched on other possible items under consideration for tax reform, such as lowering the top individual and corporate tax rates, broadening the sales and retirement sales taxes, establishing an angel investor tax credit for investments in small business, expanding research and development tax credits for human capital and making changes to favor Kentucky-based companies, all proposed by his Blue Ribbon Commission on Tax Reform.
“A more competitive tax structure will, as the economy grows, also stabilize long-term revenue, not because of higher rates, but because it’s aligned with today’s economy instead of one that existed a century ago,” Beshear said.
“Broadening our tax base and improving our business climate will help stabilize our future budgets.”
Stumbo and Stivers said they had not yet seen specific proposals from Beshear. Stivers said he could support a tax reform bill that would not increase an individual’s tax burden, and he would like to see the governor’s full tax reform package rather than focus on individual pieces.
Stumbo, meanwhile, said the state could lower corporate and individual tax rates while expanding the taxable base, thus some would see their liabilities increase.
“The balancing act is how far are you able to spread that base and hence how far are you able to lower those individual and corporate rates,” he said. “It would allow for more growth, obviously, if you expand the base, and that’s really, I think, more in line with what people talk about when they talk about elasticity in the revenue sources that we have.”
The governor will resuscitate a long-standing campaign pledge to open the state’s borders to expanded gambling. He pointed to industry studies that show hundreds of millions leaving the state — the pro-gambling business group Kentucky Wins! puts the figure at $541.3 million in tax receipts within the first year — and said expanded gaming would keep Kentuckians from flocking to out-of-state casinos.
“I realize there are many arguments for and against gaming, but there’s no reason to deny the people of Kentucky an opportunity to vote up or down on this issue,” Beshear said.
Senate Majority Caucus Chair Dan Seum, R-Fairdale, has filed Senate Bill 33, which would amend the Constitution to allow the state to offer licenses to no more than seven casinos. The Senate failed to pass a constitutional amendment tying expanded gambling to racetracks, and it’s unclear how receptive the chamber will be to SB 33.
“I don’t know,” Stivers said when asked about SB 33’s prospects. “As I’ve said, I’m not a micromanager of the issue. It’s not one of the issues I go out thinking of and putting on my agenda each and every day.”
The governor touted Kentucky’s successful launch of Kynect, the state’s health benefit exchange part of the Affordable Care Act, and his decision to expand Medicaid eligibility.
“Kentucky ranks among the worst, if not the worst, in almost every major health category, from smoking to cancer deaths, preventable hospitalizations, cardiovascular and cardiac heart disease, and diabetes,” he said. “That’s why I seized the historic opportunity created by the federal government to address Kentucky’s poor health in a transformative way.”
Beshear said he would support a statewide smoking ban in the coming session as well as extending domestic violence protection to dating partners, combating heroin’s resurgence, banning the sale of e-cigarettes to minors, expanding booster seat regulations to those up to 9 years old and creating “no-phone zones” to protect school children and construction workers.