In his seventh state of the Commonwealth address, Kentucky Gov. Steve Beshear told lawmakers that he will seek to reinvest in education, while also urging the General Assembly to reform the state's tax code.
The nearly 50-minute speech touched upon a variety of topics, including the state’s implementation of the federal Affordable Care Act, gains in auto manufacturing and the implementation of new education standards.
In stressing his latest priority, Beshear said that he would make cuts to other programs in order to reinvest in education. To make up some of the funds, the governor pleaded with lawmakers to act on tax reform this year.
“I realize that tax modernization is a sensitive topic, especially in an election year. But the people elected us to tackle difficult issues. So engage with me. I ask you to engage with me on a core weakness that is keeping the Commonwealth from reaching its potential.”
Beshear offered few details on the kind of changes he wants to see in the tax code.
After the speech, Senate President Robert Stivers said he will need specifics in order to have a discussion on the issue.
As temperatures in Kentucky slowly climb out of the polar abyss, so too will state lawmakers emerge from their districts and trek to Frankfort for the opening day of the 2014 regular session of the Kentucky General Assembly.
The session got underway Tuesday.
Kentucky legislators will have until the relatively balmy date of April 15 to craft a biennial state budget, which will be a difficult task: Amid one of the toughest economic outlooks in recent memory, legislators will be forced to grapple with funding priority issues like reinvesting in K-12 education and funding nearly $900 in teachers' pension liabilities.
Many people, from political observers to politicians themselves, have estimated that in order to fully fund these and other priorities, an additional $400 million to $1 billion (or more) in revenue must be raised to plug the gap in spending.
But the state expects only $250 million in additional revenue.
Although the budget will be the front and center issue, here's a glimpse at some other legislative priorities:
Kentucky Education Commissioner Terry Holliday is calling the next legislative session a “make or break year” for the state’s public school system.
“I think we’ve hit the wall for increasing student performance and without some reinvestment in public education I think kids are going to lose out.”
Holliday is asking state lawmakers to restore per student funding to their 2009 levels during biennium budget discussions next year. He also says state grant funding needs to be restored. That will mean committing nearly $270 million dollars more to education for the next two years.
Holliday says the General Assembly can accomplish this through tax reforms and approving expanded gaming, two issues that have not made headway in the recent past.
Education will be competing with state pension and healthcare issues among the other state agencies that have seen cuts to their budgets.
Kentucky House Speaker Greg Stumbo says he doesn't expect a tax reform package to be brought up for a vote in the current legislative session.
Stumbo told reporters Tuesday that such a package doesn't have the 60 votes necessary to pass in the House.
A special commission appointed by the governor proposed reforms that could generate about $690 million a year in additional revenue.
Stumbo said one of the proposals made by the commission could surface in days ahead as a method of shoring up Kentucky's weakening pension system for government retirees. That proposal calls for raising the cigarette tax from 60 cents to $1 a pack, which could generate $100 million for the pension system.
Kentucky lawmakers seemed eager to dig into another tax reform bill this year, but the chair of the latest tax reform commission says reform isn't likely coming soon.
Lt. Gov. Jerry Abramson—who chaired the commission —and Mary Lassiter, the secretary of the cabinet, addressed lawmakers on the budget committees about the recommendations of the Blue Ribbon Tax Commission.
Many lawmakers were eager to see a bill filed, even if tax reform is unlikely in this year's regular session. But Lassiter and Abramson implied that one was not likely anytime soon.
But State Rep. Jim Wayne, a Democrat from Louisville, who unveiled his own tax reform bill today, said he would still like the see the commission's suggestions in bill form.
A state senator who represents parts of south-central Kentucky isn't betting on major changes to the state's tax code this upcoming legislative session. Overhauling what's been described as an antiquated tax system is at, or near, the top of many lawmakers' agendas.
Sen. David Givens, who represents Allen, Barren, Edmonson, Green, Metcalfe, and Simpson counties, says while there's a lot of talk in the air about streamlining Kentucky's tax code, he doubts anything will pass during the 2013 General Assembly.
"From what I gather, I don't think the tax reform issue is far enough down the road that we can make those sorts of changes in the session ahead, with it being a short session," the Greensburg Republican told WKU Public Radio.
A panel appointed by Gov. Steve Beshear to look at changes to Kentucky's tax system has proposed lowering individual and corporate tax rates, raising the cigarette tax and expanding the state sales tax to certain services.
Lt. Gov. Jerry Abramson said the changes recommended by the Governor's Blue Ribbon Commission on Tax Reform would generate about $659 million in new state revenue each year.
Abramson, who headed the commission, said the changes will make Kentucky more competitive in creating jobs.
The proposal would lower the state's top corporate tax rate to 5.8 percent from 6 percent. Individual income tax rates also would drop. The state's cigarette tax would go to $1 a pack from the current 60 cents.
One of the big issues Kentucky lawmakers are expected to take up in the next legislative session is an overhaul of the state tax code. It's something that the commonwealth's bourbon distillers will have their collective eyes on, because a provision under consideration would create a new tax credit for manufacturers designed to offset a longstanding barrel tax.
"We pay a tax on every barrel that is aging in the commonwealth, as long as it sits in one of our warehouses. So if you're drinking a bottle of 18-year- old bourbon, it's been taxed 18 times," says Eric Gregory, president of the Kentucky Distillers Association. "That makes Kentucky non-competitive in the global marketplace. We are the only alcohol manufacturer in the world that pays such a tax."
Tax legislation designed to help Kentucky's bourbon distillers has previously passed in the Senate, but has never made it out of the House. Gregory says distillers are sensing a renewed seriousness on the part of many lawmakers to get a tax code overhaul passed next year, either in the regular session that begins January 8, or during a special session.
Kentucky's Blue Ribbon Tax Commission has wrapped up its work, but Governor Steve Beshear says the biggest challenge to revising the tax code still remains.
Tax reform is on the tip of the tongue every few years in Frankfort. But historically, not much has been accomplished. Beshear will get the commission's latest recommendations for tax reform this week. And it'll be up to him to convince lawmakers that the panel's work is worth turning into law.