What Are Taxes For?

Tax Day is an important time for Kentuckians to consider the role of government in our state and nation. Taxes are a critical tool for doing things together that we cannot do alone. With them, we invest in good schools and higher education, well-kept roads and bridges, social services for vulnerable children and adults, safe and beautiful communities and other public structures essential for shared prosperity in the Commonwealth.

Tax Break Bill a Setback for Revenue System

The General Assembly inserted some last minute tax breaks benefiting powerful interests into House Bill 445—the revenue bill that accompanied the new budget—before passing the bill and adjourning for the veto period. Those new tax breaks were never part of House Bill 445 in its previous versions, and will cost the state a reported $29 million annually in future budgets.

New Budget Will Worsen Kentucky’s College Affordability Problem

The budget passed by the General Assembly on Monday does not contain good news for higher education students in Kentucky. The 1.5 percent cuts to the state’s public universities and community colleges, new fee for community college students, and only a tiny boost to state need-based financial aid programs mean that the college affordability problem in Kentucky will continue to grow.

General Assembly Passes Budget Containing 14th Round of Cuts Since 2008

The General Assembly has passed an austere budget that includes further cuts, flat-level funding or modest increases to the education, health and safety, human services and other programs that Kentucky relies on. Most of these areas have been cut deeply through the 13 previous rounds of budget cuts that the legislature has made since 2008. The budget utilizes fund transfers and monies drawn from the rainy day fund, increases state debt and was passed with a revenue bill that includes new tax cuts.

Budget Agreement.pdf

Statement on Budget that Passed the General Assembly

KCEP Director Jason Bailey released the following statement today:

“While it is good to see the chambers of the General Assembly come together to pass a budget, the new budget falls short of what it will take to make needed progress in Kentucky. It contains the 14th round of cuts since 2008—cuts that have deeply impacted the public services that make Kentuckians healthier and more educated, our communities safer and more attractive, and our economy stronger. This budget does not adequately invest in many areas—ranging from human services to environmental, worker and public protection—and does not properly address the unfunded liability in the teachers' retirement system, meaning higher costs down the road.

The budget harms higher education students by including more cuts to universities, community colleges and adult education, deeply underfunding need-based financial aid (despite a small bump) and imposing a new fee of up to $240 a year for full-time community college students rather than a more progressive financing method for construction projects. The ongoing shift in the cost of higher education to students is driving up personal debt and contributing to growing inequality in Kentucky.

The dollars put back into K-12 education and a few other areas in this budget provide a respite from cuts but are only enough to allow programs to tread water. An exceptional bright point in the budget is the $18 million in 2016 for expanded access to pre-school.

But the revenue bill accompanying the budget includes new phased-in tax cuts that will erode revenue in future years, including a cut for the profitable bourbon industry and in the wholesale alcohol tax. Kentucky will not have the resources it takes to support a strong state economy until the legislature makes the right reforms to the inadequate state tax system. That should be the next task ahead of the General Assembly."