Kentucky’s Republican-led legislature has passed a new two-year state budget that cuts much of state government in order to put more money into the state’s ailing pension systems.
But lawmakers also approved about $680 million in new revenue by expanding the sales tax to 17 services ranging from auto repair to country club memberships and raising the tax on cigarettes.
Those tax increases helped pay for the highest-ever per-pupil funding level for K-12 public schools and helped restore some funds to higher education through performance-based funding.
Republican House Speaker David Osborne said the revenue increases were necessary to avoid more draconian cuts.
“It restored many of the cuts to education that were contemplated in the governor’s budget,” Osborne said. “And I think ultimately the budget will do a great service to the people of the commonwealth.”
Lawmakers also approved about $190 million in tax breaks and created flat 5 percent taxes on individual income and corporate income.
The tax bill would also eliminate eight individual tax write-offs like deductions for medical expenses, medical insurance and theft losses.
Lawmakers had to pass the bills before midnight in order to preserve their right to overhaul any vetoes Gov. Matt Bevin makes to the budget.
Bevin tweeted out his disapproval with the budget and tax plans Monday afternoon, saying it created “unfunded mandates.”
“I am very concerned that the current proposals from the General Assembly may not meet these basic standards of fiscal responsibility,” Bevin said. “Our economic future, and everything we expect government to pay for, depends on us doing this the right way.”
The budget cuts most of state government by 6.25 percent in order to set aside $3.3 billion for the state’s ailing pension systems — about 15 percent of all state spending for the next two years.
The budget also transfers $310 million out of the Public Employee Health Insurance Trust Fund — a pot of money lawmakers have used several times to balance budgets and resolve budget shortfalls.
The final version of the $22 billion two-year budget does not include language to fund charter schools, which had been approved by the legislature last year.
Osborne said there wasn’t support for funding the schools among House members.
“There’s just a lot of our members that just frankly, given the environment around public school funding, the shortage of public school funding, just felt like it was inappropriate to put a mechanism in there to fund charter schools,” Osborne said.
The budget also includes money to hire more social workers and give them raises and lifts the moratorium on Kinship Care, the program that gives money to people who raise foster children they’re related to.
Many education-related programs were given no funding in the budget, including grant programs that help schools buy new text books and promote teacher professional development.
University Press at the University of Kentucky will not receive funding, but lawmakers said the school would be able to foot the $700,000 tab to fund it.
The budget also zeroes out the Kentucky Commission on Women.
Bevin has 10 days to consider making any vetoes to the budget and revenue bills. He has the authority to make “line item” vetoes, meaning he can delete small sections of the budget.
Lawmakers will consider overriding any vetoes during the final two days of the session in mid April