House Speaker Osborne expects “severe” budget cuts to deal with revenue shortfalls, pension funding needs, and more

With the 2018 legislative session just weeks away, new Acting House Speaker David Osborne expects the crafting of the next two-year budget to be the most difficult the state has faced and will likely see “substantive” cuts.

The budget process during the 2018 session will be the first with Republicans controlling the House, Senate, and governor’s office. Osborne said he hopes the legislature will be more proactive in the budget process than what has been seen in the past where a budget agreement is not seen until the final hours of a 60-day session. The new Acting House Speaker said the House and Senate are having preliminary conversations on the budget to avoid last minute issues.

“It is going to be an incredibly difficult budget. No matter what we do, no matter how many things we cut, no matter how many times we go over it…it’s going to be incredibly difficult. So at some point we are going to have to face the difficulty, and it might as well be sooner than later,” Osborne said.

To deal with the revenue shortfalls being seen by the state and the struggle to find funds to put toward the needs of the failing pension systems and other government services, Osborne said without a tax reform or changes in the economic outlook for the state, many areas of state government will see deep cuts.

In terms of whether or not the General Assembly will be able to tackle tax reform on top of the other two huge issues faced in the 2018 session, Osborne said he feels it is possible but noted there are reasons there has not yet been an overhaul of the state’s tax system.

“These are decisions that impact the lives of every single Kentuckian. And we can’t be insensitive to how that impacts people. But at the same time we can’t ignore the fact that we have an antiquated tax system and one that is in desperate need of reform,” Osborne said.

Osborne would like the focus of tax reform to be making Kentucky more competitive instead of focusing on just raising more revenue.

“I think to start with the objective of raising revenues is a failed assumption. Because that’s just a tax increase, that’s not tax reform,” Osborne said.

Another area where revenues continue to fall short in the budgeting process is transportation and infrastructure as more fuel efficient cars are on the roads and less is being brought in at the pump through the gas tax.

“It is a very serious problem,” Osborne said. “When you have a funding mechanism that is based on a declining source…whatever we do in regards to a gas tax is a temporary fix. Because every year, our vehicles get more fuel efficient, we have more electric cars on the road. And while that is not an enormous impact right now, every year it gets more significant.”

Hear Osborne’s full comments on the budget, tax reform, and road fund revenues in the interview segment below:

The final part of The Bottom Line’s exclusive interview with Acting House Speaker Osborne will be posted next week.

Categories: 2018 Kentucky General Assembly, Government Modernization, Kentucky Competitiveness, Pensions, Taxes & Budget

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