House version of state budget includes revenue sources focused on health issues to help meet pension obligations

Taxes on cigarettes and opioids are included in the House version of the next two-year state budget released Wednesday as the state struggles to find funds needed for growing pension costs and other necessary state government programs. The appropriation measure and bill containing the state’s next two-year state budget passed through the House Appropriations and Revenue Committee Wednesday with bipartisan support.

The House budget maintains the governor’s recommended funding levels for the pension systems and many other areas while restoring some other cuts made in Gov. Matt Bevin’s proposal. The revenue measures included in the House budget bill would provide an additional $250 million.

House Appropriations and Revenue Committee Chair Steven Rudy said new revenue included in the bill is necessary to help fill the gaps in the state budget because there are many needs and little revenue. Rudy stated in 2017, taxpayers sent more to Frankfort than ever before but it is still not enough to meet the more than $3 billion needed for the pension systems, education, and all other government services at the levels necessary.

A 50-cent increase on the cigarette tax is included in the House budget to bring new revenue for the state. Many groups, including the Kentucky Chamber, have advocated for an increase of $1.00 in the cigarette tax.

In the committee hearing, Rudy said the cigarette tax increase is not only a revenue issue, but also a health issue as smoking has a large impact on the health of Kentuckians and a financial impact on Medicaid.

The bill also includes a 25-cent tax on opioids, which would make Kentucky the first state in the country to have such a tax. Rudy noted the state’s struggle with opioids in recent years and stated he hopes it will help stop opioid companies from “dumping pills into the state.”

The elimination of a $10 income tax credit is also included to bring in additional revenue and the suspension of a widely criticized film tax credit.

It was discussed that much of money raised by the new taxes goes toward restoring cuts to transportation for school districts, the state’s SEEK fund, higher education, cancer research and screenings, and other areas in the budget.

In an explanation of each section of the budget, it was explained that the state’s K-12 education funding, in the SEEK formula, will be funded at highest levels in state’s history by with increase to $4,055 per pupil in 2019 and $4,056 in 2020.

The House budget bill also restores the 6.25% cuts to higher education made it the governor’s budget proposal.

The growing costs of corrections is also an issue within the budget with more funding having to go to corrections, including private prisons, as the state’s prison population is expected to grow without reforms. That section of the budget does include increased funding for opioid treatment as well.

As many in the committee praised Rep. Rudy and staff for their work on the budget proposal and help given to many areas, Rudy stated many tough decisions are still having to be made as the state struggles to keep up with growing costs of pensions, Medicaid, corrections, and other areas.

The budget bill and appropriation measure now move to the House floor for a vote.

Categories: 2018 Kentucky General Assembly, Taxes & Budget

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