Governor vetoes tax reform package and budget bill ahead of lawmakers return to Frankfort

Kentucky Gov. Matt Bevin held a press conference Monday morning announcing his decision to veto the next two-year state budget and tax reform package passed by the General Assembly one week before, citing questions about the revenue estimates on how much the tax plan would generate and issues that arise in the budget as a result.

Last week, the legislature passed the next two-year budget containing restored funding for areas including education along with a tax reform plan that would lower personal income and corporate tax rates to five percent, eliminate some deductions, place the state sales tax on certain services currently not taxed, and some other items. The tax plan is estimated to generate $238.8 million in 2019 and 248.1 million in 2020 for the state, totaling an increase of $486.9 million over two years for Kentucky.

However, in his press conference, the governor noted the state is in a “financial crisis” and said while he applauds the efforts by the General Assembly to address pension and tax reform while crafting a new 2-year state budget, there is more work to be done.

Bevin stated he doesn’t believe there’s time in the final days of the 2018 session to pass the type of tax reform he would like to see. He added that while the legislature could override his vetoes, he “doesn’t see why they would,” calling the tax reform package structurally unsound.

Because the budget is based on money generated through the tax reform package, if the legislature decides to table the tax reform discussion for now, the budget will have to be rewritten and cuts will have to be made.

The governor said the budget passed by the legislature contains $600 million more in spending than the budget he proposed and also called his own proposal more responsible as it contains funds for items like the Kentucky Wired project in eastern Kentucky and more for corrections. He said lawmakers have to be realistic in its spending and crafting of a budget and said the state does not have the money that is proposed in the recently passed budget and it “kicks the can down the road.”

Bevin said tax reform can and will get done and said he plans to work with legislative leaders and job creators to come up with a more thoughtful plan but did not give a specific timeline.

While he said he appreciates the efforts of the legislature to address the critical issues of pension reform, tax reform, and a budget, there is more work to be done. He said he is hearing from many who are not happy with the process in which the reforms were passed and concerns with many items in the package.

On the issue of pension reforms, he said he believes the bill passed by the legislature is a good first step but “doesn’t even begin to address the issue” as the state still faces a $60 billion unfunded liability.

When asked if he plans to veto that bill, he said he has not made a comment on that at this point but repeated he feels it is a good first step that attempts to “stop the bleeding.”

The legislature only has two working days remaining in the 2018 legislative session. They will return to Frankfort this Friday, April 13 and Saturday, April 14 for the final days where they will have the ability to pass any remaining legislation and override any vetoes handed down from the governor.

Keep checking The Bottom Line for the latest on all the issues facing the General Assembly in the remaining days of the 2018 session.



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Jacqueline Pitts
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