Legislature votes to override governor’s vetoes on budget and tax reform package

On Friday, the Kentucky state House and Senate voted to override vetoes handed down from the Gov. Matt Bevin earlier this week on the state’s next two-year state budget and the tax reform plan that helps fund it.

Because both legislative chambers voted to override the vetoes, the legislation goes into law and Kentucky will see tax reform as well as the provisions contained in the two-year state budget crafted by the legislature.

BUDGET– House Bill 200, the state budget for the next two years, contains full funding of the Kentucky Retirement System (KRS) and Kentucky Teachers’ Retirement System (KTRS) with some additional funds going into the systems.

As for education funding, K-12 funding in the SEEK formula will be increased to $4,000 per pupil appropriation, an increase in that funding. And school transportation funds are also increased under the budget. Read more about the next two-year state budget presented in the conference committee report here.

The Senate voted 26-12 to override the veto. The House voted 66-28 to veto. View the full votes from each legislative body below:

TAX REFORM– The tax reform plan presented and passed Monday represents the first major changes made to Kentucky’s tax code in many years. The changes proposed in the plan would 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.

Personal income tax will be lowered to a flat 5% for all Kentuckians rather than the current tiered brackets which puts most citizens in a 5.8% or 6% income tax bracket.

Other changes in the plan include increasing the cigarette tax by 50 cents, sales tax applied to certain services where it has not been previously, removing many deductions for state income tax, conforming to the federal IRS codes adopted with federal tax reform, and many other areas. Read all of the details of the tax reform plan here.

The Senate voted 20-18 to override the veto. The House voted 57-40 to veto. View the full votes from each legislative body below:

The Kentucky Chamber released the following statement about the budget and tax reform last week after the legislature originally passed the bills:

The Kentucky General Assembly has now enacted a major pension reform bill, a tax reform bill and a biennial budget in the closing days of the 2018 session.  While the process left much to be desired, we commend the General Assembly for taking difficult steps to stabilize our pension systems, modernize our tax code, produce new revenue for education and most important, start turning the corner on the dire financial condition of our state government.  Kentucky’s business community wants our state to prosper so we can get back to properly funding education as the best investment in our future and to sustaining other critical services that our fellow Kentuckians deserve.

While the Kentucky Chamber had called for even greater reforms in both taxes and pensions, we consider the recent legislation – viewed as a package – to be an important first step toward improving Kentucky’s competitive position, encouraging investment in our communities and creating high-quality jobs.

The tax plan includes many long-standing priorities of the business community including single sales factor, lowering personal and corporate tax rates, repealing the inventory tax and broadening the base of sales taxes – all recommendations previously made by numerous non-partisan economists.  It also includes half of what the Chamber had proposed for the cigarette tax, another step in the right direction.

We commend the legislature for restoring most of the proposed cuts to education and having the courage to provide additional revenue to make that possible.  With the governor and legislature putting hundreds of millions of dollars into rescuing the public retirement programs, it is extremely difficult to sustain funding for basic investments in education.  We applaud the General Assembly for working to protect core funding for our schools.

We anticipate that more work will need to be done as these laws are implemented.  As the state’s largest business association, we will continue to monitor these reforms and their impact on existing businesses and industries, in order to make sure the basic intentions and the financial estimates behind the legislation are fully realized.