On Thursday, lawmakers traveled to northern Kentucky to hold interim committee meetings at Northern Kentucky University in coordination with the Northern Kentucky Chamber of Commerce.
In an update on the state budget to the Interim Committee on Appropriations and Revenue, Deputy State Budget Director Greg Harkenrider said they continue to expect a revenue surplus for fiscal year 2018 with an expected $119 million additional revenue from what was estimated.
Harkenrider said the tax reforms passed in the 2018 session adds a lot of uncertainty to forecasting only because it is difficult to know what is a standard economic event and what growth is coming from reforms, but stated the state has seen 8.2% growth.
In terms of how much revenue will be generated by tax reforms, he said the total impact for the 2019 fiscal year is expected to be $192.3 million with the effect of changes to the sales, corporate, individual, and tobacco taxes factored in.
As for what can be expected in 2019, Harkenrider said the budget office doesn’t expect to see quite as much growth in the coming budget year as it will be hard to post such high numbers after a year with large increases in revenue.
Also discussed in the Appropriations and Revenue Committee was a change to the bank franchise tax with representatives of the banking industry explaining to lawmakers that the current system in Kentucky means banks are taxed at a rate 92% higher than other Kentucky businesses and asked that the General Assembly look for a new model to ensure banks don’t choose to leave the state over the high tax system. It was also noted that an increasing number of community banks are being sold to out of state banks due in large part to the tax system.
Kentucky Bankers Association President Ballard Cassidy explained that the bank franchise tax was popular around the country for many years and was considered revenue neutral until 2005 when the corporate tax was lowered with no changes made to the bank model. He added that the newly lowered corporate income tax during the 2018 session has widened that gap even further.
Cassidy said Kentucky taxes their banks at a higher rate than any other state in the country with $46 million paid in federal and state taxes for banks. He stated a bank could choose to locate in the bordering state of Ohio and save millions.
Earlier in the day at a meeting of the Interim Joint Committee on Judiciary, lawmakers heard testimony from judges across Kentucky arguing to continue with a model where money bail is imposed on individuals regardless of the level of offense, which is being discussed in the legislature as it is costing local governments millions of dollars per year.
The judges argued they believe Kentucky judges should have eyes on a case in order to give discretion to cases and defendants should have “skin in the game,” even if it is a low-level offender.
One judge stated he knows counties and the state are struggling with the costs of bail reform and said they want to be part of the discussion to find a solution.
Chairman Chris McDaniel stated he believes perspective from the judges is good to hear but added as a small business owner and employer himself, he knows that in many cases employers provide the greatest level of stability for the lives of many of the defendants and he wants to ensure they get back to work if they are a low-level offender. In 2016, the average jail stay of someone that could not afford bail was 109 days.
The Kentucky Chamber has announced the support of the business community for bail reform in order to ensure the pre-trial justice system doesn’t disproportionately impact low-income Americans who are not able to pay their bail for a low-level non-violent offense and ensure individuals are not staying in a local jail for days because they are unable to pay their bail and lose their job.