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Debating Provisions in the Proposed State Budget

Renee Shaw talks with her guests about the state budget. Guests: Rep. Jason Petrie, (R-Elkton), chair of the House Appropriations and Revenue Committee; Rep. Josie Raymond, (D-Louisville), member of the House Appropriations and Revenue Committee; Anne-Tyler Morgan, senior fellow at the Pegasus Institute; and Jason Bailey, executive director of the Kentucky Center for Economic Policy.
Season 29 Episode 4 Length 56:34 Premiere: 01/24/22

Lawmakers and Policy Experts Discuss Pay Raises for State Workers, Possible Tax Cuts, and More

Kentucky House Speaker David Osborne promised an “aggressive approach” to scheduling work on a new state budget in his chamber.

Only 12 days into the 2022 General Assembly session, Osborne made good on that pledge when the House of Representatives passed its version of a new biennial spending plan. Democrats decried the swift passage as a rush job, moving House Bill 1 from introduction to passage in less than two weeks. Republican leaders say it was the product of eight months of extensive research, committee testimony, and deliberations.

“When you take what would normally be done in a session in January and February and you do all of that in the interim prior, it seems like it’s moving really fast,” says House Appropriations and Revenue Committee Chair Jason Petrie (R-Elkton). “But in some senses, it’s not.”

Democrats also argue that it was a mistake for Republicans to release HB 1 even before Gov. Andy Beshear had presented his budget address to lawmakers. It’s traditional for House leadership to unveil their spending plan after the sitting governor releases his or her plan. Still Rep. Josie Raymond, a Louisville Democrat on the House budget panel, says there are things to like about the GOP proposal.

“This budget is a solid first draft – it was thoughtfully done,” says Raymond. “It does no harm. There are no cuts in this budget, and that’s the first time we could say that in 16 years.”

To Spend or Not to Spend the Surplus

House Bill 1, which is now before the Senate for its consideration, includes a 6 percent pay raise for all state employees plus larger bumps for state police officers and social workers. It also provides a modest increase in per-pupil funding for public schools, money for student transportation and full-day kindergarten, and a boost in the performance-based funding pool for the state’s public colleges and universities.

The GOP plan does not include a specific pay raises for teachers, or money for pre-kindergarten or child care. Petrie says the increased dollars HB 1 allocates to public education should free up money at the local level, which would enable districts to provide pay bumps as they see fit. He also says pre-K and child care funding could come in separate bills later in the session

The House GOP budget also leaves about $1.1 billion left unappropriated, which Democrats contend is a missed opportunity to address a range of critical needs from child care, to universal pre-kindergarten, to student loan forgiveness for nurses and teachers.

“Nobody wants to blow money, but at some point it’s fiscally irresponsible to sit on money that could be put to work for us,” says Raymond. “We haven’t closed racial wealth gaps in Kentucky, we haven’t ended health disparities, we surely have not solved pandemic learning loss.”

In addition to billions of dollars coming to Kentucky from the American Rescue Plan Act, the state also accrued a significant surplus of revenues over the fiscal year. Kentucky Center for Economic Policy Executive Director Jason Bailey says that gives lawmakers one-time funds and recurring moneys to invest in the commonwealth.

"There’s a lot of ground to make up in terms of the cuts that have happened in the past,” says Bailey. “This is a once-in-a-generation opportunity where we could change the trajectory of this state if we put more money into things like pre-school that we know pay off, if we put more money into making college more affordable, etc.”

Petrie says his committee considered a wide range of fiscal needs and wants as they crafted the House budget, and he says senators will go through a similar process of prioritizing the projects and areas they want to fund. But Petrie contends that just because $1.1 billion is unappropriated so far doesn’t mean lawmakers should rush to spend it. He says incremental change based on thorough planning is the better approach.

“I don’t want to throw money [at a problem],” says Petrie. “I want to make sure that whatever we do, there’s forethought put in, there is a plan in place… so that you can continue to use that money to the maximum benefit for Kentuckians.”

While Republicans and Democrats haggle over whether and how to spend the surplus, Pegasus Institute Senior Fellow Anne-Tyler Morgan says it’s important to note the areas of bipartisan agreement, such as more money for social workers. She says there’s time to explore the options for spending those unallocated funds.

“We’ve heard a lot about the unprecedented surplus that we have and the opportunities that it brings for transformational investment, but Kentuckians also face unprecedented hardships now that require critical spending,” says Morgan. “So I think this budget strikes the balance fairly well…. between those urgent needs and the significant investments that can be made for the commonwealth.”

The Option of Additional Tax Cuts

Republican leaders have indicated a desire to return some portion of that surplus to Kentuckians, potentially in the form of tax cuts. The legislature, under GOP control, enacted a major tax reform bill in 2018 that reduced the state’s multiple tax brackets to a single 5 percent bracket for both personal and corporate income taxes.

Petrie contends that lowering the income tax even further – to 2 or 3 percent – would induce more people to move to Kentucky. He says that population growth would fuel economic growth.

But shifting the state revenue model from income taxes to more consumption taxes worries some policymakers, since that would likely mean raising the overall sales tax and/or taxing goods and services that are not currently taxed. Raymond says she fears another tax cut would benefit only the wealthy and squander the state’s $1 billion surplus.

“The vision I’ve heard tonight unfortunately says to me that we’re going to lower rich people’s taxes and raise poor people’s grocery bills,” says Raymond.

Bailey argues that a further income tax cut could devastate the state budget since about half of Kentucky’s revenues come from income taxes. He also contends that tax cuts favor the wealthy without strengthening the overall economy, saying the nine states with no income taxes are growing slower than the states with the highest income taxes. Finally, he disputes the notion that lower taxes are a big driver for relocation.

“The people who do move the most tend to be younger,” says Bailey. “They’re not looking at tax rates. They’re looking for a good quality of life, they’re looking for amenities, they’re looking for a specific job… Taxes are way, way down the list.”

Petrie says he’s heard from plenty of people who care more about their take-home pay than amenities, and that would readily move to a place with lower or no income taxes. He says any further changes to the state’s tax code would be crafted with Kentucky’s specific economic drivers in mind, and he says history proves that tax cuts do benefit the commonwealth.

“We’ve already done it in 2018 and guess what? The world didn’t end,” says Petrie. “Guess what? Actually our numbers got better.”

Beyond tax rates, Democrats say the state is missing out on potential new revenue by not allowing sports betting or other forms of expanded gaming, or by failing to legalize medicinal or recreational marijuana. Morgan says those ideas would be of little benefit to Kentucky.

“Anytime we talk about these smaller revenue measures, they’ll be debated endlessly, but the amount of money that they’ll actually generate for the commonwealth of Kentucky may be negligible,” she says. “We need to focus on what over the long term can bring in more growth to the state and more economic development to really see some change.”

Morgan says the state should explore a range of incentives that will both attract workers to Kentucky and help small businesses pay their employees more. She says states like Tennessee and Texas have enjoyed unprecedented growth by shifting away from income taxes, but she says Kentucky should continue to pursue a slow transition to more consumption taxes. She says that will help ensure the state’s revenue needs will be met.

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Host Dr. Wayne Tuckson in a dark shirt and gray jacket on the program set with a "Check Schedule" button.Host Dr. Wayne Tuckson in a dark shirt and gray jacket on the program set with a "Check Schedule" button.

Season 29 Episodes

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Legislation Introduced in the 2023 General Assembly

S29 E42 Length 56:33 Premiere Date 01/09/23

2023 Legislative Session Preview

S29 E41 Length 56:33 Premiere Date 12/19/22

National Politics

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S29 E37 Length 56:36 Premiere Date 10/24/22

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Candidates for U.S. House of Representatives: Part One

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U.S. Senate Candidate Charles Booker

S29 E34 Length 26:31 Premiere Date 10/03/22

Discussing Flooding's Impact on Eastern Kentucky Schools

S29 E33 Length 56:33 Premiere Date 09/26/22

COVID-19, Monkeypox and Influenza

S29 E32 Length 56:33 Premiere Date 09/12/22

Eastern Kentucky Flooding and Legislative Relief Package

S29 E31 Length 56:33 Premiere Date 08/29/22

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School Safety: Debating State Policies

S29 E29 Length 56:33 Premiere Date 08/01/22

Work, Wages and Welfare

S29 E28 Length 56:33 Premiere Date 07/25/22

50 Years of Title IX

S29 E26 Length 56:33 Premiere Date 07/18/22

The Impact of U.S. Supreme Court Decisions

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Kentucky's Ban on Abortion

S29 E23 Length 56:34 Premiere Date 06/27/22

Discussing New Developments in the COVID-19 Pandemic

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Reducing Opioid Addiction Rates in Kentucky

S29 E21 Length 56:36 Premiere Date 06/13/22

Mass Shootings and Gun Laws

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Previewing Kentucky's 2022 Primary Election

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Third Congressional District Democratic Primary

S29 E17 Length 56:33 Premiere Date 05/09/22

Candidates in the 2022 Primary Election: Part Two

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Candidates in the 2022 Primary Election: Part One

S29 E15 Length 58:40 Premiere Date 04/25/22

Lawmakers Review the 2022 General Assembly

S29 E14 Length 56:33 Premiere Date 04/18/22

Recap of the 2022 Legislative Session

S29 E13 Length 56:35 Premiere Date 04/11/22

Public Assistance and Jobless Benefits

S29 E12 Length 56:33 Premiere Date 03/28/22

Abortion Legislation in the 2022 General Assembly

S29 E11 Length 56:34 Premiere Date 03/21/22

State Budget, Taxes, and Other 2022 General Assembly Topics

S29 E10 Length 57:42 Premiere Date 03/14/22

Critical Race Theory and Approaches to Teaching History

S29 E9 Length 56:33 Premiere Date 02/28/22

2022 Legislative Session at the Midpoint

S29 E8 Length 56:33 Premiere Date 02/21/22

Name, Image and Likeness Compensation

S29 E7 Length 56:33 Premiere Date 02/14/22

Child Abuse and Neglect

S29 E6 Length 56:33 Premiere Date 02/07/22

Debating School Choice in Kentucky

S29 E5 Length 56:35 Premiere Date 02/01/22

Debating Provisions in the Proposed State Budget

S29 E4 Length 56:34 Premiere Date 01/24/22

Redistricting, State Budget, and Other Legislative Issues

S29 E3 Length 56:33 Premiere Date 01/10/22

Discussing Legislative Goals for the 2022 General Assembly

S29 E2 Length 56:33 Premiere Date 01/03/22

Previewing the 2022 Kentucky General Assembly

S29 E1 Length 56:35 Premiere Date 12/06/21

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Kentucky Tonight, hosted by Renee Shaw, is a public affairs discussion program broadcasted live on Monday nights at 8/7c on KET and KET.org/live.

Viewers with questions and comments may send e-mail to kytonight@ket.org or use the message form on this page. All messages should include first and last name and town or county. The phone number for viewer calls during the program is 1-800-494-7605.

After broadcast, Kentucky Tonight programs are available on KET.org and via podcast (iTunes or Android). Files are normally accessible within 24 hours after the television broadcast.

Kentucky Tonightwas awarded a 1997 regional Emmy by the Ohio Valley Chapter of the National Academy of Television Arts and Sciences. The series was also honored with a 1995 regional Emmy nomination.

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