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April 7, 2018

 


April 6, 2018

FRANKFORT -- This week, lawmakers fulfilled a main duty the state constitution requires of them as final approval was given to a state budget that will guide more than $22 billion worth of spending over the next two years.

The budget plan does not include all of the program cuts that received much attention when they were unveiled in the governor’s original budget plan. Rather, lawmakers approved a tax measure on the same day they approved the budget that raises revenue to stave off many of the proposed cuts.

In passing the budget plan, lawmakers emphasized that it fully funds the state’s main public pension systems at the levels recommended by actuarial analysis.

The budget includes 6.25 percent baseline cuts for most state agencies, although some agencies are spared. Agencies that will avoid cuts include the Department of Veterans’ Affairs, Kentucky State Police, and local school-based Kentucky Family Resource and Youth Services Centers.

Rep. Steven Rudy, R-Paducah, speaks during debate on the state budget in the House (LRC photo)Rep. Steven Rudy, R-Paducah, speaks during debate on the state budget in the House (LRC photo)For K-12 education, the budget plan, known as House Bill200, would boost base per-pupil funding for K-12 education to a record level of $4,000 per student in each fiscal year. It would also increase school transportation funding to $127.8 million in each year of the budget cycle. It would also provide more than $10 million next fiscal year to help 31 school districts replace lost revenues following a drop in the assessment on unmined coal, among other provisions.

HB 200 also includes more than $60 million in new revenue to help implement proposed adoption and foster care reforms, including more than $23 million for placement of foster children with relatives, and tens of millions of dollars to hire more social workers and increase social worker salaries.

Additional funds for spending on social workers and prosecutors is also included in the budget, with provisions that would add $10 million to hire 94 additional Youth Workers for the Department of Juvenile Justice and around $6 million to hire more prosecutors.
The budget bill passed the House by a 59-36 vote and was approved by the Senate on a 25-13 vote.

Increased revenue that the budget depends on for some of its spending will be generated by the provisions found in House Bill 366, a tax reform measure that has been approved and sent to the governor. The measure, which includes a 50 cent tax increase on packs of cigarettes, would generate nearly a half of billion dollars in additional money for the state over the next two fiscal years.

Besides the cigarette tax, the plan would create a flat rate for personal and corporate income taxes in Kentucky while expanding the sales tax to certain services.

The personal income tax rate would be set at a flat five percent instead of the current brackets ranging from two percent to six percent, while the corporate income tax would also go to a flat rate of five percent instead of the current brackets ranging from four percent to six percent. The inventory tax would also be phased out over a four-year period.

The only itemized deductions allowed under HB 366 would be for Social Security income, mortgage income and charitable giving. It would disallow the deductions for such things as medical costs, taxes paid, interest expense on investments, and casualty and theft losses. It would also remove the $10 state personal income tax credit.

Another provision would lower the pension income exclusion to $31,110 from $41,110.

The plan would also place a sales tax on some services associated with certain repairs, installation and maintenance related to personal property, such as a car. The sales tax would also be expanded to other selected services including landscaping services, janitorial services, veterinarian services for small animals, fitness and recreational sports centers, commercial laundries, golf courses and country clubs, dry cleaning, pet grooming, weight loss centers and campgrounds.
The tax measure was approved by the Senate on a 20-18 vote and by the House on a 51-44 vote.

While much attention was on the budget and tax reform measures approved this week, lawmakers also approved a number of other bills, including legislation on the following topics:

Road Plan. House Bill 202 will guide over $2.4 billion in spending for Kentucky’s bridges, repaving projects and other road needs throughout Kentucky over the next two fiscal years. The bill has been approved and delivered to the governor. Lawmakers have also approved House Joint Resolution 74, which identifies projects for in the last four years of the state’s six-year Road Plan. Projects in this plan are prioritized but not yet funded.

Adoption and foster care. House Bill 1 would reform Kentucky’s adoption and foster care system with the goal of ensuring that a child’s time in foster care is limited and that children are returned to family whenever possible. The legislation would also expand the definition of blood relative for child placement and ensure that children in foster care are reunified with family or placed in another permanent home in a timely manner. It would also require more case reviews for each child in foster care, create a “putative father registry” so that a child’s possible (but not verified) biological father can be notified of the child’s prospective adoption, and allow the state to seek termination of parental rights for new mothers who won’t seek drug treatment after giving birth to a drug-addicted baby.

Abstinence education. Senate Bill 71 would require the abstinence education be included when schools offer any human sexuality or sexually transmitted diseases curriculum.

Alcohol. House Bill 400 would allow direct shipment of alcoholic beverages to people’s homes. The legislation would allow visitors at bourbon distilleries to ship limited amounts of spirits home as well as join bourbon of the month clubs. HB 400 would also permit vineyards to ship specific amounts of wine out of state. Another provision would allow liquor stores to ship a limited amount of spirits purchased from their shops. In addition, it would also require the shippers of the spirits to verify the delivery is made to someone at least 21 years old living in a “wet” area.

By Bruce Phillips, LRC

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Lawmakers have now returned to their homes districts for a ten-day “veto recess.” This is the period of time in which lawmakers wait until the end of the time period in which the governor can cast vetoes on legislation that has recently passed. This waiting period ensures that lawmakers have a chance to consider overriding any vetoes before officially adjourning the 2018 session. The session’s final days are scheduled to be held on April 13 and 14.

If you’d like to share your thoughts with lawmakers about any of the measures that have been approved this year, you can do so by calling the General Assembly’s toll-free message line at 1-800-372-7181.

 

April 6, 2018

Gov. Matt Bevin shocked public officials statewide Thursday when he vetoed a measure allowing cities, counties, school boards and other government bodies to phase in soaring pension costs, saying that a provision that allows some smaller entities to "buy out" of the public pension system is fiscally irresponsible.

Bevin's vetoes: Republican leaders had made passage of HB 362 contingent on reaching agreement on a separate bill meant to fix Kentucky's underfunded public pension system, which passed a few hours before HB 362 on Monday.Bevin's vetoes: Republican leaders had made passage of HB 362 contingent on reaching agreement on a separate bill meant to fix Kentucky's underfunded public pension system, which passed a few hours before HB 362 on Monday.House Bill 362, passed Monday, is meant to provide relief from huge increases in pension payments that take effect in the fiscal year that begins July 1. That includes Louisville, which is facing an increase of $38 million next year, an amount that could wipe out any revenue growth in Mayor Greg Fischer's next budget.

Bevin's veto of HB 362 drew immediate expressions of alarm from officials and calls for legislators to either override the veto or fix the buyout provision that concerns the governor.

{Lawrence County judge/Executive John Osborne, Louisa Mayor Harold Slone and BOE Supt. Dr. Rob Fletcher have been asked for comment on this issue and how they plan to pay for it but have not had time to respond. However, the phase-in has another chance because Bevin has said he does not oppose it and the GOP controlled government is reportedly set to compromise.}

Fischer said that without the phase-in legislation, Louisville — along with cities, school districts and other entities across Kentucky — "are facing a devastating hit."

"In our city, it means an unprecedented $38 million increase that grows to a budget deficit of at least $50 million when you factor in other likely pension-related state budget cuts," he said. "And that will mean potentially crippling cuts to services and programs that residents depend on — including in public safety, job creation efforts, parks, community centers and libraries."

HB 362 was passed in a flurry of last-minute action Monday that also included a budget bill and tax plan by lawmakers seeking to allow enough time to return next week and override any Bevin vetoes, if necessary.

Bevin, in his veto message, said he supports the bill's provision that allows groups to phase in rising pension costs but does not support a provision that allows some smaller public entities to buy out of the state retirement system, saying it could prove too costly.

"For the sake of fiscal responsibility, I must veto House Bill 362, while reiterating that the General Assembly should work quickly to re-enact the phase-in portion of the bill," Bevin's letter said.

Republican leaders who control the House and Senate said Thursday they would consider the governor's comments but made no commitments.

Acting House Speaker David Osborne, a Prospect Republican, said House leaders would "strongly consider" Bevin's suggestion to revise the bill before the session ends April 14 but members believe all provisions of the bill are important.

“It’s obvious that the phase-in language in House Bill 362 is crucial to the financial stability of local governments, but members of our caucus also believe that the buyout element is equally important," Osborne said.

Senate President Robert Stivers, a Manchester Republican, issued only this brief statement: "We will continue to work to effectuate an appropriate phase-in."

The Kentucky Bankers' Association released a statement in support of Bevin's concerns about the buyout provision, calling the veto "the right and responsible" action.

The buyout option affects only a small group of agencies within the state public pension system such as community mental health centers, public libraries, local health departments, rape crisis centers and domestic violence shelters, all members of the Kentucky Employees Retirement System.

These groups face an increase in their pension costs of 69 percent starting July 1 — an increase they say is certain to cause some layoffs and cuts in services.

Under HB 362, they could exit the state system, pay off their liability interest-free over 30 years and start their own retirement systems.

An earlier version of the bill offered such agencies terms for exiting the state system and a deadline of July 1. The final bill extends that deadline to Dec. 31.

The change to Dec. 31 gives such agencies more time to "understand the costs of the choices we would have to make," said Steve Shannon, executive director of the association that represents most of the state's mental health agencies.

"If this veto stands, it will not allow us the opportunity to determine what is best for our organizations in addressing our public pension concerns," Shannon said.

Republican leaders had made passage of HB 362 contingent on reaching agreement on a separate bill meant to fix Kentucky's underfunded public pension system, which passed a few hours before HB 362 on Monday.

The bill to phase in pension costs was urgently sought by those affected.

Rally in support of teachers gather in Frankfort to protest the recent pension bill. Astrid Hacker/Louisville Courier Journal

"We're strongly encouraging the legislature to either override or pass a separate piece of legislation to restore that phase-in," said J.D. Chaney, deputy executive director of the Kentucky League of Cities. "... It is absolutely the most critical thing the General Assembly can do this session with regard to the operation of city governments."

Cities are among employers facing public pension contribution increases of 50 percent or higher. The bill would provide relief by limiting initial increases to 12 percent per year.

"Without a phase-in, cities will cut personnel, cut services and look at local revenue options, which are limited," Chaney said.

Eric Kennedy, director of governmental relations for the Kentucky School Boards Association said the phase-in is important to every school district in the state. While teachers are insured through a separate retirement system, school boards cover cooks, custodians, bus drivers and others employees through the County Employees Retirement System or CERS, which is subject to the phase-in provisions.

"We hope the legislature will act to either override the veto, or as the governor suggested, put only the phase-in provision into a piece of legislation that can move forward," Kennedy said.

The veto was Bevin's third in the current legislative session.

Bevin vetoed two other bills Monday.

One was Senate Bill 7, which would establish a volunteer group to advise lawmakers and state agencies on a host of rare diseases. Bevin said in his veto message that the bill was "laudable" but would mean "an unnecessary expansion of bureaucracy" and additional work for state employees.

Supporters of the measure, including Hallie Pollard, 17, who suffers from a rare, painful joint disorder known as Ehrlers-Danlos Syndrome, told lawmakers at a March committee meeting such an advisory council would aid in educating people about little-known diseases and how to get help.

"I would really, really love to see this bill passed because it would potentially help people who have rare diseases and are fighting them daily," Hallie told the House Health and Family Services Committee. "It could offer a lot of hope to us."

About one in 10 people, many of them children, suffer from one of some 7,000 diseases classified as rare, according to testimony.

Supporters said the advisory council of doctors, nurses, patients and others would be financed through a trust fund created to accept grants or donations and wouldn't cost the state anything.

But Bevin, in his veto message, said it could end up causing more work and expense for the state Department of Public Health.

Sen. Julie Raque Adams said she hopes lawmakers will consider an override.

"It's an important bill," she said.

Bevin also vetoed House Bill 148, a bill that would allow hospice organizations to take and dispose of terminally ill patients' unused drugs.

In his veto message, Bevin called the bill "well-meaning" but said it conflicts with federal law, which does not allow hospice organizations to accept controlled substances from patients.

Meanwhile, Bevin has yet to announce his intentions on other bills awaiting his signature or possible veto, including the pension bill, the state's two-year budget and a tax reform plan — the most significant and controversial pieces of legislation to emerge in the final days of the session.

An override requires a Constitutional majority of 51 of 100 votes in the House and 20 of 38 votes in the Senate. Lawmakers could override vetoes when they meet for the last two days of the session on April 13 and 14.

 

By Deborah Yetter and Tom Loftus
Louisville Courier Journal

 

Previous story from yesterday...

 

Date: 04-05-2018

Bill allows municipalities to phase in massive pension hikes

By Wes Swietek
Bowling Green Daily News

Kentucky municipalities have gotten a last-minute reprieve from massive hikes in pension costs for next year that would have likely meant widespread staffing and other cuts.

As part of efforts to shore up the state’s troubled pension system, municipalities and school districts were informed last year they would have to pay dramatically more – as much as almost 70 percent – in mandated employer funding for the Kentucky Retirement System.

For the city of Bowling Green, that would mean a $3.2 million hike, or almost 5 percent of the city’s general fund budget. For Warren County government, the projected hike was approximately $1.27 million.

But state legislators Monday night pushed through House Bill 362 that allows those increases for the KRS to be phased in over 10 years and caps the hikes at 12 percent per year.

The bill was passed Monday night – meaning it was approved in time to allow legislators to potentially override a veto by Gov. Matt Bevin.

“That was part of the rush to get it through,” said Bryanna Carroll, director of governmental affairs for the Kentucky League of Cities.

When a similar bill was first proposed earlier in the legislative session, Bevin told a Cadiz radio station that he “would never sign that bill.”

Bevin has not commented publicly about HB 362, but the Senate approved it by a 35-3 margin and the House approved it 90-2, meaning the votes are likely there to override a potential Bevin veto.

The legislation “eases what cities and schools were facing,” such as layoffs and other cuts, Carroll said.

Under the new legislation, the city of Bowling Green’s required increase drops from the $3.2 million to $770,458.

Greg Burrell, Warren County treasurer, said the county was bracing for the roughly $1.27 million hike, but with the phase-in, the increase will be about $323,000.

“We appreciate legislators undoing the process ... which would be a significant hit to our budget,” Bowling Green Mayor Bruce Wilkerson said.

Wilkerson said the city would have had to likely slow spending on things like capital improvement projects if it faced the $3.2 million hike next year.

But, he notes that the increase “doesn’t go away – we still have to pay the entire amount.”

The city had already planned for the larger hike by budgeting planned spending accordingly. The city has a general fund budget of about $70 million.

“We prepare for all kinds of contingencies,” Wilkerson said. “We budget from a standpoint of only spending what we have.”

“We’re very thankful legislators took the phased-in approach,” Warren County Judge-Executive Mike Buchanon said. “It certainly will make it easier to budget.”

With a $1.27 million hike, “we would have had to make some staffing cuts,” Buchanon said. “We’re very hopeful” that the lower hike will allow the county to avoid cutting employees, he said. The entire county budget last year was $49.2 million.

Buchanon said it was no secret the proposed hikes would have been devastating to many poorer counties across the state.

“I’m not sure some counties can afford the 12 percent,” he said, adding the phase-in approach is needed “just for the survival of some counties.”

 

 

April 4, 2018

 

Tanning salons, pet groomers,  janitorial services, vets, auto repair among services to be taxed 6% under GOP budget

FRANKFORT - Veterinarians in Kentucky would charge the state’s 6 percent sales tax when they spay your dog or cat.

Auto repair shops would add the tax to their bill for fixing your car. Taking a suit or dress to the cleaners? Get ready to pay the sales tax for that care and several others.

State lawmakers this week approved a revenue plan that includes adding the state’s sales tax to 17 services that currently are not taxed. They say more money is needed to meet the state’s needs like education and social services.

Businesses that will see the 6 percent sales tax applied to their services for the first time are not too happy with the state legislature’s decision.

“I’m very disappointed that the state budget has been balanced on the backs of small businesses,” Tom Underwood, state director of the National Federation of Independent Business, said Tuesday in calling upon Gov. Matt Bevin to veto the revenue bill.

“We’re hopeful the General Assembly will take this opportunity to reconsider the small business burden of this tax bill and find a solution to Kentucky’s financial problems that doesn’t crush our Main Street family businesses.”

Businesses will pass along the sales tax to consumers, which could lead to loss of sales, especially for those discretionary services like dry cleaning and pet grooming, said Underwood.

“This is not good,” said Pamela Brown, who has been operating Pam’s Dry Cleaners on Richmond Road in Lexington for almost 40 years.

“I’ve built up good clientele but you can’t blame customers for complaining,” she said. “I just hope they don’t decide to bring in less items to be cleaned because of it.”

Underwood said the tax plan would have been more fair if it had been “across the board with more services included.”

“It looks to me like a picking-and-choosing kind of thing by the legislature,” said Joe Schlich, practice manager for the Nicholasville Road Animal Hospital. “Why just taxing services on small animals? What about horses?”

Lawmakers didn’t provide details on why they selected the services they did.

Kentucky officials have talked about a sales tax on services for decades.

The Kentucky sales tax was enacted in 1960 under Democrat Bert T. Combs as a 3 percent retail tax on a wide range of tangibles. In 1968, the tax was increased to 5 percent under Republican Gov. Louie Nunn and to 6 percent in in 1990, under Democrat Wallace Wilkinson.

In the 1990 Kentucky General Assembly, Wilkinson presented a budget proposal to lawmakers that contained measures increasing taxes on cigarettes and corporations and eliminating sales tax exemptions on legal, engineering, and advertising services. Legislators favored raising the sales tax to 6 percent instead.

In 2017, a blue ribbon commission set up by then-Gov. Steve Beshear proposed broadening the sales tax to “limited” services, including auto repair, certain recreational activities like golf courses and fitness centers and certain commercial and personal services like landscaping and cleaning companies.

Beshear said he tried to avoid taxing “mobile” services such as legal and accounting that easily move their work across the state’s borders.

Senate President Robert Stivers, R-Manchester, said this week that Bevin “wanted to increase the sales tax in a more comprehensive plan” and “go further for tax relief on the corporate level” but “there was not the ability to get the votes for that so I believe what we have done is a step in the right direction.”

Bevin, however, said he was concerned that the legislature’s tax changes may not meet “basic standards of fiscal responsibility.”

He has the power to veto legislation but Stivers said the Senate is poised to override a veto.

Lawmakers left the Capitol Monday night and will not return until April 13 and April 14 to consider any gubernatorial vetoes.

The legislature’s revenue measure is designed to raise about $500 million over the next two years. Taxes on services would generate $436 million.

Besides taxing selected services, it increases the cigarette tax by 50 cents per pack, which is expected to generate $245 million, and cuts the individual and corporate tax code to a flat 5 percent tax.

 

KENTUCKY’S 6 PERCENT SALES TAX WOULD APPLY TO THESE SERVICES:

 

*  Landscaping services, including but not limited to: lawn care and maintenance services; tree trimming, pruning, or removal services; landscape design and installation services; landscape care and maintenance services; and snow plowing or removal services.

*  Janitorial services, including but not limited to residential and commercial cleaning services, and carpet, upholstery, and window-cleaning services.

*  Small animal veterinary services, excluding veterinary services for equine, cattle, swine, sheep, goats, llamas, alpacas, flightless birds, buffalo, and hoofed animals like deer.

*  Pet care services, including but not limited to grooming and boarding services, pet-sitting services, and pet obedience training services.

*  Fitness and recreational sports centers.
*  Golf courses and country clubs.
*  Overnight trailer campgrounds.
*  Bowling centers.
*  Industrial laundry services, including but not limited to industrial uniform supply services, protective apparel supply services, and industrial mat and rug supply services.

*  Non-coin-operated laundry and dry cleaning services.
*  Linen supply services, including but not limited to table and bed linen supply services and non-industrial uniform supply services.
*  Indoor skin tanning services, including but not limited to tanning booth or tanning bed services and spray-tanning services.
*  Non-medical diet and weight-reducing services.
*  Labor and services for certain repair, installation and maintenance of personal property, such as cars.
*  Pollution-control facilities.
*  Limousine services, if a driver is provided.
*  Extended warranty services.

 

By Jack Brammer
Lexington Herald-Leader