KATHY NOT HAPPY! Week In Review from Rep. Kathy Hinkle

For Kentucky’s nonprofits, the last year has not been an easy one.  A ruling by the Kentucky Supreme Court last March – and a rushed overhaul of the state tax code less than a month later – left these critical organizations facing the last thing anyone wants: a much-larger tax bill.

•             Our religious and civic organizations found themselves in this predicament through no fault of their own, and the cost hasn’t been small, either – about $30 million annuall. Thankfully, this issue is on track to being fixed because of legislation approved last Wednesday.  Assuming it becomes law, these organizations will no longer be taxed on such things as admissions or sales related to fundraising events. This legislation addresses the court ruling – which said nonprofits had to collect sales tax on items they sold, something that the state hadn’t enforced for decades – and it corrects an unintended oversight in last year’s tax overhaul.  I did not support the 2018 tax changes for several reasons, and one of the most important is that its secretive approach made mistakes like this more likely.
•            Thankfully, there was broad agreement among legislators to fix this, and the most important change related to nonprofits is effective immediately, once this bill is signed by the governor.
•             There are several other aspects of this year’s revenue measure that, by themselves, are positive.  Low-income families will get some needed relief with their income taxes, for example, and another measure will help level the playing field for our state-chartered banks and treat all of these institutions like other corporations for tax purposes.
•             Small operators affected by last year’s new taxes on services will also see a benefit from this legislation.  Those who do such things as mow lawns on the side, clean homes, or provide pet sitting will no longer have to collect sales tax on these services as long as they bring in less than $6,000 a year.
•             While all of these changes can certainly stand on their own, there is some understandable concern about their combined cost at a time when there are significant public-retirement system liabilities and persistent needs in such areas as education and healthcare.

I do not believe we should have to choose between improving school safety and helping our nonprofits.  This legislation is a symbol of the need for truly comprehensive tax reform and finally giving voters the chance to decide if they want Kentucky to have expanded gaming and the significant money it provides.

This legislation was not the only one with financial implications.  Although state budgets are enacted in even-number years, we made some changes on Thursday that legislators felt were needed.  The two most noteworthy would set aside $25 million in bonds for critical repairs at our state parks and $26 million more to help boost the state’s economic-development efforts.

One of the most important pieces of legislation considered last week – but still unresolved due to significant differences between the House and Senate – is how to handle the steep retirement costs faced by our regional public universities and quasi-government agencies like our public health departments and rape-crisis centers.

Simply put, what the General Assembly decides could determine whether some of these agencies are able to keep their doors open.  It is arguably the biggest issue the state faces at the moment.  A final plan will be worked on this week and next that hopefully can be passed on the legislative session’s 30^thand final day, which is March 28^th.

I will cover that and other legislation we passed in a future column.  For now, I want to say that I am pleased that two highly unpopular bills are almost certainly dead.  Those would have unfairly and unnecessarily altered how the Kentucky Teachers Retirement System is governed, and the other would have set aside up to $25 million a year (and more in future years) to help pay for private-school scholarships.  With our public schools already getting much less than they need, there is no way I could support taking away even more from them.

Finally, I must say that I was not happy at all with the way this legislative session ended.  According to the Associated Press, the General Assembly approved 155 bills last week, with more than half of those on Thursday alone.  

It is common for most bills to pass in the final days of a legislative session, after weeks of public debate in both the House and Senate, but this pace stretched that process beyond recognition.  We are better served, especially during shorter sessions in odd-numbered years, to pass fewer bills that have more scrutiny.  Kentuckians deserve that.

As I mentioned, legislators just have one working day left, and we will use that time to consider any vetoes that the governor may issue and perhaps vote on other bills as well.

I want to thank everyone who reached out to me this year to let me know their views.  It made a difference, and all I encourage you to keep this dialogue going in the months ahead.

You can always email me at Kathy.Hinkle@lrc.ky.gov, and the toll-free message line is 1-800-372-7181.  I look forward to hearing from you.