Kentucky Legislative Session Roundup

This year was Kentucky's short session lasting only 30 days.  Like most states, patching a budget shortfall consumed much of the session.  Lawmakers were able to agree to a set of spending cuts and revenue increases that will fix the budget in the first year of their biennial spending plan.  The expectation is that the governor will call the legislature back in for a special session this summer to work out year two. While recent sessions have been marked by partisan acrimony and end of session chaos, both problems moderated significantly this year allowing more work to get done.  The result was that lawmakers generally gave the session good reviews, though many key issues still failed to be resolved.

Taxes and Budget - Kentucky has dealt for years with a structural mismatch between spending and revenues.  This year the state was facing a deficit of almost half a billion dollars.  These current budget woes are expected to get even worse as the state's revenue continues to deteriorate.  The growing fiscal problems have brought the state's tax problems to the fore and at least two tax overhaul plans are being proposed by lawmakers from both parties, to possibly be taken up during a special session.  Proposals to increase gambling through video lottery terminals are also gaining traction after years of defeat in the legislature.  In the regular session an essentially stop-gap measure was passed that combined modest, across-the-board budget cuts [4 percent cuts to state agencies and 2 percent to universities] with increased consumption taxes.  Increased taxes on tobacco and alcohol will raise over $150 million per year.

  • Cigarette Tax Doubled from 30 to 60 Cents:  Many state are turning to tobacco tax increases to fill budget holes and Kentucky is one.  The doubling of the state tax also coincides with an even greater increase in the federal tax.  These price increases should further reduce levels of smoking and related health costs in the state.
  • Exemption from Sales Tax for Beer and Liquor Ended:  Despite vigorous protests by beer and liquor distributors, lawmakers ended the exemption of alcoholic beverages from the state's 6% sales tax. 
  • Stop Planned Reduction in Gas Tax:  Lawmakers froze the gasoline tax when current law had it set to drop 4 cents.  This was tied to the road and bridge plan that passed simultaneously.
  • Sales Tax on Digital Products:  Kentucky has explicitly included digital products such as software and cell phone ring tones as taxable when sold in the state [HB 347].  Adopting the change was part of complying with the Streamlined Sales and Use Tax Agreement which is an initiative to collect sales taxes on internet and catalog sales through multi-state cooperation.
  • $3.7 million Road and Bridge Plan:  The major stimulus initiative for this year was a transportation infrastructure plan that combined about $420 million in federal stimulus dollars with other federal and state funds, including the revenue from the gas tax freeze.

Education - Having undertaken significant education reform almost 20 years ago, the state enacted the first major revision of the policies adopted then.  The major assessment test is being revamped and brought more into line with new teaching standards [SB 1, summary].  The tests will also be shorter, more focused, and designed not just for aggregate data collection, but actual tracking of individual student development.  The plan had the strong support of the Kentucky Education Association and was hailed by the governor as an important first step in a top-to-bottom review of education in the state.

Criminal Justice - Kentucky has one of the highest prison growth rates in the country, having risen just under 40% between 2000 and 2008.  This year the state prison budget is approaching half a billion dollars.  However, the state is responding on several fronts with smart changes to sentencing and corrections policy, and there appears to be more on the way from both the governor and the legislature.  Unfortunately things could deteriorate into chaos if money isn't found to fill a $4.7 million gap in the state public defender office budget.

  • Pre-trial Diversion to Treatment for Addicted Drug Felons: Seeking to end the cycle of recidivism that catches up so many drug addicts and drives prison growth, SB 4 allows the pre-trial diversion of both first-time and repeat drug felons to drug treatment.  Successful completion of the program can result in charges being dropped, while program failure results in a trial on the original charges.
  • Parole Credit Toward Sentence: In order to reduce prison populations without reducing public safety HB 372 makes a change in the way it counts time served.  Now, if a parolee is returned to prison for a technical violation of their parole, the time on parole is counted toward completion of their sentence.  If a parolee commits another crime while on parole, the time between release on parolee and committing the second crime is still not counted toward their sentence.
  • Public Defender Funding Unresolved - The director of public advocacy has warned that the department will run out of funds to pay for its operations in May.  $4.7 million will be needed to cover this years expenses through the end of the fiscal year.  The department is constitutionally mandated to provide counsel to indigent defendants and they cannot refuse to provide counsel when ordered by a judge to do so [as are all states, though many are failing].  Legislative leaders claim the governor has the authority to make up the deficit using rainy day funds, but the governor has not yet announced a resolution.
Other Significant Legislation Passed
  • Payday Lending: The payday lending industry hired a gaggle of lobbyist and significantly watered down HB 444, a bill that would have capped annual loan fees at 36%, equal to the fee imposed by the federal government for military personnel.  What Kentucky workers got was a database to help check cashing companies comply with limits already in place on multiple loans and total amounts loaned, and a promise from the governor to pursue the cap next year.  The bill also placed a moratorium on new payday lending businesses for a decade, a provision the governor speculates is unconstitutional.
  • Brownfields Redevelopment Grants: A grant program [SB 27] was established to fund government agencies to assess and remediate toxic brownfields.  However, no appropriation has been made to the fund so far.

 Defeated Legislation

  • Bills to Relax Mine Safety Died:  Three bills [SB 64, SB 170, HB 119] backed by the coal industry were defeated that would have gutted landmark mine safety legislation passed two years ago.  This was a major victory for mine workers, 16 of whom died in 2006, prompting the safety reforms the following year.
  • Energy Legislation Killed:  The governor's energy legislation [HB 537], described as "an anemic measure at a time when bold initiative is needed" by the Kentucky Resources Council, was killed when amendments were added that would have ended a moratorium on nuclear plant permits and allowed oil and gas drilling on state land including parks and universities.
  • Adoption Ban for Unmarried Partners Died:  This bill would have prevented people who are living with a partner to whom they are not married from being a foster parent or from adopting a child.  The bill, plainly aimed at preventing same-sex headed families, would have closed off loving homes to children in need.
Major Initiatives Unfinished
  • Business Development Tax Incentives: Lawmakers continue to argue after the session about why millions in tax breaks for expanding a raceway to attract a nascar event, upgrading a horse track, subsidizing movie production, and other questionable "business development" incentives were not passed.  Given the political will to help business in times of rising unemployment, no matter how misguided, this package will probably be taken up in a special session.
  • Financing Authority for Major Ohio River Bridges:  Funding for three major Ohio River bridges is in limbo after the two houses failed to agree on an authority to direct the spending.  The project is a joint initiative with Indiana, were Kentucky's indecision is causing lawmakers to postpone their own legislation.


Special Session May Be Ahead for KY Legislature

Tax Overhaul May Be Gaining Steam

Governor Directs Justice Secretary to Move Forward on Justice Reform

Courts Could Grind to Halt Without Money