Groups ask lawmakers to choose state needs over income tax cut

Published 4:05 pm Tuesday, December 5, 2023

Monday, a coalition of over 40 Kentucky groups released a wishlist for the upcoming legislative session.Executive Director Jason Bailey said that it is a group that understands that the budget is the most powerful tool the state has to promote a good quality of life and a strong economy.

Now is a particularly good time to address needs, he added, considering the influx of over $45 billion in pandemic money to the state.

The wishlist is divided into four categories: health care, education, housing and community.

Bailey said that these specific ideas are meant as examples of the kinds of needs Kentucky is facing. Kentucky Together surveyed members to determine what unmet needs and priorities each group has.

While each has its own budget priorities to push during the upcoming session, Bailey said that the goal of the coalition is to illustrate Kentucky’s needs from a bird’s-eye view.

“For those Kentuckians who understand that education is important, that human services are important, that healthcare is important, that infrastructure is important, it’s a way for them to see the whole picture and how it’s all connected,” he said.

The list includes:

  • increased core school funding;
  • fully funded school transportation;
  • universal pre-K;
  • school employee raises;
  • expanded access to drug treatment and community mental health services;
  • increased funding for child and maternal health;
  • additional Medicaid slots for people with disabilities;
  • funding for housing needs in eastern and western Kentucky communities impacted by natural disasters;
  • increased funding to the Affordable Housing Trust Fund to address Kentucky’s housing crisis;
  • creation of a child tax credit to reduce child poverty;
  • aid to rural communities to match federal funds for infrastructure and other needs; and
  • cost of living adjustments for state retirees.

Kentucky Together’s website frames the upcoming General Assembly as a choice between passing a bare bones budget to make room for further income tax cuts or using the current surplus to meet some of these key state needs.

Bailey said that the coalition acknowledges that not all of its wishes can be met, but that some can.

Right now, the state’s so-called rainy day fund contains $3.7 billion, and current revenue projections estimate that $1.2 billion will be added this year.

If that happens, by the end of the summer, Kentucky’s rainy day fund will reach 32% of its annual revenue. Bailey said that most states aim for about 15%, meaning that there is room for spending.

According to a KyPolicy analysis of state budget data, by 2025, the state’s rainy day fund balance will reach over 30% of its General Fund revenues

“We’re all for a rainy day fund,” Bailey said. “We absolutely need one. But we don’t need excessive monies there when there are excessive needs in communities that are piling up.”

However, if the General Assembly wants to further reduce the income tax next year, it has to spend less money. In FY23, the legislature missed the mark to further reduce the income tax to 3.5% in 2025 by about $434 million in appropriations.

Bailey said that spending on needs like recovery funding for Eastern and Western Kentucky and full-day Kindergarten prevented the additional tax cuts from happening.

He said that legislators’ choices will continue to get harder with each half percentage point income tax drop, particularly for those representing rural areas where the school system is the largest employer and hospitals are primarily supported by state Medicaid dollars.

“State money from the budget plays a big role in the community,” Bailey said.

” … I can’t predict what they’re going to do, but I do think it will not be easy for them to pass a lean enough budget to hit those triggers over the next two years, given the needs of the state, given that revenues are already sort of leveling off because of the cuts that have already gone into effect.”

Kentucky Together consists of health, education, faith and community groups including the:

  • Kentucky Center for Economic Policy;
  • Kentucky Council of Churches;
  • Kentucky Education Association;
  • Fairness Campaign;
  • Homeless and Housing Coalition of Kentucky;
  • Kentucky’s Voice for Early Childhood;
  • Kentucky Environmental Foundation;
  • Kentucky Mental Health Coalition;
  • Kentucky State AFL-CIO; and more.