The Kentucky General Assembly began with a focus on full funding for public pensions that teachers and state workers rely upon for retirement, and we ended with a final two-year budget that commits historic funding levels to those pension systems, along with all-time high funding for education. 

In order to fund pensions and education in the record-levels we did, we passed a revenue measure based on comprehensive tax reform to deliberately move in a direction to lower, and one day possibly eliminate, income tax rates while broadening the sales tax base by adding consumption-driven services. The changes made to the tax code, in order to fund the budget, signify the first in decades and will be responsible for more than $450 million over the next two years. 

Specifically, personal income tax will be lowered to a flat 5% for all Kentuckians, rather than the current tiered brackets that reach as high as 6%. The result will place Kentucky 10th lowest in the entire country in terms of income tax rates, and will lower the income tax for 99% of Kentucky filers. The same flat 5% tax rate will be applied to corporate income tax, which will improve Kentucky’s competitiveness with neighboring states who are already lower than us. 

The tax reform measure will increase the cigarette tax by 50 cents a pack, bringing Kentucky’s cigarette tax to $1.10 per pack, which still lags behind the national average. Sales tax will be applied to certain services, such as landscaping, janitorial, pet care veterinarian services, fitness and recreational sports centers, golf courses and country clubs, pet grooming, limousine services, and personal care services, to name just a few. Comprehensively, the tax reform package we passed simplifies the tax system for Kentuckians and lowers the rate for most families – ultimately complementing federal tax reform done late in 2017 and resulting in more money for all Kentuckians and their families. 

Thanks to the tax reform we passed, we created the funding necessary to fulfill funding for the areas of most importance to Kentuckians – led by education and public pensions. One of the biggest takeaways in this two-year budget is record-level SEEK funding at $4,000 per student, which will go to every school district. We found full funding for school Family Resource and Youth Services Centers, which provide food, clothing and other services to help children succeed in school every day. The revenue found from tax reform will also support full funding for retired teacher health insurance contributions, and restored nearly $128 million in funding for school transportation. 

In addition to its focus on education, the budget places record funding into state employee pension systems, which will ensure that every state worker will get the pension they were promised when they started their careers in public service. Of the $22 billion dollar state budget, more than $3 billion was dedicated to pensions over the next 2 years. For the first time in Kentucky, public pensions are funded to the levels required to make the systems solvent and to ensure checks continue to reach retirees for generations to come. 

The two-year budget we passed sends $7 million in the next fiscal year to help 31 school districts replace lost revenues following a drop in the assessment on unmined coal, among other provisions. The budget includes more than $227 million for need-based scholarships and grants, and adds $62 million for the Postsecondary Education Performance Fund which is designed to modernize how Kentucky funds its colleges and universities. 

The budget includes more than $60 million to help implement the proposed changes to the adoption and foster care systems in Kentucky, including more than $23 million for placement of foster children with relatives, millions more to hire more social workers and increase current social worker salaries, and $5 million for kinship care. We worked hard to improve these systems over the last year, and the budget has funded the mechanisms to effect true change to help Kentucky kids in the systems. 

More than $85 million in federal funds for public safety are appropriated in the budget bill to support victims of crime programs. We also approved millions to hire more youth workers for the Department of Juvenile Justice, along with more prosecutors to improve public safety. 

And finally, among too many other items to note which also received funding, public libraries will receive over $8 million. Libraries are cornerstones of communities all around the state, and they allow access to so many resources, like the Internet, to Kentuckians. Speaking of access to the Internet, the budget approved over $70 million in non-governmental expense (NGE) spending authority for Kentucky Wired, the state’s open-access broadband network now under construction through a public/private partnership. 

The two-year budget we passed contains funding for so many programs and initiatives critical to every single Kentuckian. I’m proud to report that this budget spreads the state’s dollars – the people’s money – to the most crucial areas. I’m also confident that the two-year budget sets Kentucky on the right track to prosperity and long-term financial health. Our future is bright, and we have much to be proud of as Kentuckians. 

I am honored to represent you in Frankfort, and I look forward to hearing from you. You can reach me through the toll-free message line in Frankfort at 1-800-372-7181, or you can contact me via e-mail at scott.wells@lrc.ky.gov. As we take a break following the completion of the 2018 Session, don’t forget to track Interim Joint Committee meetings, which begin in early summer, and potential legislation through the Kentucky Legislature Home Page at www.lrc.ky.gov.

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