KY Policy Blog

Continuing General Fund Erosion Is More Evidence of the Need to Clean Up Tax Code

By Anna Baumann
August 2, 2017

As a share of the economy, Kentucky’s General Fund is worse off today than before the last positive effort to clean up the tax code under the Kentucky Education Reform Act (KERA) took effect – 5.9 percent in 2017 compared to 6.4 percent in 1990 (see graph below). Due to the growing number and size of tax breaks in Kentucky’s tax code, General Fund revenue eroded relative to the economy for two decades after KERA and has largely stagnated since 2010. In fact, weak revenue growth in 2017 put the read more

Year-End Revenue Results Underscore Need for Right Actions on Tax Reform

By Anna Baumann
July 11, 2017

Kentucky ended the 2017 fiscal year with $138.5 million less in General Fund revenue than economists predicted would be collected. The shortfall puts slightly more pressure on investments in our schools, universities and community colleges, health and human services and other building blocks of Kentucky communities. And its details reinforce the need to generate more revenue in ways that will work.

Total General Fund receipts in FY 2017 totaled $10.5 billion. Receipts did grow compared to FY 2016 by $138.9 million (1.3 percent), but the forecast predicted twice as much read more

New Study Provides More Evidence Harsher Penalties Are Not Solution to State’s Drug Problems

By Ashley Spalding
July 11, 2017

At the same time our state is increasing criminal penalties for heroin, a new analysis further bolsters existing research showing such an approach is not an effective way to address Kentucky’s drug problems.

House Bill 333, which the Kentucky legislature passed earlier this year, increases penalties for low-level heroin and fentanyl trafficking — rolling back the drug sentencing reforms in 2011’s House Bill 463. The new law makes trafficking in heroin in less than 2 grams a Class C felony, with a 5 to 10 year sentence and no eligibility read more

Senate Health Care Repeal Bill a Drastic Step Backward for Kentucky’s Health

By Dustin Pugel
June 23, 2017

The Senate released the discussion draft of their bill yesterday to repeal the Affordable Care Act (ACA). If passed, the Senate proposal would be a terrible setback for the 1.4 million Kentuckians covered by Medicaid as well as all Kentuckians who benefit from the patient protections and assistance buying coverage contained in the ACA.

Nationally, the Congressional Budget Office (CBO) estimates that it would end coverage for 22 million Americans and drive up health care costs for nearly everyone else.

Effectively Ends Medicaid Expansion

Over 473,000 low-income Kentuckians have gained read more

Kentucky’s State Budget Unable to Compensate for Massive Cuts in Trump Budget

By Ashley Spalding
June 15, 2017

President Trump’s budget proposal dramatically shifts costs to states they will be unable to afford, as shown in reports released this week by the Center on Budget and Policy Priorities. At the national level the cuts mean states and localities would immediately need to come up with the equivalent of more than five percent of state General Fund budgets to maintain the programs the federal government is shedding. Because the proposed cuts grow over time, what states need to assume responsibility for will grow to the equivalent of 37 percent read more

Troubling Hints About Direction for Tax Reform

By Anna Baumann
June 8, 2017

We don’t know yet the specifics of a tax reform plan the governor wants the General Assembly to consider in a 2017 special session. But this week, in a letter sent to legislators indicating the session will be held sometime after Aug. 15, the governor said Kentucky can become “more competitive with surrounding states like Indiana and Tennessee by lowering or eliminating certain taxes.” Given the makeup of those two states’ tax systems, this language suggests a potentially harmful direction that involves lowering taxes for the wealthy and corporations and read more

Kansas’ Experiment Yields Valuable Lessons for Kentucky

By admin
June 7, 2017

By Heidi Holliday

You’re welcome, America. Our state, Kansas, just wrapped up a 5-year long experiment in governance from which the other 49 states can now glean some important lessons. The Kansas Legislature has voted to roll back much of the 2012 package of tax cuts that sent the state into a downward spiral of financial instability and weakened the Kansas’ public schools, universities, Medicaid program and virtually everything else that the state funds.

With the state facing yet another budget shortfall of $900 million, government leaders decided that enough read more

Pension Benefits Inject $3.4 Billion into the Economies of Kentucky Counties

By Jason Bailey
June 6, 2017

As the governor and General Assembly consider additional cuts to pension benefits for employees, it’s important to understand the role such benefits play in local economies. In 2016, public retirees of the Kentucky Employees’ Retirement System, State Police Retirement System, County Employees Retirement System and Kentucky Teachers’ Retirement System received pensions totaling $3.4 billion.  That’s the economic equivalent of an entire industry — for comparison, the accommodations and food services industry in Kentucky generated $4.5 billion in earnings in 2015 while the construction industry generated $7 billion, according to the read more

Angel Investor Tax Credit Program is an Overly-Generous Subsidy for Wealthy Investors

By Pam Thomas
May 23, 2017

Kentucky’s angel investor tax credit program is touted as a way to encourage investment in start-up companies. But because it is overly generous to investors, fails to target start-ups exclusively and lacks adequate evaluation mechanisms, there are reasons to question its cost-effectiveness.

Angel investor tax credit programs are offered in more than 20 states. They are promoted as a way to encourage investors to support start-up and early stage ventures for which it is sometimes difficult to access the capital needed to begin or expand operations — especially in risky read more

Any Way You Slice It, A Shift To Consumption Taxes Will Hurt Kentucky

By Anna Baumann
May 19, 2017

There are two main reasons why shifting from income taxes to sales taxes would be bad for Kentucky:

Doing so would make our tax system more regressive than it already is (asking lower- and middle-income families to pay an even larger share of their income in taxes to pay for tax cuts for higher-income families;) and The shift would further reduce revenue growth that is needed to meet our obligations and invest in our schools, infrastructure and other building blocks of thriving communities.

These consequences of upside-down tax shifting are read more