KY Policy Blog

Bill to Collect Internet Sales Tax Would Help Kentucky’s Budget and Level Playing Field for Local Businesses

By Jason Bailey
May 1, 2013

Federal legislation requiring internet retailers to collect sales taxes owed to states would aid Kentucky’s depleted budget and end the unfair advantage out-of-state sellers have over Main Street Kentucky businesses.

The Marketplace Fairness Act passed the first hurdle in the Senate last week by a vote of 63 to 30, although Kentucky senators Mitch McConnell and Rand Paul voted against the measure. It’s expected to come to a full vote in the Senate next week, and then will be considered in the House.

A 1992 Supreme Court ruling has kept read more

What Are Taxes For?

By Anna Baumann
April 15, 2013

Tax Day is an important time for Kentuckians to consider the role of government in our state and nation. Taxes are a critical tool for doing things together that we cannot do alone. They support investment in education, health care, infrastructure, social services and other public structures essential for the common good in Kentucky.

These days, taxes are the subject of great controversy. The April income tax due date is a time when those seeking to shrink or eliminate many of the functions of government argue for more cuts. But read more

Without More Revenue, Paying Pension Liabilities Will Continue to Be Challenge

By Jason Bailey
April 11, 2013

After the General Assembly passed final pension legislation, some proponents of Senate Bill 2 hailed it as “historic.” But the costs Kentucky faces to pay down its unfunded pension liability remain substantial—and the new revenues generated by the General Assembly to make those payments are meager.

After Senate Bill 2 is implemented, the employers that participate in the Kentucky Employees Retirement System (KERS) will need to come up with an estimated $590 million in pension payments in 2015 and $621 million in 2016, an increase of $253 million and $284 read more

Child Care Cuts Part of Broader Underinvestment in Early Learning

By Anna Baumann
April 8, 2013

Recent cuts to Kentucky’s Child Care Assistance Program (CCAP) and Kinship Care are part of a broader set of cuts to child care and early childhood education programs, despite solid evidence that we actually need more investment in these areas.

In January, the Cabinet for Health and Family Services announced a moratorium beginning this month on new enrollments in CCAP, a program that subsidizes quality child care for income eligible families where parents are working, participating in an educational or training program, or receiving aid through the Temporary Assistance to read more

State’s Mental Health System Has Experienced Severe Funding Shortfalls

By Jason Bailey
April 5, 2013

Discussion of the news that Seven Counties Services, a community mental health center in Louisville, plans to file for bankruptcy should include a look at the chronic lack of state funding for behavioral health over the last couple decades. The state’s community mental health centers have been hit by a combination of state General Fund budget cuts, frozen Medicaid reimbursements and the underfunding of pension liabilities.

In 1966, Kentucky passed legislation to implement President John F. Kennedy’s Community Mental Health Act. The state established local centers that provide treatment and read more

Pension Revenue Bill Provides Modest Resources to Address Budget Challenges

By Jason Bailey
March 28, 2013

The pension revenue bill that passed the General Assembly this week provides only an estimated $31.7 million in net new state revenue to help address Kentucky’s budget needs. House Bill 440 combines General Fund revenue tweaks and a Road Fund tax cut.

While official documents identified $95.7 million in new General Fund monies, $30 million of what is counted in that amount is expected revenue from federal tax law changes and not because of House Bill 440. Also, the bill cuts $34 million from the Road Fund by providing a read more

Revenue Recovery from Great Recession is Slow

By Jason Bailey
March 20, 2013

The debate over pensions in Frankfort hinges in part on whether the state should raise additional revenue to help make the pension payment or dig into the rest of the budget to find the funds. The weakness of the current economic recovery is one reason more revenues simply must be generated.

Just how slow is our recovery from the Great Recession? The figure below compares revenue growth in inflation-adjusted General Fund dollars after the current recession and after the last recession in 2001. The 2001 recession was not nearly as read more

Not Paying Pension Bills Adds Up

By Jason Bailey
March 15, 2013

A major contributor to Kentucky’s pension funding problem is the legislature’s failure to make the full required contribution to the retirement system in recent years.

Shortfalls in payments started as early as 1993, but began in earnest in 2004. As the first figure below shows, the state has shortchanged the pension system by at least $100 million a year since 2007.

 Annual Shortfalls

Source: KCEP analysis of Kentucky Retirement Systems data. Analysis is for Kentucky Employees Retirement System Pension Fund only.

Added up, the shortfalls total $1.8 billion, as shown in the read more

Lottery Funds Not Adequately Supporting State Financial Aid Programs

By Ashley Spalding
February 27, 2013

The House has recently identified new lottery funds as a potential source of revenue to help pay down Kentucky’s pension liability. Whatever happens with that proposal, it’s important to understand that the student financial aid programs that currently receive almost all of the lottery revenue are already substantially underfunded.

Capping the monies for college scholarships, even while allowing up to 2 percent annual growth as proposed by the House, would mean that our neediest students would continue to be turned away for financial aid. More dollars are needed both to read more

Gambling Revenues Are No Substitute for Tax Reform

By Jason Bailey
February 27, 2013

The House has proposed generating new revenues for the state pension system by expanding the lottery and utilizing revenues from instant racing. However, the plan generates only a portion of the funds needed to make the annual pension payment, while gambling revenues tend to grow slowly over the long-term. If such a proposal advances, it should not replace the need for state tax reform that generates additional and sustainable revenues.

According to the speaker’s February 26 presentation on the proposal, the House does not expect these new gambling options to read more