The Kentucky House sped to passage Friday morning an amended state revenue bill that could ease the path to hit triggers for tax cuts in future years, in line with the Republican supermajority’s long-term goal to eliminate the income tax.
The GOP-dominated chamber also cleared a late-amended bill to move a large grant program out of the Democratic governor’s administration and place it under a Republican-led agency.
Both pieces of legislation began as 11-page bills, but were amended with mostly new language in a House budget committee meeting Thursday.
The revenue bill, House Bill 8, became a wide-ranging 124-page bill, while House Bill 723 changing the state’s GRANT Program — set to soon distribute $450 million of funds — expanded to 63 pages. The amended versions of both bills were not publicly available on the Legislative Research Commission website until Thursday evening, roughly 12 hours before the House passed both Friday morning.
In addition to various changes to the state tax code, new language in HB 8 makes a change to Kentucky’s 2022 law that created a trigger mechanism to potentially lower the individual income tax rate by half a percent each year if the state’s revenue, spending and budget reserve trust fund reach a certain threshold.
Kentucky failed to hit one of the tax cut triggers last summer because its General Fund spending was $435 million too high in that fiscal year. The triggers were put in place to ensure that Kentucky did not decrease its tax rate too fast and jeopardize government services, which is what happened in Kansas a decade ago.
The trigger law already exempted spending to pay down the state’s public pension debt, but HB 8 would now exclude any appropriation from the budget reserve trust fund, so long as it is specifically identified in a spending bill as not being subject to the trigger law.
House Bill 1 that cleared the Senate last week would appropriate $3.5 billion from the budget reserve trust fund — often referred to as the state’s “rainy day fund.” Close to $1 billion of this spending is on already exempt pension payments, but the bill includes “notwithstanding” language to disregard the trigger law and say the rest of the appropriations do not count as General Fund spending under it.
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Categories: Kentucky, General