This past week’s pace of bills was ridiculous. It was like going and putting your mouth over the end of a fire house and turning it on. The results are catastrophic. And now I can understand why so many mistakes are made in legislation and why so many challenges are sustained after court review. Nonetheless, here’s a review of the bills for the past week.
Not-for-Profit Fix (The Kentucky Bankers Giveaway)
In the last session, a rushed overhaul of Kentucky’s tax code left not-for-profits paying sales taxes. Religious and civic organizations found themselves paying more in taxes through no fault of their own, and the cost was about about $30 million annually. Since that time, Kentucky not-for-profits and constituents in general asked for the statute to be fixed.
The bill to fix the 2018 tax snafu was HB 354—a 251 page bill. All told, HB 354 gave away $105 million of future revenue. While the bill fixed the not-for-profits tax liability, it also gave $56 million way in future bank franchise tax revenue. Notably the Kentucky Bankers Association made $160,000 dollars in campaign contributions over the last election cycle.
According to Pam Thomas, a budget expert with the Kentucky Center for Economic Policy, “research does not support the claim that tax breaks help states’ economies, but they do make it harder for states to invest in the building blocks of growth. Consider one final bit of budgetary context; the General Fund revenue we are losing through HB 354 is enough to pay for 1,635 teachers – or an average of about 14 teachers per district.” Great writeup here.
In addition to the giveaway to Kentucky’s banks, the bill also included a provision making tax records safe from public scrutiny. This provision was never debated and and legislators were unaware of the change at the time of the debate. It was discovered only after a story entitled, “Kentucky lawmakers secretly approved a loophole to hide tax documents from the public,” ran in the C-J ran the next day. According to the C-J, the bill “will place off-limits to the public several categories of documents held by the Kentucky Department of Revenue, including final tax rulings that are not appealed, requests for tax guidance, private letter rulings and requests concerning the division of income for interstate businesses.”
So by my count, it cost roughly 100 million dollars to undo a 50 million dollar mistake.
Democratic Wins Sparse But Exist
Two highly unpopular bills are almost certainly dead. Those would have unfairly and unnecessarily altered how the Kentucky Teachers Retirement System is governed (HB 525), and the other would have set aside up to $25 million a year at first (HB 205) to help pay for private-school scholarships. With our public schools already getting much less than they need and subjected to many unfunded mandates, there is no way I could support taking away even more from them.
The Rush to Passage
Finally, I must say that I was not happy at all with the way this legislative session ended. According to the Associated Press, the General Assembly approved 155 bills last week, with more than half of those on Thursday alone. It is common for most bills to pass in the final days of a legislative session, after weeks of public debate in both the House and Senate, but this pace stretched that process beyond recognition. We are better served, especially during shorter sessions in odd-numbered years, to pass fewer bills that have more scrutiny. Kentuckians deserve that.
Only One Day Remains!
As I mentioned, legislators just have one working day left, and we will use that time to consider any vetoes that the governor may issue and perhaps vote on other bills as well. I want to thank everyone who reached out to me this year to let me know their views. It made a difference, and all I encourage you to keep this dialogue going in the months ahead. You can always email me at email@example.com, and the toll-free message line is 1-800-372-7181. If you have a hearing impairment, the number is 1-800-896-0305. If you would like to know more about legislation or the legislative process, please visit the General Assembly’s website at www.legislature.ky.gov.