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Government & Politics

Kentucky Legislature Advances Budget, Tax ‘Fixes’ On Last Day

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Henryk Sadura
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On the final day of this year’s Kentucky General Assembly, state lawmakers are advancing “clean-up” bills that would make changes to the two-year budget and revenue bills that passed into law on Friday.

The changes would reauthorize a tax incentive used by major manufacturers like Toyota, General Electric and Ford in Kentucky, redirect some funds towards schools in counties that have lost coal severance revenue and fund the delayed statewide broadband project KentuckyWired.

Sen. Chris McDaniel, chair of the Senate Appropriations and Revenue Committee, said that the combination of tax and spending measures would be revenue neutral compared to what the legislature has already passed.

“Ultimately what you’ll find is this balances out,” McDaniel said.

The changes would mean that Kentucky would bring in $395.8 million in tax receipts over the next two years, far less than the $487 million originally predicted under the revenue bill.

House budget chair Steve Rudy said the difference would offset by setting aside less money in the state’s rainy day fund than previously planned.

“All of it said, everything will be covered and we will have $230 million in the rainy day fund as opposed to $300 million, but we are still in balance and that’s still more than was in the rainy day fund in the last biennium,” Rudy said.

The KentuckyWired broadband project will be funded under a bill making its way through the legislature on Saturday and the state’s side of the public-private project will be authorized to borrow $110 million to pay private partners for delays associated with it.

Lawmakers have criticized the project’s financial arrangement and delays in securing agreements with owners of telephone poles and properties where the network’s fiber optic wires need to be installed.

Louisville Republican Rep. Jason Nemes voted in favor of the measure, but called it a “sham.”

“It is an important project and we’ve got to go through with it because of the position that we’re in, but this is an outrageous example of bad government,” said Nemes.

The budget “clean up” bill would for the next year freeze pension contribution rates for local health departments and other quasi-agencies — they weren’t included in a phase-in of those higher contributions for local governments that passed into law on Friday.

It would allow the teacher pension system to continue to provide a subsidy for health insurance of retired teachers who don’t qualify for Medicare yet.

It would also shuffle $7 million out of the coal endowment fund and split the funds among school systems affected by loss in unmined minerals tax receipts.

The tax “clean up” bill would remove a 20 percent tax deduction for pass-through companies, generating about $45 million — a similar deduction is included in the federal tax changes that passed late last year.

The bill would also reauthorize the Angel Investor Tax Credit, which applies to mostly wealthy people who invest in certain start-up companies, though the program would be frozen for the next two years.

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