Republican leaders of the General Assembly are throwing water on the idea that they’ll make major changes to the state’s tax code during the upcoming legislative session.
Lawmakers have to craft a new two-year budget for the state and are hoping to overhaul the pension systems in the session, which lasts from Jan. 2 until mid-April.
And for the first time in Kentucky history, Republicans will have control of the House, Senate and governorship during a budget-writing session.
At a Kentucky Chamber of Commerce event Tuesday, Senate Majority Floor Leader Damon Thayer said he doesn’t think there will be time for tax reform in the upcoming session.
“If we can get out of this session by Friday the 13th of April, which is the constitutional day we are currently scheduled to adjourn, if we can get out of there with pension reform, a budget and a road plan, I’ll think it’s a success,” Thayer said.
State government has struggled to bring in enough tax revenue to meet budgetary demands in recent years, and the state’s ailing pension systems require larger and larger contributions to remain solvent.
During his State of the Commonwealth address earlier this year, Gov. Matt Bevin said he would call lawmakers back to Frankfort for a special legislative session to overhaul the state’s tax code and pension systems.
Bevin said he wanted to shift the state “from production-based tax economy to a consumption-based tax-economy” — possibly meaning a move away from relying on income tax revenue and more on sales taxes.
But Bevin backed off the call for tax reform after pushback from Republican lawmakers, who said pension changes should be made first.
Sen. Chris McDaniel, a Republican from Taylor Mill and chair of the Senate's budget committee, said pension changes would have more impact on the upcoming budget than anything else.
“The fact is even if we do tax reform, in the absence of making it retroactive, at least the first year is going to be un-impacted by tax reform and probably even the second year,” McDaniel said during the chamber event.
State economists predict that Kentucky will have a $156 million budget shortfall by the end of June — the end of the state’s fiscal year. The projected shortfall means Bevin is authorized to make cuts to the current budget.
Thayer, McDaniel and other Republican leaders expressed hope that tax reform would take place at some point in the future.
Senate President Robert Stivers, a Republican from Manchester, said revising the state’s tax code would be “twice as complex” as pension changes.
“It’s very difficult,” Stivers said.
Lawmakers said they plan to approve changes to the pension systems in the first weeks of the legislative session and hope a draft of a pension bill will be released before Christmas.
