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Ky. Senate Republicans unveil budget, setting the stage for tax overhaul

The Senate, located in the State Capitol in Frankfort, is the upper house of the Kentucky General Assembly.
The Senate, located in the State Capitol in Frankfort, is the upper house of the Kentucky General Assembly.

Republicans in the Kentucky Senate have unveiled their version of a two-year budget, funding several initiatives like raises for state workers and renovating state parks, but leaving about $1.2 billion unspent.

The extra money sets the stage for lawmakers to overhaul Kentucky’s tax code, largely by cutting the income tax.House Republicans have already advanced a bill that would lower the income tax from 5% to 4%, reducing revenue into the state’s coffers by about$1.3 billion over two years.

Sen. Chris McDaniel, a Republican and chair of the Senate budget committee, said the state mademore money than it expected during the pandemic, giving budget-writers more to work with.

“We had the ability to fund additional priorities in the commonwealth and we took a very conservative yet measured approach to those priorities,” McDaniel said.

The legislature writes a new budget every two years. The plan sets how the state spends its money, and it’s paired with a revenue bill that establishes tax rates.

Unlike the House version of the budget, the Senate planwouldn’t fund full-day kindergarten or a $10 million pot of money for lawmakers to spend on projects in their own districts.

Though both chambers proposed raises for state workers, the Senate’s version sets a dollar amount—$4,500 per employee—while the House would create a 6% increase. It would also provide $4,800 per year raises to social workers next year and another 10% raise the year after.

The plans do not include raises for teachers. Republican leaders say those decisions should be left up to local school districts.

Both the House and Senate budgets include slight increases for the SEEK education funding formula, raising it from $4,000 this year to $4,100 in 2023 and $4,200 in 2024.

The Senate plan also includes $250 million for improvements to Kentucky State Parks.

Sen. Morgan McGarvey, a Democrat from Louisville and the chamber’s minority leader, said Democratic lawmakers only learned about the new Republican plan an hour before it was voted out of committee.

“This is not the way to make policy in Frankfort,” McGarvey said. “The state’s budget is not only our ultimate policy document, it is a moral document. It is where we put the state’s priorities. We don’t even know what all those priorities are right now.”

Making up more than three-quarters of both legislative chambers, Republicans are firmly in charge of the budget process in Kentucky. Democratic Gov. Andy Beshear will have the opportunity to review and veto all or part of the bill, but GOP lawmakers can easily override him, and have repeatedly done so in the past.

Jason Bailey, executive director of the progressive think tank Kentucky Center for Economic Policy,reviewed the Senate plan on Wednesday and said it leaves “substantial dollars unspent.”

Bailey said it’s unclear what the Senate plans to do with the extra money, but warned against using them for tax cuts.

“Using those monies for permanent tax cuts like the House has proposed would leave a massive hole in the budget moving forward,” Bailey said.

The plan advanced quickly on Wednesday, passing out of a committee in the morning and receiving a 30-6 vote in the Senate in the afternoon. Leaders from the House and Senate will now negotiate a final version.

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