Bevin official says tax changes put budget out of balance
FRANKFORT, Ky. (AP) — Citing a rushed process through the legislature, Kentucky’s budget director said Friday that a recently approved tax hike will lead to a $50 million shortfall over the next two years.
John Chilton wrote a letter to Republican Gov. Matt Bevin saying revenue projections for House Bill 366 are not accurate. The Legislative Research Commission estimates the new taxes will generate $478 million over the next two years. Lawmakers crafted a two-year operating budget to spend all of that money. But Chilton says an analysis by his office shows revenues will be at least $50 million less than the LRC projected.
“This, of course, is a great concern,” Chilton wrote.
Bevin has not yet taken action on the bill. He has until April 13 to either sign it into law or veto it. Last week, he posted a message on his Twitter account saying he was concerned the bill may not meet “basic standards of fiscal responsibility.”
House Bill 366 would impose a 6 percent sales tax on a variety of services, including auto and home repairs. It would also cut income taxes for most individuals and corporations. Lawmakers used the projected new revenue to pay for record classroom spending and to give up to 10 percent raises to social workers.
Representatives for House and Senate leadership did not immediately respond to a request for comment Friday afternoon. But in recent days, House Republican leaders have touted the tax plan as a “widespread improvement across the board.”
Chilton says it is difficult to predict how changes in the state’s tax code will affect revenue, “especially when some taxes are being increased, and other taxes are being decreased.” Normally, he says, the Legislative Research Commission would work with the Office of the State Budget Director and the Department of Revenue to make sure everyone agreed how much money the new taxes would generate.
“HB 366 did not follow this process,” Chilton wrote, adding that his office began analyzing the changes for the first time on the same day the legislature passed the bill. “As we continue our analysis and discussions with the LRC staff, we may become aware of other concerns about the scoring and implementation of HB 366.”
Lawmakers plan to adjourn for the year on April 14, giving them time to override any potential veto. The House of Representatives voted 51 to 44 to approve the tax changes. Shortly after that vote, acting House Speaker David Osborne told reporters he was confident lawmakers would override a veto.
“We had 51 votes to pass it; we’ll have 51 votes if we need it,” he said.