Exactly how the 2024 annual legislative session in Frankfort will unfold is still uncertain.
No pre-filed bills (which have been posted publicly on the website of the Legislative Research Commission before the start of each annual session in years past) have been officially posted for the 2024 session, although several Northern Kentucky lawmakers have announced plans to file specific legislation for consideration next month. Four lawmakers (Reps. Kim Banta, Mike Clines, Stephanie Dietz, and Steve Rawlings) briefly discussed their bills during an NKY Chamber of Commerce ‘Where We Stand” legislative preview event at Boone County Distilling Co. in Independence Tuesday.
Among those proposals: a bill to make possession of an anatomically correct child sex doll a Class D felony (Dietz); a bill to allow state merit scholarship funding for homeschooled students (Rawlings); a teacher recourse bill (Clines); and a proposed student teacher stipend (Banta).
The only bill that is constitutionally required of state lawmakers next session, however, is a balanced state budget for the next two years. It’s the same bill required of the Kentucky General Assembly in every annual session in even-numbered years. For that reason, each even-numbered year annual session is called a budget session.
NKY lawmaker and Senate Appropriations and Revenue Committee chairman Chris McDaniel (R-Ryland Heights) was on hand at Tuesday’s event with Senate President Robert Stivers (R-Manchester) to fill in the blanks about what is likely (or not) on the budget front during the upcoming session.
Another round of sales tax on services unlikely
Kentucky businesses bracing for a new round of sales tax on services in 2024 can relax a bit, based on comments made by McDaniel. He said that he doesn’t anticipate much, if any, “broadening” of the sales tax on services during the 2024 legislative session that starts Jan. 2.
“We really are beginning to come to a place where you have to ask yourself how much broadening do you really want?” said McDaniel. “Do you want to start taxing residential utilities? Do you want to start taxing employer-provided health plans? Do you want to start taxing pharmaceuticals and groceries, mortgage interest? Because we’ve delved pretty far into it at this point. I really don’t see a whole lot of additional places at this point. I’m sure there will be some conversation but I don’t anticipate it being very robust.”
Shelving another round of taxes on services would be a switch for the Kentucky General Assembly, which has added dozens of services to the state’s 6% sales tax rolls in recent years. Twelve services (including dry cleaning and pet care) were added to the rolls in 2018 and 2019. At least 30 more services had been added to the sales tax rolls by the end of the 2023 annual session.
But 2024 appears to be different. According to McDaniel, there’s no real appetite to tax additional services in the next budget cycle even as Kentucky is set to lower its income tax to 4% on Jan. 1, 2024 as required under 2023 House Bill 1. Revenue growth appears to be one reason why.
‘Far beyond what we actually anticipated’
McDaniel said, “Growth has been far beyond what we actually anticipated it was going to be when we started down this path. We’ve really been able to accelerate that growth, as industries have moved into the commonwealth, as certain economic development activities have really taken off.”
State economic data appears to back up McDaniel’s comments.
The state’s Quarterly Economic and Revenue Report for the first quarter of 2024 said that current forecasts predict “1.6% growth in fiscal year 2024” in state General Fund revenue with a revenue surplus of $1.2 billion over enacted estimates from the 2022 annual session.
Two other indicators of the state’s fiscal health are Kentucky’s state-level credit rating (upgraded in 2023 for the first time in 13 years) and its $3.7 billion record balance in the state’s Budget Reserve Trust Fund. Also called a rainy day fund, the trust fund is on hand to help stabilize the state budget in times of economic stress.
McDaniel’s comments on the state’s fiscal health resonated with NKY Chamber of Commerce Vice President of Public Affairs Tami Wilson, who moderated the Tuesday event. Wilson said foregoing another round of taxes on services (especially business-to-business taxes) is welcome in the region.
“It’s good to hear that you’re not wanting to broaden the tax base, because we’re concerned about the business to business taxation and how far that will go because that will stymie growth,” Wilson said.
There are other items on the NKY Chamber wish list for the 2024 annual session, too. Workforce development and economic development are the top priorities for the NKY Chamber going into 2024, Wilson said. Apparently, they are also priorities for the Kentucky Senate as well.
Workforce development
According to Stivers, workforce development will be a top issue going into 2024. Legislation that would help businesses build their workforce by improving access to employee child care and addressing substance use disorders are likely to surface, he said.
Attracting and retaining a skilled workforce through existing programs or new avenues for recruitment are other possibilities for legislation in the next session, added McDaniel.
Additionally, McDaniel said improved immigration policies would also develop Kentucky’s economy by allowing skilled workers to “be brought into the light, to be brought into the workforce.”
“Ultimately, what the nation needs is a better immigration policy,” he said. “We simply have too many people who are here frankly right now working in the dark. While there are some state level (programs) I think federal partnerships are important as well.”
Wilson agreed, saying, “We would love to explore ways that Kentucky can be more streamlined in bringing those legal immigrants into our workforce to help address that workforce crisis.”
Access to childcare
Regarding childcare funding, Clines said a new $15 million grant pilot program approved by the 2022 General Assembly (HB 499) is providing matching funds for employer-assisted child care. The fund opened in July 2023 and is expected to be available through 2026, he said.
Working next session to ensure that county and city zoning laws are more childcare business-friendly may be another step forward, said the Alexandria Republican.
Dietz (R-Edgewood) gave a nod to church-based childcare programs as examples of how to run childcare programs successfully. Many church-based or other organizational childcare programs, at least in NKY, are working well, said Dietz. She suggested that the Kentucky General Assembly look at those programs for ideas on improving childcare access in practical ways.
“Throwing money at things doesn’t always solve these problems,” Dietz said, referring to childcare access in Kentucky.
Education
At nearly 40% of the state General Fund (state tax revenue) budget, K-12 education is always a priority in any budget session. Banta (R- Fort Mitchell) chairs the House Budget Review Subcommittee on Primary and Secondary Education and Workforce Development. She said she would like for the budget to include money for teacher raises.
Providing school districts with ample guaranteed base funding for public education (also called SEEK funding) can move Kentucky in that direction, she said.
“We fund (SEEK) so that superintendents can give raises and do what they want,” Banta said. “We’d like to get up to a competitive rate so that jumping states (especially in areas near the border like NKY) is not attractive.”
According to Banta, it is ultimately up to the local districts to use the funding tools provided to them by the state to bring teacher salaries up to where they think they should be.
Public schools’ role in preparing students for the workforce was also part of the panel discussion Tuesday. Banta said NKY students have access to college-readiness programs like the Young Scholars Academy (a partnership between school districts and NKU) and work-ready experiences that she said are filling a void. “I don’t know what more schools can do to get kids involved and show them all the different paths they can take,” she said.
Stivers interjected, saying industries can initiate relationships with schools to get students interested in specific fields at a younger age. That approach worked in Pike County, and he feels it may work elsewhere, including NKY.
In NKY, Wilson said, “it’s more of an education of the parents, rather than always wanting their son or daughter to go on a four-year education track to explore other opportunities like trade schools. That’s something that’s important to the Chamber.”
A ‘budget session’
Kentucky’s current two-year state budget for fiscal years 2022 through 2024 totals over $113 billion, including state and federal funds and other funding types. How much funding is in the next state budget remains to be seen.
What is certain, according to Stivers, is that the budget bill state lawmakers take up every two years is more important than anything else they will do when they return to Frankfort in January.
To quote Stivers: “You can’t make anything in education, economic development, infrastructure go without the dollars behind it. That’s why the budget is the ultimate policy document.”