Budget, public safety, workforce development, school choice top to-do list
The Kentucky legislative process is political. That’s true both inside Republican and Democratic caucuses and in how the parties interact with each other. Bills can live or die by the clout of the lawmaker (or lawmakers) behind them. Then there is the state budget, which is the only legislation that the Kentucky General Assembly is constitutionally required – political squabbles or not – to pass in session every two years.
The state budget is so important that annual legislative sessions in even-numbered years are dubbed budget sessions to emphasize just how big a deal the budget is. Senate Majority Floor Leader Damon Thayer (R-Georgetown) told LINK nky in October that passing a two year state budget is absolutely “the biggest issue” awaiting lawmakers during the 2024 legislative session that began Jan. 2.
State budget
Not only is the state budget a big issue, it’s a massive amount of funding. All funds (including state and federal) appropriated in the current budget total approximately $113.8 billion, according to the state budget director’s office. About one quarter of that funding is state general fund revenue, the majority which is appropriated for public education and Medicaid. In 2022, Kentucky general fund appropriations totaled $29.2 billion, according to official budget reports.
Funding appropriated in the next budget could be less, on par, or more than is budgeted now. It depends on how the process unfolds now that Gov. Andy Beshear has unveiled his more than $130 billion state budget plan, which he announced in a televised address Dec. 18. That proposal is now in Kentucky state lawmakers’ court. After a bill is filed, legislative committees will be able to hold budget hearings on the proposal. Eventually a budget bill will make its way from committee to a final vote with significant negotiation (and intervening votes) in the process.
By April 15 – the last day the General Assembly can constitutionally meet in even-numbered years – a final budget should make it to Beshear to be signed into law. But no one is expecting a full rubber stamp from the governor.
“We had over 80 of our bills and resolutions vetoed by him that we’ve overridden,” Thayer said back in October. “Having to deal with that over the last four years has been frustrating. But it’s just a stump we have to plow around.”
Even if Beshear does decide to veto part of the budget bill (as he did in 2022), at least some appropriations are likely to become law with support of the Republican supermajority held by both the Senate and House.
So what can Northern Kentucky expect in terms of appropriations in 2024? A top priority is education. According to Thayer, “Education is always going to be a focus.” Right now 36.9% of the state’s General Fund budget goes to elementary and secondary education, according to 2022 data from the state budget office. Another 9.7 percent cited by the office was appropriated for public colleges and universities.
The Kentucky public education landscape could look a bit different in future years, however, if lawmakers agree to seek voter approval for use of public funds for public charter schools and non-public schools as some anticipate. Votes on tax reform, criminal justice and public safety, workforce development, and certificate or need reform could also be in the works.
Legislation in any, or all, of those areas would likely impact NKY.
School choice
If the Kentucky General Assembly takes up the issue of school choice in 2024 it isn’t expected to go it alone. Members of the NKY legislative caucus have told LINK a potential first step may be a proposed constitutional amendment after a 2022 state Supreme Court ruling that struck down a 2021 school choice law.
A proposed amendment would essentially put the question of public funding for schools outside the governance of a local school district before voters in Nov. 2024. Lawmakers would still have to approve the funding. Rep. Marianne Proctor (R-Union) told LINK that the initial question, however, should be up to the voters.
“The Supreme Court ruling does make (the issue) go before the people but I think that’s where it belongs,” said Proctor. “It belongs with the people.”
Kentucky has 171 public school districts including 120 county school districts and 51 independent school districts (11 in NKY). All receive public funds. But recent state laws have attempted to allow public funds for education outside of the traditional public school system, or common schools. Public charter schools (run by boards of directors, not school boards) were legalized in Kentucky in 2017 but have yet to be funded despite a 2022 law that mandated a publicly funded charter school pilot program in the state. That law, 2022 HB 9, was ruled unconstitutional by a Franklin Circuit Court judge on Dec. 11.
The 2021 law (HB 563) ruled unconstitutional in 2022 would have allowed public tax credits for donors who fund private school tuition.
Approval of a proposed school choice amendment by voters in 2024 could potentially clear a path for public funding of public charters and non-public schools by the Kentucky General Assembly as early as 2025.
Justice and public safety
One slice of the state general fund budget that has remained largely static over the past decade is criminal justice. State lawmakers appropriated roughly 11.7% of the budget for criminal justice (corrections and juvenile justice, for example) in 2022. That was an increase of less than one percent of criminal justice appropriations in both 2014 and 2016. (10.9%).
But what is not static is how the funding is appropriated. That can change from budget to budget, depending on the legislative agenda.
A major crime package unveiled by a group of Republican lawmakers in September and filed last week gives a glimpse into potential uses for some of that funding in the two years ahead. Should it become law, the legislation is expected to beef up penalties for a swath of crimes in a single legislative package.
Getting fentanyl off the streets is a central part of the bill.
According to the Kentucky Office of the Attorney General, the highly-potent synthetic opioid fentanyl was a factor in over 70 percent of Kentucky’s 2,250 overdose deaths in 2021. Part of the proposed crime package would target illicit fentanyl by allowing prosecutors to seek a life sentence without parole — and possibly the death penalty — for intentionally selling fentanyl or related drugs that cause overdose death.
Provisions targeting gang crime are also tucked into the package, which would potentially change the threshold for felony vandalism of public or private property to $500 in damages (down from $1000), create a “3 Strikes Law” for violent felony offenders, and make carjacking a Class C felony, punishable by five to 10 years in prison. Also proposed? Language that would allow the death penalty for someone convicted of intentionally killing an on-duty law enforcement officer.
And there could be other public safety proposals in the works. Beshear has proposed new raises for state troopers and enhanced stipends for law enforcement — a carryover from his 2023 reelection win over Attorney General Daniel Cameron. Those provisions are found in the governor’s budget proposal. Approval of that spending, however, would need to come from the General Assembly which may have its own funding ideas in mind.
Workforce development
The fentanyl epidemic targeted in the proposed crime package goes beyond public health. A Kentucky Chamber report released in May indicates that drug abuse is also a barrier to workforce development. Substance use disorder is “a key reason why Kentucky has one of the lowest workforce participation rates in the nation,” according to a May 8 Chamber press release.
Some employers in NKY are feeling the pressure from substance use disorder. That point was driven home by the NKY Chamber when it listed workforce support for persons with a history of substance abuse or justice system involvement as one of its legislative priorities for 2024.
Key state lawmakers seem to be receptive to the idea.
Kentucky Senate President Roberts Stivers (R-Manchester) told the NKY Chamber at its Where We Stand legislative preview event in December that lawmakers are likely to address substance use disorder in the context of workforce development during the 2024 session. A hint of what that legislation could look like can potentially be drawn from key policy recommendations from the Kentucky Chamber released in May 2023. Among the recommendations:
- Increase public funding for prevention, treatment, and recovery
- Optimize and expand Kentucky’s treatment and recovery infrastructure
- Screen more effectively for and treat substance use disorder among justice-involved Kentuckians, and
- “Stop the flow of fentanyl into Kentucky and the United States,” in the Chamber’s words.
Employee child care access is another factor in workforce development both in NKY and statewide that is expected to make an appearance during the 2024 session. Legislation that could make it easier for childcare facilities to navigate local zoning laws is one possibility, state lawmakers told the NKY Chamber at its preview event. Continued access to a $15 million grant pilot program for employer-assisted child care created by 2022 HB 499 is also on lawmakers’ minds.
Certificate of need
Less certain this session is if state lawmakers will make changes to a 1970s-era certificate of need law that requires state approval for new or expanded health care services. At least 18 types of health care services from hospitals to home health agencies are governed by the statute now. But there is broad disagreement on whether the requirement is necessary.
Those who want to keep Kentucky’s certificate of need law say it controls health care costs and protects access to services for those who are underinsured or served by Medicaid or Medicare. Those who want to reform, or even repeal, Kentucky’s certificate of need law believe it stifles competition.
Caught up in the debate is St. Elizabeth Healthcare, a dominant NKY health care provider that has sometimes been labeled a monopoly by those favoring certificate of need reform. Proctor and Steve Rawlings (R-Burlington) filed legislation in the 2023 session (HB 312) to exempt Boone, Campbell, and Kenton counties from the state’s certificate of need law. That proposal stalled in the House.
Last week, Proctor filed three new bills targeting certificate of need that aren’t specific to NKY but would make changes impacting the entire state. But it’s uncertain if lawmakers are ready to act.
Last year the Legislative Research Commission established a Certificate of Need Task Force to study the issue in full and report findings to the Kentucky Legislative Research Commission ahead of the 2024 legislative session. On Dec. 14, that task force issued a one-sentence recommendation for possible further study of certificate of need rather than recommending substantive changes. A resolution to create another task force this year is pending in the Senate.
Tax reform
State general fund revenue relies largely on taxes and fees including (for now) a state individual income tax. A fiscal update released by the state budget office in December showed 4.5% growth in individual income tax receipts for fiscal year 2024 through October. But Kentucky has a plan in place to eventually phase out the revenue source.
Lawmakers have so far reduced the tax from a top rate of 6% in 2017 to 4% today, including a 5% to 4.5% cut in 2023 and another half-percent drop (to 4%) on Jan. 1. But there won’t be any reduction in 2025 under the law. That’s because Kentucky has only met one of two revenue conditions per the law that would trigger another rate cut. Had both conditions been met, the rate would have been allowed to fall to 3.5% in 2025 with legislative approval.
It is possible that state lawmakers could pass a bill in 2024 that would expedite a reduction in the tax but right now that appears unlikely. A Sept. 8 Associated Press article quoted Senate Appropriations and Revenue Chair Chris McDaniel (R-Ryland Heights) as saying that the 2022 law “appropriately weighed the importance of lowering taxes with the need for critical government functions such as education, corrections and more.”
The Kentucky Chamber of Commerce – which has called cutting the individual income tax its “top legislative priority” – appears to agree. In September, Kentucky Chamber President Ashli Watts said the organization “applauds legislators for their commitment to carefully phasing out the income tax, and we will continue working with them to achieve this important goal for our state.”
Another tax reform issue to watch is potential repeal of the state inheritance tax, which is on the Kentucky Chamber’s wish list. The tax was considered a “small but important source of General Fund Revenue generating $51 million” in 2015, according to the independent Kentucky Center for Economic Policy. The state Chamber countered that in its 2024 legislative agenda document saying the tax “can be disruptive to business structures and encourage some Kentuckians or their beneficiaries to leave the state.” That could signal some potential action on the issue in 2024.
As far as new taxes, McDaniel told the NKY Chamber at the December Where We Stand event that he doesn’t see much if any “broadening of the base” in 2024 specifically as it relates to taxes on services. After several previous rounds of adding the 6% state sales tax to untaxed services the Senate budget chairman told the NKY Chamber that there appears to be little appetite for a new hike in 2024.
Road Plan and other priorities
Road construction is another budget priority during the 2024 session. As part of that, there may be continued focus on the $3.6 billion Brent Spence Bridge Corridor Project which is included in NKY’s share of the current state Road Plan.
The $3.4 billion 2022-2024 state Road Plan provided for approximately $760 million for construction of a companion bridge to the existing Brent Spence Bridge, including $250 million in state matching funds, $360 million in federal grant funds ($180 million per fiscal year), and $150 million in federally backed transportation bonds. The majority of that will carry over to the new budget cycle, according to information provided to LINK by the Legislative Research Commission. But there is always the possibility that additional funding will be needed for corridor improvements.
Per the commission, additional funds would be drawn from the regular federal fund allotment with required matching funds. There is no indication of how much, if any, new state funding may be appropriated in 2024. But it’s one to track.
Major transportation projects like the Brent Spence Bridge Corridor and potential changes to the state’s K-12 education system give NKY lawmakers a unique voice on these and other issues in 2024. Specific priorities of the NKY caucus will become more clear in coming weeks. Where the bills go from there will be interesting to watch.