In just a short three weeks, we state lawmakers will be back in Frankfort for another regular legislative session—the 147th in our state’s history.
And, while the 30-day “short” session beginning Tuesday, Jan. 8 won’t be a budget session requiring the writing of a new state budget (we did that in 2012), lawmakers will likely consider recommended changes to our state’s tax system sometime before the session concludes in March. The recommendations, which experts say could generate upwards of $700 million in new state revenue for the state, are just part of an ambitious agenda lawmakers are expected to undertake.
After spending the first week of the session swearing in recently elected lawmakers (including 19 freshmen), holding leadership elections and organizing ourselves into committees, the Kentucky General Assembly will break until the second week of February, as is typical for annual sessions held in odd-numbered years. Then we return to Frankfort to begin the policy making part of the session. Issues like the aforementioned state tax reform, redistricting of state legislative seats, fine-tuning the prescription drug bill passed in 2012, and possible confirmation of a state health benefit exchange (now being developed under executive order) to help the state comply with Obamacare are all likely to surface among the dozens of bills that will be heard in legislative meetings and on the House and Senate floors.
The issue of tax reform is certainly not new but, in some ways, it is more timely than ever before. Kentucky has had to make over $1.5 billion in spending cuts in recent years and has no choice but to fix a broken public pension system that has over $13 billion in unfunded pension obligations among funds held by Kentucky Retirement Systems alone. Pension experts are recommending that the state pay its full contribution to the KRS which will cost around an additional $350 million in fiscal year 2014, based on actuarial projections.
We need new revenue, and many believe some reform to the state’s tax code is the way to go.
Among the recommendations made by the governor’s Blue Ribbon Commission on Tax Reform this month are a statutory reduction in both the state’s personal income tax rate and overall corporate taxes, expanding the state’s 6 percent sales tax to include more services, and limiting deductions while increasing revenue from retirement income by lowering the taxable amount from the first $41,100 in retirement income (current threshold) to $30,000. Enacting a state Earned Income Tax Credit to give low- to moderate-income workers a refund on personal income tax paid over a certain amount was also suggested.
Support for tax reform at the state level is broader than it’s been in past years given continued fiscal constraints on state services. Still, it is a far piece from a done deal. Since the next session is the 30-day regular session held in odd-numbered years and not the 60-day regular session which is constitutionally set aside for budget matters in even-numbered years, the constitution requires a “supermajority” of votes in the House and Senate to pass any bill that raises or lowers revenue (i.e, tax reform). Numerically speaking, that’s 3/5 of each chamber, or 60 votes in the House and 23 votes in the Senate, and neither is easy to reach.
Guessing on a final vote is, of course, premature. We don’t know if a tax reform bill will even make it out of committee, much less pass into law. But the issue is an important one that faces us, either in 2013 or another session yet to come.
Redistricting—or redrawing of district lines in the state legislature, in this instance—went to court and back in 2012. New lines were never passed for the state legislative seats (new congressional lines were drawn and passed into law), so that is something we likely have to look forward to in the session beginning in January. No new proposals have been floated to my knowledge, but I feel certain that the issue, once brought to committee, will be enacted by the General Assembly rather quickly. Few lawmakers want to publicly squabble about an issue that drew so much controversy in the last regular session and beyond.
Now a word about House Bill 1, another piece of legislation from the 2012 regular session. Also known as the “pill mill bill”, this bill—now law—created new regulations for ownership and operating of pain clinics, prescribing and dispensing of controlled substances containing hydrocodone (found in pills like Vicodin and Lortab), mandatory use of the e-monitoring system called KASPER (which stands for Kentucky All Schedule Prescription Electronic Reporting) by health providers, tracking of non-analgesic controlled substances (like Xanax and Klonopin) and other rules. Since most of the rules took effect last July, many medical providers and patients have expressed concern with prescribing requirements for mental health and pediatrics patients (among others) and prescribing in hospitals inpatient and ER settings, just to name a couple of places. Whether or not insurance should/should not pay for urine drug screens ordered by physicians in order to meet the law’s requirements has also been questioned. I am sure we will be looking at these issues in the upcoming session and making changes as warranted.
The issue regarding health exchanges is tied to the Affordable Care Act (aka Obamacare) which orders that such exchanges be implemented by Jan. 1, 2014 to help folks purchase health coverage. Next session, we state lawmakers will likely decide whether or not to confirm establishment of the state health benefit exchange that the governor ordered be developed for individuals and small group employers by Jan. 1. The exchanges must be implemented by Jan. 1, 2014. If the General Assembly confirms the governor’s order, the state exchange will be authorized by state law. If not, there are a few options on how to reach federal compliance: Enact legislation that would require Kentucky to work with other states in a multistate exchange; partner with the federal government on an exchange, or; do nothing an allow the federal government to take the process over for the state.
More to come next week on issues facing the Kentucky General Assembly in 2013. Until then, enjoy the season.