TheTimesTribune.com, Corbin, KY

State News

March 26, 2014

Senate passes budget with no locked-in gas tax hikes

CORBIN — By Ronnie Ellis / CNHI News Service

The state Senate on Tuesday passed its version of a two-year revenue measure, and unlike the House version, it does not lock in gas tax increases.

The Democratically-controlled House promptly refused to go along and the two chambers will appoint a conference committee to work out a compromise.

There was also some discussion that the Republican-controlled Senate improperly attached the measure to a non-appropriations bill, but it wasn’t clear by the end of the day if they might have to re-work the bill sponsored by budget chairman Sen. Bob Leeper, I-Paducah.

Either way, the substance of the bill won’t change, and unlike the House, the Senate version doesn’t lock in higher gas taxes to help fund the road plan.

Kentucky’s gas tax fluctuates with wholesale prices. The per-gallon tax is scheduled to drop on April 1 because wholesale prices have been falling. The House wants to lock in the rate at December levels, which would keep the tax at 30.8 cents. The difference is about $107 million over the two-year biennium for the Road Fund.

“There is not a feeling our side that we needed to change the gas tax,” Leeper said. “Obviously, if you don’t raise the gas tax, you’ve going to affect the road plan.” The Senate has yet to release its version of the road plan.

Democrats in the House said it was more important to keep that $107 million for road construction, repair and maintenance, and pointed out that about 40 percent of it goes back to county governments to maintain county and secondary roads.

The Senate also removed language contained in the House measure designed to protect about 79 public libraries which were formed by petition and whose taxing authority is the subject of multiple lawsuits.

Kentucky has 106 library districts, 79 of which were created by petition under a law that said they must go back to voters any time they wish to increase tax rates. But lawmakers passed a bill in 1979 that limits taxing entities to a 4 percent increase in tax revenues (not rates) each year. If they want to raise more than 104 percent of what they received the previous year, local governments, school boards and taxing entities must submit that to voters.

After that, libraries argued they were subject to HB 44 provisions rather than the petition law and for years have raised tax rates under that law. But taxpayer groups in Kenton and Campbell counties sued, arguing the tax rates should be rolled back to 1978 levels and two lower court rulings have agreed. The libraries have appealed, saying they will be financially devastated if they have to return to 1978 funding levels.

The House revenue plan would include language codifying libraries’ interpretation of the laws. Leeper said the Senate didn’t want to interfere with the issue while it is in the courts, though he said it’s likely the legislature will have to address the issue of library funding down the road.

The Senate retains but alters a House provision on applying a pari-mutuel tax to instant racing which is now offered at horse tracks in Franklin and Henderson but which is the subject of on-going litigation.

Both bills retroactively apply the tax to September 2011 when the two tracks began offering the games but the Senate would tax those proceeds and those in the future at 1.5 percent. The House would tax proceeds from September to enactment of the bill at 1.5 percent and 3.5 percent going forward. The difference is about $1.1 million for the biennium.

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