BR Sub on Education

By Dustin Miller

Commissioner Lewis and Associate Commissioner Kinney gave a presentation on the KDE budget, and a copy of their slides are available HERE. Below is a summary of key points and legislative questions, but would say the two main takeaways from the meeting are: 

- Though P-12 education received more dollars in SEEK, overall it was underfunded.

- On JCPS, Commissioner Lewis could not provide an estimate of the possible costs for state management of JCPS. He says this isn't possible until JCPS in coordination with KDE puts together a school improvement plan and that plan can not be developed until the KBE puts JCPS under state management and that process is not complete.

Other notes and legislative questions:

- Slide 3 notes - Didn't get SB 1 and full-day kindergarten dollars. Also only received 1/2 of funding for SEEK transportation

- Overall message...glad to have gotten more dollars, but still $300 million short

- Slide 8, noted that FRYSC's down in KDE budget, but received additional dollars in CHFS budget, up slightly over this biennium.

Rep Huff asked if 25 positions removed worked with districts or were they administrative? A. All district focused

Rep. Flood asked about technology funding and FRYSC's?

Lewis answered and said that FRYSC's is very important helps impact poverty which impacts learning. In addition that decisions at KDE should be data-driven and thus technology is important. 

Rep. Flood asked about PD funding and teacher development resource funding that was cut and isn't that important?

Lewis says PD is important and understands the difficult budget situation legislators faced but hopes in the future that PD funds can be increased.

Rep. Flood asked what are your top 3 goals for funding in the future?

Lewis hard to say at this point. Dealing with the current budget and will work with current KBE to set those goals in the future. 

Rand asked about program elimination in the instructional resource, what is in the $16.7 million?

Kinney: could be textbooks, computer purchases, but it varies by district.

Rep. Rand asked about cuts at KDE office, and whether there were resources necessary to manage JCPS, will it divert funds from other districts?

Lewis clarifies that he has made a recommendation, but nothing has happened yet. Hard to answer the question, because the management plan won't be put together until after the district is actually under management. Statutes and regulations say that a plan doesn't have to be put together until the KBE puts the district under management. It will be costly, but reminds members that a significant amount of dollars from KDE are already spent in JCPS.

Rep. Rand asked about Lewis' top priorities for KDE?

1. Skills Gap and CTE

2. Early grade literacy and numeracy before 3rd grades including public preschool

3. High school graduation requirements - Needs to be stronger

4. Closing the achievement gaps

Rep. Brown asked about Safe Schools funding? 

Kinney says that KDE partners with KY Center for School Safety who will get those funds. Things they do include district audits and training that are district-facing. Lewis mentions that some go for school resource officers.

Rep. Brown asked about preschool and full-day kindergarten funding?

Lewis gave a detailed answer about how the funding works for both. But specifically noted that public preschool works well and is a good program and that there are lots of kids who qualify who don't get in because of funding, which is a problem. *Very supportive of public preschool.

Rep. Brown also concerned about quality of diploma and shares concerns of Lewis about graduation requirements. 

Lewis coming to KBE in August with new regulation strengthening graduation requirements 

Rep. Huff asked about number and list of districts that don't provide full-day kindergarten? Lewis thought it was very low, but would get data to her.

Rep. Tipton noted that an alarming number didn't meet the ACT benchmarks set by CPE, which is the "college ready" number.

Sen. West how much was KDE cut? 

$54 million, but specific to Frankfort, 6.25% cut of $24 million KDE Frankfort operations

Sen. West asked about SEEK increase, do districts have an ability to use those dollars for PD, textbooks, etc? 

Yes those are flexible 

Sen. West wants to see changes to PD and new teacher development. If in two years PD is increased then would like to see these changes as part of that

Rep. Riley also spoke about PD and new teacher development and echoed the comments of Sen. West.  

A&R Notes

By Dustin Miller

The A&R Committee met in Frankfort to receive an update on General Fund receipts and a presentation on the Limited Liability Entity Tax.

State Revenue Update

Greg Harkenrider with the Governor's Office Economic Analysis provided an update on state revenues. A copy of his presentation is available HERE and the highlights and key legislative questions are summarized below:

- Expected that June receipts will be up and that receipts overall will be up for the 2018 fiscal year. 

- It is expected that Road Fund revenues will be in line with the enacted estimate and that it will be within $10 million. Two notes: gallonage appears to have gone up slightly on motor fuels tax and that although the estimate was accurate the overall revenue was not good to keep up with road fund needs

- Language in HB 487 makes KY look like South Dakota for purposes on online sales tax collection related to the recent US Supreme Court decision. Sets a de minimum standard of $100k in gross receipts or 200 transactions to have economic nexus.

Rep. Fleming asked about Wayfair timing?

Harkenrider - Going to take a prospective approach, so no back taxes. Tough part is reaching out to retailers to get them to register as a retailer in KY for sales tax. Thinks it will be a slow start and told legislators not to get their hopes up for large revenue increases in Kentucky for FY 2019.

Rep. Rudy asked about Wayfair...Estimates?

Harkenrider - Nothing official from GOEA.

Rudy said GAO says $94-140 million per year?

Harkenrider - We think those are a little high because of efforts around streamlined sales tax

Rudy asks if streamlined sales tax program that compensates online vendors for voluntary collection will fall apart?

Harkenrider - Not sure will have to follow up

Rep. Tipton asked about expansion of sales tax and questions from nonprofits and charitable organizations?

Harkenrider - Sales tax expanded to participatory admissions. Legislative intent was to catch for-profit entities. Court case in Feb. said for-profits and not for profits can't be treated separately. Thus charities are caught in this as well. McDaniel said there is interest in fixing this quickly the next time the legislature is in session.

Limited Liability Entity Tax

The LLET- Cost of Goods Sold Definition presentation was provided by Charles George, Kentucky Society of CPAs; Eric Scott, Ernst & Young; and Kevin Doyle, CFO with Congleton-Hacker Company.  A copy of their slides are available HERE.

Legislative Tax Expenditures Task Force

Provided by Mike Helton

The Joint House and Senate Legislative Tax Expenditures Task Force met for the first time this afternoon.  The group is co-chaired by Rep. Ken Fleming of Louisville and Senator Chris McDaniel of Northern Kentucky. McDaniel is also Chair of the Senate Appropriations and Revenue Committee.  We will be keeping a close watch on the activities of the Task Force because it could develop into a forum for more comprehensive tax reform.

The Task Force was created in House Bill 200, the state's biennial Budget this past session. The group was appointed by House Speaker Pro Tem David Osborne and President Robert Stivers  to review, examine and analyze all tax expenditures. Tax expenditures are exemptions from the state tax code and are compiled once per year and published for purposes of tax policy planning and for policymakers as tax policy is considered. The memo creating the Task force is available HERE and the members of the House and Senate are identified.

Today's initial meeting was for educating members on the various exemptions.  Two of the State's Deputy Budget Directors and economists testified with a power point that is available HERE. They gave an overview of the process in identifying and gathering data to compile the State Tax Expenditure Document including what an expenditure is and how they estimate annual costs for each expenditure.  The estimating process is similar to the Consensus Forecast Group estimate used to craft the biennial budget. 

Revenue Commissioner Dan Bork testified on the interaction of the Department of Revenue with the State Budget office in sharing the data used to compile the expenditure reports.  He went into great detail explaining the confidential protections Revenue employs for protection and for complying with federal IRS confidentiality rules. Commissioner Bork's presentation is also available HERE. 

The other presentations were on the film industry's incentives that have received significant debate in the General Assembly and other Economic Development incentives.

KY Primary Election Results

2018 Primary Election Results

Kentucky voters went to the polls today to determine party nominees for the General Election in November. There were 51 state legislative primary races with 19 incumbents facing primary challenges. Based on unofficial results, we have provided this spreadsheet, with House & Senate primary tabs, showing the outcome of tonight's elections. In addition, we want to highlight a few key races:

- Anti-Incumbent sentiment hit the State House with 4 incumbent State Representatives losing their primary election. Horlander (D-Louisville), Shell (R-Lancaster), Morgan (R-Richmond), and Couch (R-Hyden).

- The surprise of the evening was the defeat of House Majority Floor Leader Jonathan Shell losing by 115 votes to high school teacher Travis Brenda. It appears this race was the focal point of advocacy for the teacher's unions, who are upset with the pension reform legislation that the legislature passed during this most recent session.

- The anti-incumbent bug didn't seem to hit the State Senate, where all 5 incumbent State Senators with primary races won.   

- Two former State Representatives won primary elections tonight, Democrat Cluster Howard in the 91st and Bill Farmer in the 88th. Both will have opponents in the General Election. 

- There were several congressional primary elections as well, but most attention was on the 6th Congressional district. Incumbent Andy Barr (R-Lexington) successfully won his primary. The focus, however, was on the Democratic primary to determine his challenger in November. Lexington Mayor Jim Gray ran against political newcomer and former Marine pilot, Amy McGrath. Gray was thought to be the frontrunner, however, McGrath defeated Gray in a 6-way primary garnering 49% of the vote. The Barr-McGrath race will likely draw national attention as Democrats see this as a place to possibly pick up a seat, but Barr will be well financed with a campaign fund of over $2 million.

We will have more analysis in the days ahead. 

Bill Lists - Day 60-Sine Die

From Government Strategies:

These are the final bill lists from the 2018 Session. We will provide a detailed report from the 2018 Session to our clients this week.

Education Bill List

Energy-Environment Bill List

General Business Bill List

Health Care Bill List

Health Insurance Bill List

Insurance Bill List

Transportation Bill List