Cigarette and alcohol tax passed to cushion state budget cuts

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By Tom McKee


Not long after legislators approved the state’s two-year budget last April, we began to realize that as much as we had scaled back, it still would not be enough because of the steep downturn in the nation’s economy.

            Our state economists told us last fall that, despite several hundred million dollars already being cut, we would need to come up with $456 million more to balance the budget by the end of the fiscal year on June 30, 2009.

            Last week, the General Assembly voted to largely follow a plan that Governor Beshear and his administration had created to overcome this deficit.  The new law that comes from this plan includes more cuts, uses a significant portion of our “Rainy Day” fund and creates some additional revenue.

Part of that revenue comes from raising the alcohol tax a modest amount by adding the sales tax to retail alcohol package prices.  The sales tax is already applied to alcoholic drinks bought at restaurants and bars, as well as soft drinks at the supermarket, so we felt that this was a logical extension.

After a lot of discussion, we also agreed to raise the cigarette tax by 30 cents, which is far lower than the proposed 70-cent increase that the governor had recommended.  It is important to note that the larger tax increase on cigarettes comes from the federal government, and that Kentucky’s rate is still half of the national average.

Without this revenue, there is no way we could continue protecting our classrooms, our critical health and human services, and our tobacco settlement programs from severe cuts.  While our revenue plan was not an easy choice to make, it offers a better alternative than the setbacks we would have seen in those areas.

While the budget took up much of our time last week, there were several other issues worth noting.

            On Thursday, for example, the House voted to keep those 18 and younger from being able to talk or text on their cell phones while driving.

            We also gave our local governments a reprieve on the timeline for payments they are called upon to make to their retirement system.  This approach would free up some money now, when they need it most, without negatively affecting their retirement system.

            Another bill to make it through the House would give voters a chance next year to change our constitution and give most felons voting rights after they serve their sentences, including probation and parole.  Right now, only Kentucky and Virginia due not automatically grant these rights when a sentence is complete.

            In other issues, the Agriculture and Small Business Committee that I chair continues to be very active.  Last week, it approved three bills I am sponsoring, with the hope that the full House would soon vote for them.

            These bills would provide some needed reforms for the state veterinarian’s office; update the laws regarding the safety net for grain marketing; and make it possible for us to have smaller farms in agriculture districts.

            This week, the General Assembly is not scheduled to convene on the floor; however, committees will continue to meet.  The session will begin again on Monday for the final three full weeks of session.  Our last day will be toward the end of March.

            As always, please let me know if you have any thoughts or concerns about issues involving state government.  You can always write to me at Room 332B, Capitol Annex, 702 Capitol Avenue, Frankfort, KY 40601.

            You can also leave a message for me or for any legislator at 800-372-7181.  For the deaf or hard of hearing, the number is 800-896-0305.

            I hope to hear from you soon.