KY house 2020 1st biennium budget should include "cuts to state expenses & expenditures with modernization of Ky's obsolete tax base.

1. When the Governor implies legislature must raise taxes to offset current deficit all of
us must be reminded how Kentucky’s finances got in this mess in the first place!
First we start with the 1994 premise that Kentucky’s average growth rate of state
expenditures was 6% compared with the average growth rate of state tax revenues
of 5.3%. Pretty much through the 80’s Kentucky kept spending more money than it
had and covering the general fund deficits by raiding the road fund. So in 1994 it
was no surprise to those who know Kentucky’s expenses were more than its
income.
In 1995, Jack Fish---executive director Kentuckians For Better Transportation---
wrote in the January 16, 1995 Lexington Herald on page A7 that $60 million of Road
Fund dollars were diverted to cover General Fund deficits. In addition, another $92
million was diverted to cover General Fund deficits as well as another $85 million
going to the State Police. Seven million of the $85 million was sales tax revenues on
motor fuels that always was considered Road Fund dollars. During the Jones
Administration $150 million was diverted---a record amount to the General Fund to
cover General Fund deficits.
Jack and most people that are familiar with this fund argues the Road Fund creates
taxpayers.
Now, Jack and the rest of us would agree Kentucky must have good roads to get its
products to market because we know 77% of the $112 billion in products shipped
from Kentucky go by roads. ---TheRoad Information Program-KyDepartment of Transportation, 1/2000
However, Jack and the rest of us would agree the new knowledge-based economy
requires a good education for all the members of our society---not just a few.
So here’s the dilemma.
To have good roads tax dollars must continuously flow into the Road Fund. We
need good roads to grow Kentucky’s economy that produces those good jobs for our
high standard of living.
In addition, the legislature started the reform of Kentucky education in 1990 to
establish one of the best education systems in the Country. Naturally, this takes a
continuous flow of tax dollars which means Kentucky’s economy must be kept
humming.
Its important that both priorities be met by the 2003 General Assembly. Roads and
Education must receive the tax dollars so Kentucky can become ever more
competitive with other states and meet it’s 21st Century level of services.
However, such a plan must include the following ingredients:

2.  First, the legislature must stop diverting Road Fund dollars to the General
Fund to cover escalating General fund deficits caused by spending more tax
dollars than the state can afford.
 Secondly, all administrations must collect all taxes due and owing from all
classes of taxpayers which is estimated to be $88 million from illegally
licensed motor vehicle owners, in-state truck owners, rental car owners,
state income tax filers estimated at over $50 million tax dollars.
 Thirdly, General Fund ought to write legislation reimbursing Road Fund for
the collective amounts diverted---thereby replenishing the Road Fund to
meet its 6-year road fund commitments.
To address the need for expanded revenue base neededto pay for the roads and
education Kentucky needs to survive in the 21st Century, the following November
15, 1995 recommendations are brought to your attention to debate implementing
all those recommendations that have not already been implemented.
 KY Commission on Tax Policy dated November 15, 1995 made the following
recommendations: Red font indicates already done
Individual Income Tax
Adopt federal adjusted gross income (AGI) and filing status. Adopt federal Standard
deduction and personal exemption levels and eliminate the low-income credit.
Retain current itemized deductions. Adopt a flat 6% rate structure on modified
income.
Corporate Taxes
Lower the top corporate income tax rate to 7% from the current 8.25%. The issue
of unitary filing should be resolved by legislation to permit a corporation to elect to
file a consolidated KY corporation income tax return or a separate entity return with
the requirement to continue filing on the same method for 5 years. Eliminate the
net operating loss carryback provision, and maintain the current carryforward.
Eliminate the corporate license tax on debt owned and to unrelated third parties.
Subject banks and financial institutions to normal corporate taxation in lieu of
intangible property taxes. Extend favorable treatment currently limited to KY
domiciled holding companies to holding companies domiciled outside KY.
Property Taxes
Exempt all tangible and intangible property from state and local taxation; exempt
unmined coal. Tax all real property at full state and local rates. Modify House Bill

3. 44. Make PVAs part of the Revenue Cabinet merit system, and turn over collection
of property taxes to the Revenue Cabinet.
Health Care Provider Tax
Eliminate the health care provide tax on physicians only.
Coal Severance Tax
Earmark a percentage of coal severance tax revenue to return to localities to offset
the burden to local governments due to the elimination of the unmined minerals tax.
Phase out the allocation over a five-year period.
Miscellaneous Tax
Repeal the racetrack license tax and admissions tax of 15 cents per person
Pari-mutuel tax
Tax the daily handle at all racetracks at a rate needed to fund equine research and
development programs
Inheritance Tax
Eliminate the inheritance tax while retaining the estate tax
Sales & Use Tax
Broaden sales tax base (in '94 KY had 161 services of which 23 were taxed) by
repealing many of the current exemptions. Food remains exempt. Sales tax
expanded to a limited group of personal services. Special exemptions offered to
certain industries would also be eliminated. Farm exemption would be treated at
par with other business exemptions.
Road Fund Recommendations]
Index Motor Fuels Taxes: Index gasoline, special fuels, and other highway motor
fuels taxes to the U.S. Consumer Price Index. In the first year of implementation, the
rate should be set so that it is revenue neutral.
Motor Vehicle Usage Tax Credit
Equalize the trade-in credit for the motor vehicle usage tax on used and new cars by
allowing the credit on new cares; adjust the motor fuels tax to make revenue
neutral.

4. Change the basis for valuing used vehicles for the motor vehicle usage tax to 90% of
book retail; adjust the motor fuels tax to make revenue neutral
Exempt all trucks over 26,000 pounds from the motor vehicle usage tax; adjust the
motor fuels tax to make revenue neutral. The lost revenue will be recouped through
the special fuels portion of the proposed motor fuels tax increase, retaining the
desired revenue neutrality on this industry as a major class of highway user.
General
Codify consensus revenue estimating by legislation
Establish budget reserve trust fund of 5%
Use the federal quarterly payment schedule for corporate income tax
Amend the insurance premiums tax to move the filing date from March 1 of each
year to February 15th
Enhance the use of electronic filing and electronic fund transfer
ESTABLISH A REVENUE DATA BASE
Fight for Federal Legislation to repeal 4.3 cents per gallon of the federal motor fuels
tax and repeal the entire federal motor fuels tax if the national average for price of
gasoline rises above $1.50 per gallon. This will allow Kentucky to increase it’s gas tax
by 4.3 cents allowing Road Fund future financial security.
ADDITIONAL POLICY CHANGES TO ENHANCE REVENUES OR REDUCE COST OF
ADMINISTRATION
Eliminate one-of-the-three-tax tiers on Kentucky trucks called weight-distance tax
and recouping revenue loss by enhancing motor fuels and registration fees. This tax
policy reduces administration cost for trucking industry and state while enhancing
possibility trucking industry may come back to State bringing better-than-average
jobs to stimulate Kentucky’s economy and is “revenue neutral”.
 DEVELOPMENT OF A ONE-PAGE STATE INCOME TAX RETURN STARTED IN
1/3/95
 ADD 20 OR MORE PERMANENT EMPLOYEES TO REVENUE CABINET’S
DEPARTMENT OF COLLECTIONS AND FUND REVENUE CABINET TO
ELIMINATE USING “LOANED REVENUE EMPLOYEES” TO WORK ANNUAL
BACKLOGS TAX PROCESSING

5.  ACCELERATE THE DATE PROPERTY ESCHEATS TO THE STATE TO FIVE
YEARS. RAISE THE $25 FLOOR ON ADVERTISING TO $100 TO ELIMINATE
CLAIMANTS ADVERTISING.
 FINANCE & ADMINISTRATION CABINET REVIEW & UPDATE AND
IMPLEMENT 1987 AUTOMATED PURCHASING STUDY
 AS A RESULT OF PASSAGE OF H.B. 538 IN 2000 ELEVATING PVAs TO FULL-
TIME MERIT STATE EMPLOYEES SUBJECT TO KENTUCKY REVENUE
CABINET’S GENERAL AUTHORITY AS OUTLINED IN KRS 13.020 – 030; KRS
131, 132, 133, 134 and 136, REDUCE NUMBER OF PVA OFFICES FROM 120
TO 50 AND AMEND CURRENT LEGISLATION ALL COUNTY/STATE PVA
DATA BECOME PROPERTY OF THE KENTUCKY REVENUE CABINET (TAX
ROLLS AND ALL OFFICE TAX RECORDS) IN MANUAL AND/OR ELECTRONIC
FORMAT AND MADE ACCESSIBLE TO KENTUCKY REVEVNUE CABINETS .
 CONDUCT A COMPREHENSIVE ECONOMIC IMPACT STUDY OF THE
"EXTENDED WEIGHT HAUL ROAD SYSTEM" ON THE COAL PRODUCING
ECONOMY OF THE STATE
 REVISE COPIER PROCUREMENT PRACTICES AND REQUIRE THAT AGENCIES
PURCHASE COPIERS CONSISTENT WITH THEIR NEEDS
 REQUIRE THAT EACH STATE AGENCY PUBLICATION BE SUPPORTED BY A
NEEDS ASSESSMENT DOCUMENT APPROVED AT THE SECRETARY OR
COMMISSIONER LEVEL
 CONTRACT WITH A PRIVATE FIRM TO REVIEW THE STATE'S MONTHLY
TELEPHONE BILLS
 USE ELECTRONIC FUND TRANSFERS TO PAY TELEPHONE BILLS
 STREAMLINE THE PROCESS OF ISSUING CHECKS FROM THE STATE
TREASURER
 DIRECT DEPOSIT OF THE STATE PAYROLL DIRECTLY INTO THE ACCOUNTS
OF EMPLOYEES--- SAVINGS ESTIMATED TO BE $1.2 MILLION IN ‘95
 ESTABLISH INVESTMENT POOLS---AS RECOMMENDED BY THE NATIONAL
ASSOCIATION OF STATE TREASURERS FOR COUNTIES---ALLOWING EACH
COUNTY INSTANT LIQUIDITY---YET IT YIELDS A GREATER RETURN ON
THEIR INVESTMENTS SINCE LARGE SUMS OF MONIES ARE BEING
INVESTED UNIFORMITY.

6.  A POOL ACTS AS A VOLUNTARY, STATE-MANAGED INVESTMENT OPTION
FOR THE SURPLUS OPERATING THE FUNDS WITHIN A STATE. EACH LOCAL
GOVERNMENT POOLS ITS EXCESS OPERATING FUNDS WITH THAT OF
OTHER LOCAL GOVERNMENTS IN AN OPERATION MUCH LIKE A MONEY
MARKET MUTUAL FUND, BUT WITH THE ADDED BENEFIT OF BEING
STRUCTURED TO MEET THE UNIQUE NEEDS OF GOVERNMENT INVESTORS.
ALTHOUGH ALL FUNDS ARE POOLED FOR INVESTMENT PURPOSES, EACH
LOCALITY'S PARTICIPATION IN THE POOL IS REPORTED SEPARATELY.
 STUDY THE CASH MANAGEMENT PRACTICES OF STATE UNIVERSITIES AND
EXPLORE THE POSSIBILITY OF A POOL OF INVESTMENT FUNDS FROM
WHICH UNIVERSITIES COULD DRAW DOWN.
 RECOMMEND ELECTRONICALLY TRANSFERRING FUNDS MORE
EFFICIENTLY BY LOWERING THRESHOLDS ALLOWING MAXIMUM
INTEREST TO BE EARNED.
 ELECTRONIC FUND TRANSFERS (EFT) CAN BE USED TO PAY LARGE SUMS
OF MONIES TO VENDORS, AND TO CONTROL THE DATE FUNDS ARE
WITHDRAWN FROM THE STATE'S ACCOUNT FOR BETTER CONTROLS TO
ENSURE THAT BILLS ARE NOT BEING PAID BEFORE THEIR DUE DATES.
 RECOMMEND BETTER WAYS FOR STATE TO STOP PAYMENTS ON CHECKS
W/INSUFFICIENT FUNDS
 ELIMINATE EXCESS LAYERS OF NON-MERIT MANAGEMENT AND PLACE
MORE EMPHASIS ON DIRECT SERVICE MERIT EMPLOYEES
 ELIMINATE LAYERS OF NON-MERIT EMPLOYEE MANAGEMENT AND
REALLOCATE STAFF TO DIRECT SERVICE MERIT POSITIONS
 ESTABLISH A NEW PERSONAL MANAGEMENT CABINET
 AFTER REDUCING STATE EMPLOYEE NUMBERS TO ESTIMATED 30,000
STATE POSITIONS RE-ENGINEER REMAINING JOBS
 RETRAIN STAFF AND AWARD PAY INCREASES TO JOB HOLDERS WHOSE
POSITIONS RECEIVE ADDED DUTIES FROM RE-ENGINEERING PROCESS
 REDUCE THE NUMBER OF STATE TESTING CENTERS FROM 15 TO 6
 MOVE FROM A "DEFINED BENEFIT" TO A "DEFINED CONTRIBUTION
PROGRAM" FOR NEW STATE EMPLOYEES

7.  MERGE ADMINISTRATION AND SUPPORT SERVICES OF THE KENTUCKY
EMPLOYEES RETIREMENT SYSTEM, THE COUNTY EMPLOYEES
RETIREMENT SYSTEM, THE STATE POLICE RETIREMENT SYSTEM AND THE
TEACHERS RETIREMENT SYSTEM
 RE-ENGINEER AND AUTOMATE FRONT END PROCESSING OF DOCUMENTS
ENTERING THE REVENUE CABINET AND ACTIVATE MICROFILMING AT THE
CABINET LEVEL TO ACHIEVE SAME DAY DEPOSITS REQUIRE SHERIFF
DEPARTMENTS TO REMIT PAYMENTS EVERY TWO WEEKS
 DESIGN AND IMPLEMENT SYSTEMS AND PROCESSES FOR MEASURING THE
COSTS OF REVENUE GENERATION
 RAISE TEACHER SALARIES USING SAVINGS CREATING 17 PVA REGIONS &
ADJUSTING DEPUTY PVA PAY ACCORDINGLY & REGIONALIZING
SUPERINTENDENT POSITION TO 17 RATHER THAN CURRENT 174
SUPERINTENDTS;
 ESTABLISH CHILD CARE CENTERS FOR STATE WORKERS
 LEGISLATION TIGHTENING UP ENFORCEMENT OF COLLECTING
INSURANCE SURCHARGE
 AMENDING LEGISLATION DECLARING IT ILLEGAL FOR EXECUTIVE AND
LEGISLATIVE BRANCH TO USE STATE EMPLOYEE RETIREMENT FUNDS TO
BALANCE THE BUDGET
 AMEND LEGISLATION MAKING IT ILLEGAL FOR GENERAL ASSEMBLY TO
USE STATE RETIREMENT DOLLARS FOR BALANCING STATE BUDGET OR
COVERING GENERAL FUND DEFICITS
Sincerely,
Bill Huff
319 Dixie Manor St
Harrodsburg, Ky. 40330-1244
859.734.2228
wlhuff@gmail.com