By Tom Loftus and Morgan Watkins
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FRANKFORT, Ky. — Gov. Matt Bevin on Monday vetoed both the state budget bill and the tax bill that his fellow Republicans in control of the Kentucky House and Senate passed a week ago.
“The budget has hundreds of millions of dollars in spending that we really can’t afford to spend,” Bevin said at a news conference at the Capitol Monday morning. “… Sure, it feels good. Sure, it quiets people down. But the reality is the money’s not there and we’re kicking the can down the road. And that is not responsible.”
In his formal veto messages issued later Monday, Bevin said that the tax bill contains some “positive elements” but that it falls far short of comprehensive reform and that it overestimates how much new revenue it will generate.
And Bevin said in a second veto message that the 2018-20 state budget lawmakers sent him “fails to adequately budget for known costs” and thereby does not meet the Kentucky Constitution’s requirement that the state budget be balanced.
But Senate President Robert Stivers, R-Manchester, and House Speaker Pro Tem David Osborne, R-Prospect, responded mid-day Monday in a joint statement saying Bevin’s comments are “misguided.”
“We believe Gov. Bevin is misguided in his interpretation of the budget and the revenue bills,” Stivers and Osborne said after Bevin’s morning press conference but before Bevin had formally vetoed the bills.
They said they are confident in revenue projections of the legislative staff that were used to support the tax and budget bills. “To our knowledge, the Governor has had no discussions with any legislators on the details of this budget and what he might consider to be a shortfall,” the Stivers-Osborne statement said.
The two leaders asked that Bevin meet with legislators to hear their rationale before vetoing the bills, but the governor proceeded to issue the vetoes late in the day.
Lawmakers are scheduled to return to Frankfort on Friday and Saturday for the session’s final two days, when they will have the ability to vote to override Bevin on the bills.
That may be difficult — particularly for the tax bill that passed each chamber with the bare minimum number of votes a week ago. All of those votes must hold if Bevin’s vetoes will be overridden.
The Stivers-Osborne statement did not say whether they expected the bills to be overridden. But Osborne said a week ago he expected the 51 votes would hold and the House would override a veto of the tax bill.
If lawmakers override the vetoes, the tax and budget bills become law. But if they fail to override the budget bill, Bevin must call a special legislative session later this spring so some budget bill can be enacted before the state’s next two-year budget period begins on July 1.
That’s what Bevin suggested in his veto messages, saying there is “adequate time” over the next three months “to work together to develop a sustainable, fiscally responsible budget” and a “comprehensive approach to tax reform that will lead to economic growth.”
The tax and budget bills passed last week were part of a delicately crafted bargain between leaders of the House and Senate Republican majorities that also produced passage of a pension reform bill.
Bevin said Monday that the pension reform bill fell far short of what is needed to address what he said is the worst-funded public pension system of any state with at least $60 billion in unfunded liabilities.
“I want to make something very clear: The pension bill that was passed does not solve the problem, doesn’t even come close to solving the problem,” Bevin said.
Still, he said the modest steps the bill does take are positive. He did not say whether or not he will veto it.
The tax reform bill was unveiled and zipped through the General Assembly on April 2. It would put the state’s 6 percent sales tax on 17 services, lower the income tax rate for most people and corporations, raise the cigarette tax by 50 cents to $1.10 per pack and make other changes.
Legislators estimated the tax bill would raise $487 million in additional revenue during the 2018-20 budget period. That revenue was critical in providing the money needed for lawmakers to pass a budget bill that avoided deep cuts to public schools and other parts of state government — cuts proposed by Bevin last January.
On Monday, Bevin said the budget bill mandates spending on a variety of certain expenses — for prisons, Medicaid, the Kentucky Wired project to expand the state’s broadband network, etc. — without providing nearly enough money.
His veto message said the bill spends “nearly $600 million more” than the budget he proposed in January “without reducing expenditures elsewhere or adequately identifying revenue sources for the proposed spending.”
Read this: Bevin vetoes bill allowing Louisville to phase in huge pension costs
Background: Here’s what happens if Bevin vetoes tax reform or budget bills
Bevin commended the legislature Monday for trying to improve the state’s “antiquated” tax structure, but those reforms must be more comprehensive, he said.
He said he has been hearing from constituents concerned about the budget and the changes the legislature approved to the tax code. He cautioned that these changes could deter businesses from investing in the commonwealth.
He said one potential employer considering Kentucky for a $750 million investment is “very concerned” about the tax bill.
Neither of the legislature’s budget committee chairmen — Rep. Steven Rudy, R-Paducah, and Sen. Chris McDaniel, R-Taylor Mill — immediately returned phone messages Monday.
But Bevin said more than potential employers, taxpayers are expressing concern about the tax and budget bills.
“But you know who’s really upset about what we’ve done on the budget and tax structure? The people that are paying for it. That’s who’s upset. They weren’t here protesting. They’re working,” Bevin said.
Bevin’s comment was a reference to teachers who turned out in massive numbers at the Capitol over the past month to protest the pension bill.
The Kentucky Education Association, the statewide teachers union, responded later Monday with a statement that said lawmakers worked “hard and thoughtfully” on the tax and budget measures “in the interest of forging a way forward for the people of the Commonwealth. In dismissing those bills out of hand, Gov. Bevin shows that he cares as little for legislators’ work as he cares for the work of Kentucky’s other public employees.”
More: As Kentucky teachers’ movement grows, splits appear over next moves and possible sickouts
Read this: Kentucky budget director says tax changes would lead to a $50 million shortfall
The governor also indicated at his press conference that many legislators lack a good understanding of the tax and pension reform issues.
“They don’t understand finance,” he said. “They don’t understand pensions, and yet they are the ones that are going to have to make decisions.”
Tom Loftus: tloftus@courierjournal.com; Twitter: @TomLoftus_CJ. Support strong local journalism by subscribing today: www.courier-journal.com/toml.
Morgan Watkins: 502-582-4502; mwatkins@courierjournal.com; Twitter: @morganwatkins26. Support strong local journalism by subscribing today: www.courier-journal.com/morganw.