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February 15, 2009

Tax hikes on alcohol, cigarettes have spared education funding cuts — for now

By HEATHER PYLES, CJ Staff Writer The Commonwealth Journal Sun Feb 15, 2009, 01:38 AM EST

By HEATHER PYLES

CJ Staff Writer

The passage of tax hikes on cigarettes and alcohol have spared state schools from devastating funding cuts for now, and local school officials are breathing a collective sigh of relief.

But the new bill may not keep school districts from undergoing less significant budget cuts for this year, and more state shortfalls expected in the next few years means that the state education system isn’t quite out of the woods yet.

“I’m breathing a sigh of relief to get through this year, but I’m worried to death about next year,” said Science Hill Schools Superintendent Rick Walker.

The legislation, signed into law by Gov. Steve Beshear on Friday, will double the state’s cigarette tax, raising it from 30 cents to 60 cents per pack, and it will apply Kentucky’s 6 percent retail sales tax on packaged liquor.

The alcohol tax, which will be applied to beer, wine and liquor, is reported to raise around $10 million for the state in June alone. The cigarette tax increase is expected to bring in an additional $42 million.

The tax increases will go into effect on April 1.

The state had been facing a $456 million revenue shortfall for this fiscal year, which ends June 30. That shortfall left lawmakers scrambling to cut numerous state agencies, including schools, to make up the gap.

“We’re just happy with legislators coming up with new revenue,” said Pulaski County Schools Superintendent Tim Eaton.

Schools were facing the possibility of a deep 4 percent cut to Support Education Excellence in Kentucky (SEEK) funds, which would have proven catastrophic to nearly every school district in the state, including those in the county.

“Thank goodness they (lawmakers) did something,” said Walker.

SEEK funds are used for teachers’ salaries, which increase every year based on experience and education, providing services for special needs students, transportation costs and utility costs.

Walker said if the vote had gone the other way, and if the 4 percent had gone into effect, his district would’ve had to consider serious employee cutbacks before the school year even ended.

And while Walker expressed some gratitude that the bill passed at the last minute, he said the state’s schools aren’t in the clear — and he said they won’t be until more significant changes in state government are made.

“The economy exacerbated the budget problems, but it did not cause them,” Walker said.

Walker’s sentiments echo that of many across the state who are saying the tax hikes are only serving as a “band-aid,” and that Kentucky’s budget woes won’t truly be solved until serious overhauls in the state’s tax system are undertaken.

“They (lawmakers) did something, but they have got to keep going,” Walker said.

“It’s not just a problem with the economy, it’s a problem with the tax system in Kentucky,” Walker continued. “We need to go on and bite the bullet and do it.”

While lawmakers will no doubt be busy searching for solutions to the state’s budget woes — which may include looking into a tax system overhaul — schools are staying cautiously optimistic that those suggested deep cuts won’t be brought back to the table anytime soon.

The 4 percent cut to SEEK won’t be applied this year, but another less significant 2 percent cut may still be on the table for Kentucky school districts. Those funding cuts would effect schools’ flexible focus funds, which go toward textbooks, professional development and extended school services.

Somerset Schools Superintendent Dr. Teresa Wallace said her district won’t have too much difficulty enacting that cut should Beshear mandate that it be applied.

“We (Somerset Schools) won’t have a problem with that,” said Somerset Schools Superintendent Dr. Teresa Wallace about the possibility of state schools taking on the 2 percent cutback.

“If that’s all we get I’d be tickled to death,” she added.

Many districts will be unable to purchase new textbooks for students, and those that already have will have to pay the Kentucky Department of Education back for the cost of those books.

While school districts are grateful they may have to deal with only the 2 percent cut, that cut — if it’s applied — will come after districts have already sought to cut back a bit to accommodate various rising costs and a floundering economy.

“The downturn of the economy has had a huge effect from so many directions,” Eaton said.

Eaton said local school districts have already suffered from significant hits to their budgets because of several different factors, including unfunded mandates and rising transportation — only funded at around 80 percent — and rising energy costs.

“There are just a lot of ways that our general fund has been hit,” Eaton said.

Eaton also said the schools are collecting less money from the vehicle tax because fewer people are buying cars, which has also decreased funding.

The state legislature is slated to resume its session next week.

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