The amount of income tax Kentucky residents pay is slated to decrease slightly beginning next year, but experts say the Federal Reserve's decision to hike interest rates has set the stage for an impending recession, and they're concerned more tax cuts could drain the state budget and impact critical public services.

Jason Bailey, executive director of the Kentucky Center for Economic Policy, said the state uses tax funds to help communities rebuild from natural disasters. He argued given the level of devastation from the recent flooding in eastern Kentucky, the state must be able to help provide safe housing, water access and other basic needs for thousands of people as winter approaches.

"The damage in eastern Kentucky from the flooding was extensive," Bailey observed. "There are about 1,600 homes that were destroyed, bridges and schools that need to be replaced. And the federal government provides some resources but not nearly enough given the scale of the disaster there."

Earlier this year, the Republican-controlled state Legislature voted to override the governor's veto of House Bill 8, legislation outlining the gradual reduction of the state's current 5% individual income tax rate down to 4.5% next year, with potential future reductions down the road, based on the amount of money in Kentucky's general fund.

Bailey acknowledged Kentucky has padded its rainy-day fund with a $943 million surplus, but he cautioned permanent tax cuts going disproportionately to the wealthy will ultimately take money away from public schools, health care access and transportation, if a recession hits.

"These tax cuts will go overwhelmingly to the wealthy at a time when everyday Kentuckians need state services to help buffer what could be a painful recession," Bailey contended.

He pointed to child care as an example of how state dollars from taxes could be used to help prop up the child care industry statewide and help families already struggling with inflation and high gas prices.

"About half of Kentuckians live in a child care desert," Bailey pointed out. "We've seen child care centers shut down throughout the state. People can't afford it. And it's not sustainable."

American Rescue Plan Act funds for child care centers expire in 2024. According to a recent survey by the Prichard Committee, 72% of child care centers in the Commonwealth said they would increase tuition without the additional federal funding. About 22% said they would shut their doors.

Minnesota lawmakers have a few weeks left to wrap up their legislative session on time. A new state budget tops the list of remaining tasks, with observers wondering if both chambers have just enough bipartisanship in them to get it done.

Minnesota still has a surplus for the next two years but elected officials from both parties are trying to get ahead of a projected deficit for 2028 and 2029 by looking at spending cuts. Gov. Tim Walz and fellow Democrats have also eyed raising certain taxes and fees to keep a negative balance at bay.

Kevin Parsneau, professor of political science and Minnesota State University-Mankato, said after a rocky start, things have been relatively cordial.

"They've gotten a lot done, a lot faster than you might've expected," Parsneau observed. "Although there are some very big issues that have to be resolved within the next few weeks."

The start of the session was mostly delayed because of a power-sharing dispute between House Republicans and Democrats set off by the need for a special election. The chamber is now in a tie and while they have to work together, Parsneau acknowledged the scenario has the potential to derail progress. He echoed others by noting large federal funding cuts led by the Trump administration make things hard for states to plan spending.

While the White House has been aggressive in recent months to cut aid, the next federal budget is not scheduled to be finalized until later this year. With Congressional Republicans in control, Parsneau pointed out states could lose even more assistance. Because Minnesota's budget has to be in the books beforehand, he wondered if lawmakers will have to come back later this year.

"I assume they're hoping to avoid a special session," Parsneau added. "But it seems like it's gonna be difficult to do that."

He suggested it is a tough situation because voters might view a special session as another example of political drama. Parsneau emphasized voters are locked into a mindset of wanting decisive action from their representatives. Beyond a budget, a bonding bill for infrastructure projects has been debated. As for cuts, education and health programs are getting heavy focus.


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CORRECTION: This web-version of the story initially listed Rep. Dusty Johnson as "Rep. Dusty Johnson, R-N.D." It has since been corrected to reflect that he represents South Dakota. (10:35 a.m. CT, April 23, 2025)

A bus tour will zip through eastern South Dakota Thursday, where local leaders, health care providers and farm voices want to connect the dots between stable federal aid and their ability to plan, after recent actions have put them in a tough spot.

Thursday's events are part of the rural community tours organized by United Today, Stronger Tomorrow, a coalition that contends heavy budget cuts and grant freezes carried out by the Trump administration are the opposite of creating efficiencies.

Thursday's tour will stop in Madison, which is part of a new, largely federally funded tristate pipeline to improve water quality and economic development.

Roy Lindsay, mayor of Madison, said his city of about 7,000 cannot build a stronger future without the help of federal programs.

"It seems like whoever's pushing the buttons are looking at numbers more than (the) reality of what those departments actually mean," Lindsay observed.

Local officials echoed demands from voters who have shown up at town halls asking their members of Congress to push back against cuts. In an emailed statement, Rep. Dusty Johnson, R-S.D., said he understands the concerns but cited the federal debt as a need to, in his words, "right-size our government."

Farming communities said they are stuck in a holding pattern due to downsizing within the U.S. Department of Agriculture, including conservation grants.

Travis Entenman, executive director of the Northern Prairies Land Trust, which works with private landowners on projects, said in a "red" state, it is already hard to convince people to try out federal programs and he fears the funding dilemma will hinder progress.

"The uncertainty of it all, and the back and forth, and no one really knows what's going on, makes it extra frustrating," Entenman explained.

Entenman acknowledged not every farmer who applies for the grants gets one but added those who do have come to expect reliability in receiving funds as they work to make their farmland healthier and economically viable.

A federal judge ordered the Trump administration to "unfreeze" affected conservation grants, but Entenman and other South Dakota groups said they have yet to see evidence of money flowing again.

Dozens of mine safety field offices in Kentucky and across the country would close under a proposal by the federal Department of Government Efficiency.

According to an analysis by the nonprofit Appalachian Citizens' Law Center, offices in Barbourville and Harlan are on a list of seven in Kentucky slated for closure.

Brendan Muckian-Bates, policy and advocacy associate at the law center, said closing the offices could turn a 30-minute drive to inspect a rural coal mine into a 3- to 4-hour round trip.

"With the proposed consolidations in Kentucky, some of these offices that would be left would essentially make it near impossible for an MSHA field inspector to conduct the mandatory 4-times-a-year underground mine safety inspections," Muckian-Bates contended.

News outlets first reported last month the Department of Government Efficiency had listed the leases of dozens of Mine Safety and Health Administration field offices across the country for cancellation. Trump administration officials and adviser Elon Musk said lease terminations are part of cost-cutting efforts to eliminate waste, fraud and abuse.

Thousands of coal-mining jobs have been lost in recent decades but inspectors remain busy. More than 16,000 inspections were conducted last year, accounting for more than 234,000 hours on site at mines.

Muckian-Bates added proposed cuts to the National Institute for Occupational Safety and Health would make inspections more challenging.


"Every day that these layoffs remain in effect, that NIOSH offices are closed, more miners will become sick and potentially die," Muckian-Bates argued.

Congress created the federal mine safety agency as part of the Mine Safety Act of 1977, after the deaths of 26 miners in two underground explosions at the Scotia Mine in Letcher County the year prior.

This story is based on original reporting by Liam Niemeyer for the Kentucky Lantern.


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