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.

A coalition of South Dakota groups is voicing its opposition to a ballot measure intended to end a state sales tax on consumables.

If passed this November, Initiated Measure 28 would repeal the state's 4.2% sales tax on "anything sold for human consumption," including food and other products from toothpaste to tobacco, CBD and vaping products.

Sandra Waltman, director of public affairs for the South Dakota Education Association, said the teachers union opposes the repeal because it does not include a plan to replace the money the current tax contributes to education.

"Our main reason for opposing this is the lack of a plan for replacing the $176 million and what that will do, not only for K-12 students but for higher education," Waltman explained. "Districts would probably be looking at a very bare-bones budget."

Currently, Waltman said about 60% of public school funding comes from state coffers, and the other 40% from local property taxes. She called the potential effect on education "drastic," saying they could lead to fewer teachers, larger class sizes and cuts to newer resources like mental health support and programs for career and technical education.

Proponents of the measure said repealing the tax could help the nearly 9% of South Dakotans who are food insecure but Waltman countered the same people would likely feel the effects of underfunded school systems.

"To repeal one tax without a more broad conversation about how you replace that revenue is shortsighted, and we think you shouldn't just be repealing a tax without a plan."

Other groups opposing the measure include the South Dakota Cattlemen's Association, Chamber of Commerce and Industry, South Dakotans Against a State Income Tax and the South Dakota Farm Bureau.

North Dakota officials will highlight a new project today to boost childcare access for parents with nontraditional work hours.

A local provider likes what the state's been doing to help facilities and families but hopes for more action. Health and Human Services leaders will appear at a child care facility in Fargo to discuss a pilot initiative, giving operators financial incentives to increase capacity for childcare slots outside the hours of 7:30 a.m to 5:30 p.m.

Kathy Busche, owner of Kathy's Kids Daycare in Hazen, said she will need to see more details but would have interest in signing up. She explained it has been a big need in her area.

"We're right in the middle of coal country and so, a lot of our plant workers are working 12-hour shifts, starting at 6:30 in the morning," Busche observed. "We have hospital workers that are working 12-hour shifts."

The announcement is part of a series of investments the state adopted last year to ease the childcare burden felt across North Dakota. Busche noted she especially likes the inclusion grant to provide day care for kids with special needs. She feels the state could go further in offering incentives to retain staff.

The state has been providing a stipend, which maxes out at $3,600, to help stabilize the child care workforce. Busche emphasized her workers have already used up their portions.

"Now, there's really no incentives left to keep staff," Busche contended. "Without staff, we can't have more kids."

Busche feels the state should not write a "blank check" to address problems and wants policymakers to keep evaluating what is working. She hopes staff retention is among the topics state lawmakers revisit when they return to session early next year.

By Ashli Blow for Tennessee Lookout.
Broadcast version by Danielle Smith for Tennessee News Service reporting for the Solutions Journalism Network-Public News Service Collaboration

Rebecca Maino would set aside $20 each month for her house repairs. Her aging home in Memphis had a leaky sink, an outdated air conditioner, and holes in the walls.

It just wasn’t enough to cover the costs. On her limited budget, she couldn’t manage to save more money while paying her family’s bills.

“When [contractors] come in and the scope of work that they tell you is thousands of dollars, people that are on fixed incomes that have worked their whole life to pay their home off, they simply cannot afford that,” said Maino. 

Over the years, the inconvenience evolved into a safety concern. With the increasing frequency of extreme weather — like last week’s deadly, subfreezing temperatures — her energy-inefficient home was becoming a health risk. Maino turned to Memphis Gas Light and Water (MLGW) and their weatherization program that could help with improvements. 

As storms intensify, environmental coalitions are backing these assistance programs as a viable climate solution in southern cities like Memphis. Weatherization gives residents the resources they need to protect themselves while reducing energy use from sources that emit climate-altering pollution. It also reduces energy during peak power demands that Tennessee now experiences as people try to stay warm in winter weather.

Weatherization programs have a longstanding presence across the nation. It’s a strong policy framework that MLGW has adapted into a program that is uniquely its own, some of which comes down to Memphis grit: the people behind the program who are dedicated to working hard for their community. 

“I take my job personally, because I came from a challenging upbringing right here in Memphis. I know what it’s like to be cold in the wintertime, hot in the summertime, and not having a lot of necessary needs to be met,” said David Wright, the technician who was assigned to Maino’s case. 

“We can’t rebuild a house all over again,” he said. “We try to make the [recommendations] the best that we possibly can give to a customer and to meet the needs they have.” 

When Wright showed up at Maino’s doorstep, that’s exactly what he did. He walked Maino through the issues while writing a work order that prescribed her a new air conditioner and heater, pipe repairs, and wall patchups. That order also identified the contractors responsible for installing appliances and making the necessary fixes. 

Maino never received an invoice, because the ratepayers had it covered. 

$8.3M in ratepayer donations funds weatherization projects 

In 2016, a MLGW customer-led advisory board told the utility it wasn’t doing enough with Share The Pennies—a small program that rounded up utility bills to the next whole dollar for weatherization services. For three years, customers were given the option to donate their extra change, but many weren’t checking the box. 

The board worked with Memphis City Councilmember Patrice Robinson to propose a resolution that would make Share The Pennies an opt-out program, asking customers to remove themselves if they didn’t want to participate. The city council passed it. 

Margie Borrum-Smith took the calls from unhappy customers. 

“People would say, ‘I don’t want anybody telling me what to do with my money,’ but when they hear about what’s going on, they want to participate,” said Borrum-Smith, who is now the manager of MLGW’s energy services and oversees the Share The Pennies program. 

Customers contributing to the program give about $12 each year, resulting in a collective revenue of $8.3 million. It has funded the weatherization of 935 homes. 

But, managing the program budget is not just about the quantity of work, it’s about the quality of the work, said Borrum-Smith. 

MLGW technicians oversee home projects from beginning to end. To perform services, they are required to hold certification as a home energy rater, an accreditation recognized by the U.S. Department of Energy. 

Trained to conduct ethical inspections and uphold industry standards, they offer cost-saving recommendations and investments in sustainable appliances such as heat pumps—an energy-efficient technology capable of both heating and cooling homes.

During installations, technicians collaborate with a roster of 41 local contractors, with many being small businesses owned by people of color and women. Together, they adhere to a set of standards and code enforcements.

“In the end, the technician has to sign off and the customer has to sign off,” said Borrum-Smith. “It’s the technician that should be asking, ‘are you satisfied?’ Because we shouldn’t let anything pass that should not be like we want it in our home.” 

The demand for weatherization services exceeds what Borrum-Smith’s team can currently meet. In addition to better living conditions, people want more affordable monthly utility bills. 

Memphis has one of the highest energy burdens nationally, where families or individuals allocate a significant portion of their income to utility bills. Thirteen percent of households face energy burdens, nearly 10% higher than the national average, as reported by the American Council for an Energy-Efficient Economy. 

MLGW’s next enrollment period opens on Tuesday. The utility partners with the Metropolitan Interfaith Association to manage the hundreds of people who ask for weatherization services. In past years, they’ve received so many applications, they closed the portal in just a day. 

Borrum-Smith hopes that the program can eventually offer a second enrollment period each year, but this expansion would require more funding. Despite that MLGW receives federal and state funding for weatherization programs, as well as contributions from ratepayers, meeting the pace and scale of demands will require more funding. 

Energy efficiency as a solution in motion 

Weatherization is among America’s oldest resiliency policies. 

In response to the 1973 oil crisis that brought about soaring energy costs, the U.S. The Department of Energy created its weatherization assistance program. Now, nearly half a century later, the Biden administration is using similar approaches as a tool to meet climate targets with unprecedented funding packages for clean energy. 

“Weatherization is key from a climate resilience standpoint,” said Will Bryan, policy director with the Southern Energy Efficiency Alliance. 

“There are two dimensions to this,” he said. “There’s certainly reducing greenhouse gas emissions, which is vital and which weatherization does. The other benefit improves the kind of resilience of a household in the face of climate impacts.”

The impacts of climate change, such as hotter summers and more intense winter storms, pose dual threats to both safety and the operational integrity of energy grids. Tennessee Valley Authority, the energy provider for MLGW, has been grappling with these challenges. 

In recent years, the utilities have implemented rolling blackouts due to high electrical demand that strains its energy grid. Just last week, they jointly issued energy conservation alerts, urging customers to voluntarily reduce their energy usage when temperatures dropped to single digits.

While cohesive emergency plans and the adoption of clean energy sources are imperative for a holistic climate response across Tennessee, these solutions are years away. But weatherization already has a strong policy groundwork. 

That’s why Bryan and his colleagues at SEEA are actively aiding state energy offices now on home energy programs, offering guidance on effective strategies for administering and allocating federal funding. He anticipates that millions of dollars could come through Tennessee because of initiatives such as the Inflation Reduction Act and the Bipartisan Infrastructure Law. These funding packages offer rebates and other funding streams that can be used to directly lower the cost of energy improvements. 

Already, Memphis city planners funneled $500,000 awarded from the American Rescue Plan Act into the Share The Pennies program last year. 

As program managers and energy consultants try to expand their financial resources for weatherization programs, they are grateful to customers like those at MLGW who are helping their neighbors. This accessible and dependable revenue source is something even Share the Pennies participants, like Maino herself, can contribute to. With her monthly utility costs now $30 lower, Maino rounds up her bill, passing on the assistance to others. 

“Everybody wants to be Bill Gates. Everybody wants to be Warren Buffet, but the reality is when you’re a single mother, like I am, I don’t have the liberty to sit here and write a $10,000 or $10 million check,” said Maino. “But rounding up to the nearest dollar, that’s not going to affect anyone’s bottom line.”


Ashli Blow wrote this article for Tennessee Lookout.


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