The Kentucky Legislative session gaveled in earlier this month and one of the big topics that is being discussed, yet again, is local revenue diversification.

We know that revenue is the lifeblood of any local government. It’s how communities’ needs can be met and growth can be supported.

So what is local revenue diversification, anyway?

Revenue is the lifeblood of any local government. Flexibility in how that revenue is generated and used is essential to supporting growth and meeting the needs of the community.

A buzzword of sorts in Kentucky for decades, revenue diversification communicates the chronic issue of local governments not having access to revenue measures that allow them to properly invest in themselves.

Let’s back up a bit. Admittedly, it does go by many names: revenue modernization, revenue diversification, tax reform. But revenue diversification at its most basic means creating variety in your income sources to increase revenue.

Now, in Kentucky, this is where things get tricky. In our beautiful Commonwealth, ‘variety’ and ‘local revenue’ are two concepts that don’t know much about one another.

Section 181 of the Kentucky Constitution only allows the Kentucky General Assembly – our state legislators – to delegate three types of taxes to local governments: ad valorem property taxes; license fees (occupational and insurance taxes); and franchise fees. To have only three in such a restricted manner is very rare. So rare, in fact, that Kentucky is one of only 17 states that even utilizes these types of local taxes – because we have no other choice!

Of these 17 states, only 6 of them rely on them as heavily as Kentucky does.

And on the flip side, we are one of only a handful of states wherein local governments do not have the power to levy diverse taxing options.

We are an outlier of the outliers – and not in a good way!

The impact this has is that places like, for example, Louisville – our state’s economic engine and business hub – falls woefully behind national trends in attraction, recruitment, retention of both employers and employees. Not to mention being unable to respond to the increasing standards of a city of Louisville’s size, like quality of life projects and initiatives that other mayors around the country are able to capitalize on.

Then elsewhere in the state in, for example, Hopkinsville or Manchester, local officials are not able to capitalize on opportunities because they have to turn to the state to ask for resources that are already scarce.

This inflexibility also means that residents who work and live in each community are paying the entire bill for public safety, parks, roads, and other services everyone enjoys, as there is no ability for local governments to collect funds from people who travel through and visit our communities.

Flexibility is critical for local governments to be proper stewards of their residents’ wants and needs. Kentucky’s current system is outdated, inflexible, and is holding us back from our full potential.

There are many different ways to approach reform – and the goal is to create a system that is better able to meet the needs of the community. Community input is essential to this process, as is the need for transparency and accountability.

That’s why You Decide, Kentucky! is here. We are talking to voters to educate and galvanize them around this need for change in our Commonwealth.

YDK! is focused on the individual needs and challenges of each region throughout the state. As an educational non-profit, we are implementing programming and grassroots organizing to reach every Kentuckian through a multi-year campaign to familiarize voters on this issue, and we have already started.

Our mission is focused on these steps towards local revenue diversification:

1. State legislators approve a Constitutional amendment to Section 181 that is then placed on the statewide November ballot for voter approval in the 2024 general election.
2. In order for the proposed Constitutional Amendment to be adopted, a majority of Kentuckians must vote in favor of the amendment.
3. State legislators, with input from constituents and interested parties, implement a new taxing framework that empowers localities to have more control of how revenue is raised and lessens the burden on residents and businesses.
4. Kentucky’s local governments adopt new taxing structures according to the framework.

Join our campaign so that we may unlock the door to a Kentucky where every resident is heard and every community’s needs are fulfilled.