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Pension reform highlights session


By Tom Marshall
Senior Advocate writer

Pension reform looms large over the recently convened session of the state Legislature.

The governor has presented the Legislature with a plan that would dramatically reshape the pension system for state employees, but does not appear to have enough support to garner passage.

The plan appears to have some support in the Senate, but little in the House, Montgomery County’s representatives in the Legislature say.
The governor had planned to hold a special session in the fall to discuss pension reform, but a sexual harassment scandal in Frankfort scuttled those plans.

Several alternative bills have been drafted and are currently being scored to determine the potential impact, state Sen. Ralph Alvarado, R-Winchester, told the Advocate.

As part of the scoring process a bill undergoes a cost-benefit analysis.
Once that process is complete, Alvarado expects compromise bills to begin surfacing, likely this week.

Alvarado said he expects some kind of a hybrid defined-benefit plan will be the result and it will come down to which one can get enough support for passage.

“It will come down to compromise and what we can get passed,” he said.
Both Alvarado and state Rep. David Hale, R-Wellington, agree that the KERS (Kentucky Employee Retirement System) and KTRS (Kentucky Retired Teachers Retirement System) funds must be addressed now before the entire system collapses.

The KERS fund, for instance, is only 13 to 14 percent funded, while the KTRS fund is in better shape, but still seriously underfunded, Hale said.
Teachers across the state have rallied against the governor’s plan, which would institute considerable cuts to the benefits offered to new teachers.
Without immediate action, the funds in the retirement systems have no more than 10 years of solvency, Hale warns.

Personally, Hale said he will not support any legislation that does not protect the pension benefits already promised to retired state employees.
“I think we have to live up to what they were promised,” he said.
As a retired state employee himself, Hale said this is imperative.

He said he is concerned that legislators will not have sufficient time to review potential legislation before the governor announces his biennial budget proposal during an address Jan. 16.

Hale said he also wants time to discuss potential legislation with his constituents before reaching any decisions.
“This is something that is so important that we can’t rush through it,” Hale said.

Fortunately, he said, this is a 60-day session so legislators have plenty of time to draft a plan that works in the best interest of all involved.
Hale said he considers pension reform the key to unlocking what lies ahead for the two other central issues facing this session of the General Assembly—tax reform and the budget.

The governor has promised that nothing is off limits when it comes to revising the state’s tax system.

Alvarado said he favors a more consumption-based system in which income taxes are reduced. He argues that consumption-based taxes affect everyone and is a fairer way of taxing everyone.

Whether items like food and other products and services are taxed will be up to the Legislature as a whole to decide, Alvarado said.
The senator said he also believes that the state can do a better job collecting taxes.

Alvarado estimates that the state is losing approximately $300 million a year by not doing a better job of collecting sales taxes on online sales from smaller businesses. The state already does a good job of collecting taxes from larger retailers like Amazon, for instance, he said.
Alvarado said he is aware that a task force has been established in the House to look at tax reform alternatives. Any tax measure will have to start in the House.

Whatever the Legislature decides on pension and tax reform will have a direct impact on the shape of the next two-year budget plan, Hale said.
Hale and Alvarado expect that plan to be very lean regardless and tough decisions will have to be made.

Funding for higher education will once again be under the microscope.
“Until we get pension reform and tax reform done it will be hard to come up with a budget,” Hale said.