2013 General Assembly

Weak gruel or real reform? Can't end pension crisis without dedicated revenue

lawmakers can't end pension crisis without dedicated revenue stream

March 3, 2013 

In a Wednesday floor speech, House Speaker Greg Stumbo likened public pension reform to rabbit stew. "If you don't have the rabbit," he said, "you don't have the stew. If you don't have the money, you don't have (pension) reform."

Amen to Stumbo's impeccable down-home logic.

Kentucky lawmakers — be they Republicans or Democrats, senators or representatives — can make valid cases for their differences on the details of what reform of the Kentucky Retirement Systems should look like. "Defined benefits," "defined contributions" or a hybrid mix of the two all have their pros and cons.

If reform is to happen — and conflicts at the end week make it likely it would be in a special session — it ultimately will take a shape acceptable to both Senate Republicans and House Democrats.

But there's no denying the need for a new revenue stream to fund any real reform of the troubled pension system.

One of the main reasons KRS has $18 billion in unfunded liability now is that the legislature failed to fully fund the system for much of the past two decades. Without a dedicated revenue stream, there's no guarantee lawmakers will not revert to the same bad habit in the future.

Equally important, the dedicated revenue stream and the systemic reforms must be joined at the hip as they move through the legislative process. Republicans who argue for reform now and funding later simply hope to use reforms put in the statutes this year to leverage additional cuts in the next budget cycle for state agencies and programs already cut to the bone as a result of recent revenue shortfalls.

Stumbo and House Democrats deserve applause for recognizing the need to fund pension reform from the get-go. However, the method they have chosen — a mix of revenue from "instant racing" and new lottery games — is very debatable.

Rightly, the state's higher education assistance programs deserve first call on any new lottery revenue. Although Stumbo's plan allows for a two percent annual growth in the lottery's contribution to these programs, that is not enough to meet the demand for need-based assistance programs that annually run out of money before they run out of applicants.

Similarly, with Kentucky's Thoroughbred racing industry already struggling to compete with the higher purses and breeding incentives offered by "racino" states, it seems at least a bit illogical to cap the share of state revenue from instant racing going to programs that benefit the industry, as the House plan would do.

In his floor speech, Stumbo acknowledged the House-passed pension reform and its plan for a dedicated revenue stream would not be the final versions. When House and Senate leaders sit down to negotiate these issues, if they ever do, there will have to be some compromise by both sides.

But while the House should be open to negotiation on what the revenue stream might be, it must continue to insist on adding the rabbit to the mix by front-loading the money for pension reform. Otherwise, there will be no rabbit stew. Or, pension reform.

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