Politics & Government

Plan to raise $600 million a year for pension debt appears dead on arrival in House

'A pension is a promise.' Public employees rally against GOP pension plan at Capitol

Calling for the legislature to find new sources of revenue rather than make changes to the pension system, public employees rallied against the Republican proposal to reform the state's pension system.
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Calling for the legislature to find new sources of revenue rather than make changes to the pension system, public employees rallied against the Republican proposal to reform the state's pension system.

State Rep. James Kay, D-Versailles, last week filed a package of five bills that could collect more than $600 million a year in fresh revenue for Kentucky’s ailing public pension systems with taxes on tobacco, prescription opiates and outsourced labor and potentially raise even more money by scrutinizing the state’s long-unexamined tax breaks.

But Kay’s plan appears dead on arrival.

House Speaker Pro Tem David Osborne, R-Prospect, on Friday said the Republican-led House of Representatives won’t consider any bills during this legislative session that simply raise additional revenue — not even for the state’s $40 billion in unfunded pension liabilities.

“There is very little sentiment in our caucus just to increase taxes,” Osborne said. “We are looking at aspects of tax reform, and some of those things may in fact raise revenues. But anything that just raises revenues as far as I’m concerned is a tax increase, and there is very little appetite in our caucus for that.”

Tax reform of any kind would be difficult to achieve during this session, Osborne added. House GOP leaders hope to have their own pension bill ready to share with the public soon, he said. Osborne and other leaders have not shared information about their bill’s contents.

Top GOP lawmakers stood with Republican Gov. Matt Bevin last October as he unveiled a proposal to — among other things — shift future public employees into 401(k)-style accounts and require current employees to kick in 3 percent more of their pay for their retiree health care plans, allowing the state to withdraw its contributions. But Bevin’s proposal proved so unpopular that rank-and-file lawmakers rejected it.

In an interview outside Osborne’s Capitol office, Kay said he isn’t surprised that his bills are doomed. For all of the talk of a “pension crisis” in Frankfort, Republican leaders in the General Assembly won’t consider anyone’s ideas but their own, which focus on cutting retirement benefits for teachers and other public workers, he said.

State Rep. James Kay, D-Versailles LRC Public Information

“I’ve worked on this comprehensive plan for three years,” said Kay, who is a member of the Public Pension Oversight Board.

“I presented this plan in its raw form to the pension oversight board, and it got no response,” Kay said. “I presented this plan to House leadership; same reaction. The current approach is to cut benefits and not to raise revenue. They don’t want to look at anything that’s outside of that box. They want to solve this problem on the backs of state employees and teachers.”

Kay’s House Bills 337, 338 and 339 would levy new taxes on prescription opiates, outsourced state government labor to private contractors and tobacco products and e-cigarettes, respectively. House Bill 340 would create a legislative committee that would examine the state’s $13 billion in annual tax breaks and recommend the elimination of those that aren’t producing a credible benefit. House Bill 341 would limit a governor to 500 political appointees and cap their salaries at $85,000, although the legislature could grant exemptions.

Kay estimated the annual value of the three tax-collection bills as high as $620 million in the first year, although they still need legislative staff to prepare fiscal notes for them. He said the value of reviewing billions of dollars in tax breaks could not be quantified until lawmakers began the process.

All of the money raised or saved from each bill would be dedicated to paying down the state’s pension debts, Kay said.

Public employees suspect that Frankfort’s pension debate has devolved into a political attack on them, Louisville firefighter Brian O’Neill said Monday.

O’Neill cited a letter sent Friday to legislators by a slate of Kentucky business and Republican leaders demanding the elimination of government pensions. Now there is a House member who has a plan to raise hundreds of millions of dollars to shore up the pensions, but he won’t even get a chance to be heard, O’Neill said.

“This is just further proof that they have no interest in doing anything serious to solve the pension problem” said O’Neill, a member of the Kentucky Public Pension Coalition. “This isn’t a fiscal issue to them. It’s not a matter of finding enough money. They don’t care about finding money. It’s an ideological issue, because they want to dismantle the public pension system. They just don’t believe we should have pensions.”

John Cheves: 859-231-3266, @BGPolitics