KENTUCKY (3/31/13) - At midnight last Wednesday, it was over. All the negotiations, all the hand-wringing over what bills would clear the 2013 Kentucky General Assembly by the end of its 30th legislative session day on March 26.
All in all, it was a pretty spectacular ending.
After at least 25 hours of talks in two days and a few incarnations over the past few weeks, Senate Bill 2—the session’s public pension reform bill—received final passage by a 32-6 vote in the Senate and a 70-28 vote in the House last Tuesday night. Also approved was its funding source, House Bill 440, which was given final approval by a vote of 82-17 in the House and 35-3 in the Senate. The funding bill is expected to drum up the $100 million or so annually that the state needs to pay down over $30 billion in unfunded obligations to the Kentucky Retirement Systems for state and local government retiree pensions.
Essentially, SB 2 will protect retirements benefits under Kentucky’s existing traditional benefit plan for workers and retirees now covered by the retirement systems, as required by the “inviolable contract” in state law, while placing those who join the retirement systems as of Jan. 1, 2014 (including new state legislators and judges) in a hybrid “cash balance” 401K-style pension plan that will guarantee retirees at least a four percent return on their investment. It will allow cost of living raises for retirees only if they are prefunded by the General Assembly. Most notably, SB 2 will require the General Assembly to make is actuarially required contribution, or “ARC”, to the retirement systems each year. That is where HB 440 enters the equation.
Known as the “funding mechanism” for SB 2, HB 440 will help the state come up with the around $100 million a year it needs to pay the ARC by making a handful of revenue changes. They include reducing the state personal income tax credit by $10, offering a trade-in credit for new car purchases as of July 1, 2014 as a revenue offset, enhancing revenue collection by the state Department of Revenue, and reducing the cap on total reimbursement for vendors who collect the state’s sales tax.
Supporters of the pension reform package in SB 2 and HB 440 say it will avert “fiscal crisis” and save Kentucky taxpayers $10 billion over the next 20 years, all the while honoring the state’s promise to existing workers and retirees and meeting the needs of future workers and retirees. Those who did not support the legislation were particularly concerned that money generated by HB 440 would go to the General Fund without being specifically earmarked for pensions, although leaders who crafted the compromise said the funding will assuredly go toward its intended use.
The funding mechanism, HB 440, is one which I voted for with reservation because it did not dedicate itself toward the unfunded liability in the pension system. We have to create the revenue stream and this bill did it, but it is not dedicated. We must dedicate it in the next session.
Secondly, the SB 2 compromise is one I voted against along with 27 others that included three Republicans, the former Speaker of the House, the current Majority Caucus Chairman, and three House standing committee chairs (including me), as well as about 15 others who have been in the General Assembly for going on two decades. The reasons were many. These include opposition to the hybrid plan by virtually all state workers, all who are engaged in the labor movement and support working people. Another reason that many, including I, voted against it is that it will cost upward of one quarter billion dollars more to the taxpayers than the plan offered by the House and drafted by me. This is a huge tax increase to the people.
SB 2 as passed also will result in a workforce which, because of the portability created by the compromise, is constantly changing. This means that, over time, we will not have as well-qualified, well-educated, well-trained people in all fields required to run a government and we will have major problems to address. The plan will require revisiting between five and 10 years from now because of these known and identified weaknesses.
The legislative process never delivers exactly what one person or group wants. It delivers—if we’re lucky—a compromise on issues that are critically important to a citizen base. Compromise is what lawmakers delivered in the pension reform deal, and it is what led to last-minute agreements on other issues important to Kentuckians, not the least of which is production of industrial hemp.
The session’s hemp bill—SB 50—appeared all but dead until the last two hours of the session when the General Assembly gave final approval to the legislation by a vote of 35-1 in the Senate and 88-4 in the House. As passed, the legislation would create an administrative framework for growing industrial hemp in Kentucky, should the state receive a waiver to grow the crop or the federal ban on industrial hemp production be lifted.
The hemp debate over the past few months became a cause célèbre in Kentucky, where industrial hemp production led the nation until the Civil War. Now, the Commonwealth waits for a waiver or otherwise-end to the ban in the hope that the crop can once again legally take root in Kentucky soil and, moreover, turn a profit.
Also tackled by session’s end was the override of the governor’s veto of HB 279, widely known as the “religious freedom bill.” By a vote of 79-15 in the House and 32-6 in the Senate, both chambers revived and enacted the hot-button legislation, which requires the government to have a compelling interest for substantially infringing upon a person’s religious freedom. The bill has been sent to the Secretary of State and will become law—it cannot be vetoed again.
Some will be disappointed with the results of the 2013 Regular Session of the Kentucky General Assembly. But many others will look at what was accomplished over the past 30 legislative days and say that, even if we lawmakers decide to amend legislation in future sessions, we didn’t let imperfection impede progress. And that is, really, pretty spectacular.
Please, feel free to log on to the Legislative Research Commission web site at www.lrc.ky.gov to track any bill of importance to you that was considered for passage during the 2013 Regular Session. You will find much more information, including the full language of the bills and resolutions themselves, on the web site. And, thank you for allowing me to serve as your State Representative in Frankfort.
Have a good week ahead.
Rep. Brent Yonts
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