Kentucky Chamber President and CEO Dave Adkisson joined a panel on Kentucky Tonight Monday to discuss public pension reform and the state budget with few days left in the legislative session.
The panel also included Jason Bailey of Kentucky Center for Economic Policy, Stephanie Winkler of Kentucky Education Association and Jordan Harris of the Pegasus Institute.
The panel focused on the issues faced by the state legislature as they struggle to craft a responsible budget while addressing Kentucky’s pension crisis. Senate Bill 1, the legislation containing structural reforms to the state’s retirement systems, has faced challenges, but Adkisson said the House and Senate “feel the press of needing to do something.”
The Kentucky Chamber supports pension reform in this legislative session. However, if the reforms do not pass this session, Adkisson suggested taking time during the summer to back up, convene with a deliberate process and come back to the legislature with a plan that will pass. Winkler said they would not entertain any of the structural changes in the proposed legislation.
Harris commended Senator Bowen for his efforts on Senate Bill 1, stating he believes “Senate Bill 1 has done a lot to make sure that it respects the fact that people have made these decisions about their retirement, have made these decisions about their employment, and makes sure it keeps those benefits intact.”
All panelists commended Governor Bevin for fully funding the pension systems the last two years. The Kentucky Chamber and Pegasus Institute said structural changes, not just fully funding the annual required contributions, are needed to solve the state’s pension crisis.
“The idea that simply putting more money into the system, simply keeping the status quo will fix this problem is a total farce,” Harris explained. “It will continue to lead us down this path where we have more money come out of the system than we have going into the system.”
The panelists debated on the reasons the funding levels reached such low levels, discussing the impacts of increases to public employee benefits and market returns. Also, Bailey and Harris agreed that the recession played a large role in the debt. Harris said vulnerability from the recession demonstrates the need for pension reform, but “the recession alone cannot be blamed for the problems.”
Most of the pension debate was focused on education. Adkisson noted education spending has increased by 27% between 2011 and 2017, but much of the additional money has gone to repairing the pension system. The pension debt is a big problem because “it is sucking all the dollars out of the state budget that we would like to spend on teachers’ salaries, on textbooks, on summer school, on professional development,” pointing out education is the number one priority of the Kentucky Chamber.
As the conversation turned to the state budget, the panelists focused on tax reform. All panelists expressed their support of tax reform in varying forms. Both Bailey and Adkisson commended the House budget, specifically the tax increase on cigarettes, as well as Rep. Santoro’s infrastructure investment bill that would raise the gas tax $0.10, House Bill 609.
Though the Kentucky Chamber supports these tax increases, Adkisson said the Kentucky Chamber’s major goal is comprehensive tax reform. He described a letter sent to all legislators calling for comprehensive tax reform and lists the tax reforms that would make Kentucky more competitive, business friendly, and bring in revenue.
To learn more about the House version of the state budget, read The Bottom Line story: House version of state budget includes revenue sources focused on health issues to help meet pension obligations.
The panel made predictions about the Senate budget that was released this morning. Read The Bottom Line article explaining the Senate budget: Senate version of state budget prioritizes funds for pensions, education, and public safety without tax increases.