Governor warns that state will be "financially insolvent" without tax and pension reforms

02/08/2017 09:48 PM

FRANKFORT — Gov. Matt Bevin touched a number of subjects in his State of the Commonwealth address on Wednesday, recapping his first year in office while looking ahead to what he hopes to accomplish in his second.

In his nearly hourlong speech, Bevin, who relied on notes rather than a teleprompter, said tax and pension reforms would be forthcoming in a special session this year.

Kentucky will “become financially insolvent” if the two aren’t addressed hand-in-hand, and the state can’t afford a tax reform proposal that is revenue neutral, he said.

Bevin offered a glimpse at what he envisions for tax reform but little detail, mentioning only the state’s inventory and inheritance taxes as likely casualties in a package. Kentucky “has one of the most convoluted tax plans,” he said.

Bevin added the state needs to move from a production-based tax code to a consumption-based system and that every tax expenditure would be up for consideration. In that area, the governor challenged lawmakers to “think big” and “be bold.”

“I’m talking about bringing every sacred cow that people think can’t be touched on a tax front, bringing them all out of the barn,” he said.

“And some of those sacred cows are going to be returned to the barn as sacred cows, and some of them are going to be turned into hamburger, and I’m going to need your help to make it happen.”

The governor said work has begun “behind the scenes” on a tax proposal for consideration later this year, and legislative leaders told reporters after Bevin’s address that they’ll need time to sell it to their caucuses and constituents once it’s complete.

“And the governor will have to do the same thing to educate the public and travel around Kentucky and do that,” said Hoover, R-Jamestown. “… There’s no doubt in my mind that we can and will do that this year.”

Republicans hold supermajorities in both legislative chambers, enough votes to clear the three-fifths threshold needed to pass revenue bills.

Senate President Robert Stivers said top lawmakers have asked that the special session’s schedule coincide with the school calendar so legislators won’t have to cancel planned family vacations. Special sessions must last at least five days, and Stivers said lawmakers hope to use as few days as possible to pass a tax reform bill.

Exactly when that tax proposal will be ready for public scrutiny remains unclear. Hoover said legislators have just started their involvement in helping craft the tax reform plan, and Stivers, R-Manchester, said he hoped to build bipartisan consensus on its components.

“It’s really hard to try to estimate when this will be ready for a special session,” he said.

Bevin reiterated his hope to further develop Kentucky’s manufacturing sector, saying the recently enacted right-to-work law will help the state “fish in bigger ponds” when competing against other states for businesses.

The governor said Volvo wanted to locate its first U.S. car plant in Kentucky in 2015 but ultimately crossed the state off its list, in part, because it lacked a right-to-work law. The Swedish automaker ultimately chose South Carolina.

“Had we been serious about passing right to work, had we shown any interest in them as a company with any real significance, they would have been here,” Bevin said. “Those are the kind of companies that wanted to see this.”

House Minority Floor Leader Rocky Adkins, D-Sandy Hook, remained skeptical on the impact of the right-to-work law, saying that and prevailing wage repeal would result in lower wages for workers.

He also said he disagrees with how Bevin “talks about Kentucky when it comes to whether we’re a competitive state or not.”

“I think we’re a competitive state,” Adkins told reporters. “I think Kentucky is showing that by the investments it’s making in its major industrial manufacturing sector.”

House Bill 1 was among seven GOP priority bills that became law in the first week of the legislative session, an “unprecedented” feat, Bevin said. Others passed include banning abortions past 20 weeks of conception, prevailing wage repeal and mandatory pre-abortion ultrasounds.

The governor thanked lawmakers for their work in getting those bills across the legislative finish line and singled out Hoover, the first Republican state House speaker in 96 years, for his leadership in session’s opening days last month.

“Jeff Hoover masterfully accomplished something that people didn’t think was possible,” Bevin said.

The governor highlighted some of pieces of legislation he hopes to see on his desk, such as charter school and medical review panel bills.

The latter bill is still pending in the Senate, and Hoover says lawmakers in the lower chamber are also working to amend it in hopes of resolving some issues, adding that he expects Senate Bill 4 to pass the legislature.

Bevin also indicated that he would like to see the General Assembly take up additional criminal justice reforms and that he would appoint a “czar” to improve the state’s adoption and foster care programs.


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