Groups want state to sell bonds to cover pension debt and pay for it by ending tax breaks
08/21/2012 06:51 PM
Employee groups and local government organizations lobbied the Kentucky Public Pension task force Tuesday to float a bond to cover the billions of dollars in unfunded liability facing the state pension system.
The Kentucky Association of Regional Mental Health, Kentucky Association of Counties, and the union American Federation of State, County and Municipal Employees (AFSCME) were among the groups most vocal in asking the task force to consider issuing a bond.
AFSCME suggested the state issue the bond and did the math for legislators figuring a bond payment would amount to between $250 million and $266 million dollars a year for the next 30 years.
It would save the state $6.3 billion dollars over those 30 years, said Dan Doonan, a labor economist for AFSCME International research.
He told the group that a bond would only cover the unfunded liability – or make up the difference in funding.
The state would still need to figure out a way to pay for the bond payment. Doonan asked the task force to consider cutting tax expenditures, which are tax credits and incentives written in the law. Together, they amount to nearly $16 billion in the 2014 budget, he said.
Doonan presented a list to the task force itemizing several big-ticket tax expenditures:
- $157 million spent to exclude dividends from taxable income — a tax law from 1969.
- $782.5 million spent to exclude capital gains from income when property transferred through an estate — a 1954 law.
- $15.2 million to exclude ships and vessels from taxation, which has been in place since 1966.
Legislators said they would consider the proposal and made plans to reach out to the Blue Ribbon Tax Commission to examine tax expenditures.
Rep. Mike Cherry started the three hour meeting with a review of what led the state down the road to an unfunded liability of nearly $30 billion for the retirement funds that cover state and county workers and teachers.
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