http://mycn2.com/politics/groups-want-state-to-sell-bonds-to-cover-pension-debt-and-pay-for-it-by-ending-tax-breaks

Publication Date: August 21, 2012

Author: Nick Storm

Groups want state to sell bonds to cover pension debt and pay for it by ending tax breaks

08/21/2012 07:51 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.

About Nick Storm

Nick Storm joined cn|2 in December 2011 as a reporter for Pure Politics. Throughout his career, Nick has covered several big political stories up close, including interviewing President Barack Obama on the campaign trail back in 2008. Nick says he loves being at the forefront of Kentucky politics and working with the brightest journalists in the commonwealth. Follow Nick on Twitter @Nick_Storm. Nick can be reached at 502-792-1107 or nicholas.storm@twcable.com.

Comments

  • Bruce Layne wrote on August 22, 2012 11:03 AM :

    This is ironic, in that Kentucky has a constitutional requirement to balance its budget every year, and every year our legislators give in to the demands of those lining up to receive more than there is to offer. The legislators “balance” the budget by issuing bonds, and it is this bond debt that is strangling Kentucky. We’re reaching the point that we can’t borrow enough to pay the interest on the previous bond debt and we can’t borrow any more because Kentucky’s credit rating has been lowered, precisely because we have an unsustainable bond debt. Frankfort keeps raising taxes in every way they can imagine, but that’s way past the point of being sustainable. Government can only squeeze so much out of the state economy before they kill the goose that lays the golden eggs by stifling the economy. Kentucky’s taxes are already at the crossover point, where adding more taxes is so harmful to the state’s economy that a higher tax rate would result in less tax revenue. And still, those who live off our taxes are crying for more bond debt and more taxes, which they promote as “ending tax breaks” because that’s more politically palatable than “raising taxes”. More of what caused the problem is seldom the solution to the problem.

    I have an idea. Let’s lower taxes by 20% and cut spending by 40%. That’ll balance the budget, and it’ll restore Kentucky’s credit rating rather than kicking the debt can down the road another year and making the problem even worse. Of course, those who make their living off other people’s taxes will tell us that’s impossible. In their minds, it is impossible. They can’t even imagine lowering taxes and cutting spending. They won’t be happy until every business and every productive self employed Kentuckian has relocated to Tennessee or Texas.

  • David Adams wrote on August 22, 2012 04:49 PM :

    Raising taxes and borrowing excessively to paper over years of fiscal mismanagement is not the way to fix this. I agree with Bruce; less government is the only way out of this.

  • Jim Carroll wrote on August 23, 2012 08:42 AM :

    Those who “live off our taxes” haven’t seen significant raises in more than a decade, and are underpaid relative to the private sector. No state employee gets a Christmas bonus, stock options, gym privileges or any other perk that a comparable large business provides. Meanwhile, state workers are having more and more work heaped on them as the workforce shrinks dramatically.
    We get this strategy — portray public servants as undeserving fatcats. It’s a false narrative being perpetrated by the far right to serve their agenda.

  • sally sue wrote on August 28, 2012 09:38 AM :

    Why don’t the legislators work on repealing HB 299 and funnel that money into the other retirements systems. Oh right, because that would directly impact them!

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