Pension debate ratchets up the political, policy and procedural drama

02/26/2013 10:30 PM

Tackling the state’s public pension crisis was billed as the issue of the 2013 General Assembly. And as the session hits the two-thirds-of-the-way-through mark on Wednesday, the pension debates and all its sidebars haven’t disappointed.

It has come to a head this week as House Democrats scrambled to change the framework of reforms the Senate passed and find money to plug the $100-million-plus general fund hole that paying the state government’s full share into the system would require.

Two separate measures passed House panels Tuesday with only Democratic support. All the Republicans on the budget committee voted “pass” Tuesday night on the revenue measure, which moved to the House floor by a 17-0-11 vote. And the bill with pension system changes made it through the House State Government Committee Tuesday morning 17-1-10. The sharp partisan divide only foreshadows an ultimate showdown between House Democratic leaders and Senate Republican leaders.

To fund or not fund?

First, there’s been the argument over whether lawmakers need to explicitly state where to find an extra $100 million in general funds per year to make the state’s full payment into the Kentucky Retirement. (House Democrats say yes, Senate Republicans say that can be done with the budget next year).

Though there have been some false starts — and more false starts — that gave way Tuesday to a debate over capturing extra revenue from new lottery games, Keno and an online lottery. Those are two areas that would expand the customer base of lotteries. Most House members on the Appropriations and Revenue Committee seemed satisfied that the proposal wouldn’t take away from funding KEES scholarships. House Speaker Greg Stumbo told the House budget committee Tuesday evening that scholarships’ share of the lottery proceeds would continue to grow 2 percent each year, while the rest of new money would go into a fund set aside for the state’s pension payments.

Instant debate

It also thrust the General Assembly into the middle of the debate over instant racing. That game, which is currently being offered at two tracks, allows patrons to bet on historic races on video terminals. The constitutionality of the game has been challenged by the Family Foundation of Kentucky — a case currently before the Kentucky Supreme Court.

Stumbo’s plan would allow the racetracks to reduce their state taxes through deductions up to the first $300 million wagered on the games. Beyond that, the state would capture a greater share, which would go into the special fund tagged for pension payments.

At stake is potentially proceeds the racing industry could use for breeders incentives and purses — a concern articulated by Rep. Susan Westrom, D-Lexington. And there’s also the matter of whether the Kentucky Supreme Court will uphold the constitutionality of instant racing as a form of parimutuel wagering. That was brought up by Republican Rep. Bob DeWeese, R-Louisville, at Tuesday evening’s hearing. Here are highlights of the debate over the instant racing component:

And the Senate Republican leaders are still not thrilled about the changes the House is making.

Senate President Robert Stivers and Senate Republican Floor Leader Damon Thayer said they were “underwhelmed” by the financial proposals and Thayer also put it into football terms. Check it out:

And that’s just the money problems.

Policy debates

House and Senate leaders also will ultimately have to find common ground on other proposed reforms to the system.

The Senate’s version of the pension reforms created a “hybrid” cash balance system in which an employee and the state contribute into an account that guarantees the public worker at least 4 percent return.

Employee and retiree groups didn’t like it because it wasn’t as consistent as a set pension-check system based on a worker’s salary and years of service. City and county governments like the hybrid plan because it leaves them less susceptible to market changes that could eat away at investment income the retirement fund also relies on.

The House version also creates a new oversight board to keep watch over the Kentucky Retirement System investments and allows cost of living increases for pensions to kick back in but only if the General Assembly provides the money or if the retirement system has enough in the bank.

Here’s Rep. Brent Yonts, D-Greenville and chairman of the state government committee, followed by Rep. Brad Montell, R-Shelbyville, and Jim Carroll, spokesman for a state retiree group:

Procedural grievances

Finally, the last-minute nature of the House Democrats changes didn’t go over well with House Republicans.

After the House finished its work Tuesday afternoon, GOP Floor Leader Jeff Hoover rose to chastise the majority for springing last-minute committee substitutes on the legislators. Watch Hoover and the response from Rep. Rocky Adkins, the House Democratic floor leader:

The House could take up the two pension reform-related bills as early as Wednesday. Then the real fun between Senate and House leaders will begin.


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