Senate bill setting 6 percent debt ceiling clears budget committee
02/19/2015 02:41 PM
FRANKFORT — The Senate Appropriations and Revenue Committee has unanimously sent a bill that would cap the state’s debt at 6 percent of its revenue to the Senate floor Thursday.
Senate Bill 94, sponsored by Sen. Joe Bowen, R-Owensboro, would also direct any savings realized in drawing down the state’s indebtedness to the underfunded Kentucky Employees Retirement System for non-hazardous state workers.
Bowen, testifying for the bill, said the state currently has a debt ratio of 8.1 percent rather than the reported 6.7 percent once county courthouse debt obligations are included. As the state lowers its debt, SB 94 would pump millions into the beleaguered pension fund, which has just 21 percent of the money needed to meet current and future retirement liabilities.
The mechanism would give the pension plan “much-needed funds to relieve their looming cash-flow challenges,” Bowen said.
“Let me give you an example of what the projections would be on meeting the threshold of a 6 percent debt ceiling,” he added. “For fiscal year ’17 the projections are we would save $8.8 million; fiscal year ’18 that jumps to $34.3 million; fiscal year ’19, $35.5 million; fiscal year ’20, $105.9 million; fiscal year ’21, $134.1 million; and fiscal year ’22, $177.1 million.”
A similar piece of legislation, which did not include the special KERS non-hazardous pension fund, unanimously passed the Senate last year but stalled in the House.
SB 94 would exempt the road fund and agency debt from the 6 percent cap, and the legislature could vote to raise the ceiling during emergencies declared by the governor, Bowen said, noting many he has spoken with support the idea of a debt ceiling.
“Depending on the publication that you look at, we rank near the bottom in all the important financial categories that states are measured by,” he said. “We’re 48th out of 50 in debt per GDP, we’re 38th out of 50 in debt per capita, we’re 43rd out of 50 in total state debt when you include all unfunded liabilities. Every man, woman and child owes the state of Kentucky $3,400.”
Sen. Chris McDaniel, chairman of the Senate Appropriations and Revenue Committee, called SB 94 “a good bill” and said lawmakers are often asked to tackle difficult issues during sessions.
“We were not sent here to avoid tough choices by any stretch of the imagination, and you have certainly not done that with this,” said McDaniel, R-Taylor Mill.
The state’s debt and unfunded liabilities are “the greatest challenge facing the commonwealth,” said Sen. Chris Girdler, R-Somerset.
“We spend a lot of time around here talking about a lot of different issues, and Sen. Bowen one of the analogies I like to make is, you know, we’re talking about flood insurance while the house is burning down, and debt and our unfunded liabilities, it’s burning our house down.”
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