Daily Independent (Ashland, KY)

March 26, 2013

Pension reform package passes

By RONNIE ELLIS
CNHI News Service

FRANKFORT — It went down to the wire and a lot of people didn’t like either the final product or the process.

But Kentucky’s General Assembly managed to pass a pension reform package on the final night of the 2013 session.

The last-minute compromise package made some changes in the bill originally passed by the Republican-controlled Senate, but it retained, at least in philosophy, most of the features of the Senate bill.

After July 2014 new state employees will be placed into a half-defined benefit, half-cash balance plan. After Jan. 1, 2014, all new legislators and judges will be placed into the same kind of system. The plan will guarantee a minimum of a 4 percent investment return and none of it will affect existing employees or retirees.

Nor does it affect teachers. But it does apply to classified employees in the school system who are represented by the Kentucky Education Association.

All day Tuesday, lobbyists on both sides of the issue thronged the capitol and rank-and-file lawmakers wondered if there would be a vote and, if there were one, would the measure pass?

No one seemed pleased with the state of things on the final day of the 2013 General Assembly – but then not much had happened by dinner time Tuesday night.

Just as happened Monday,leaders of both chambers shuttled back and forth from their respective chamber to the Gov. Steve Beshear’s office. Each time House Speaker Greg Stumbo, D-Prestonsburg, emerged he seemed to be carrying a slightly different plan to fund the annually required contribution to the pension system.

Gone was a 2-cent reduction in the gasoline tax – an idea which House Democrats refused to go along with Monday night. Monday’s plan, including the change in the gas tax in 2014 and some other minor tax changes, was supposed to produce about $110 million.

That’s roughly the amount the General Fund must provide for lawmakers next year to make what is expected to be a $325 million contribution to the pension system. (The rest comes from road fund salaries, federal programs and agency “employers.”)

But no one seemed to like the gas tax idea: local officials said it would cost them money they needed for local roads. Paving and construction companies didn’t like it either.

The latest plan  reduces the personal credit on income taxes to $10, allows purchasers of new cars to get credit against sales taxes on the value of their used trade-in (money which would also be lost to the Road Fund); and a number of technical and compliance changes to the tax code.

That bill passed the House 82-17 with 10 Republicans and seven Democrats voting no.

The structural change in the benefit package is not supported by public employees or KEA, which represents classified employees. Both groups, and labor representatives, objected to moving new employees into any type of cash balance and complained bitterly they were locked out of negotiations.

That troubled many House Democrats.

Stumbo said the plan honors the “inviolable contract” with present employees and retirees.

“You honor that contract, ladies and gentlemen,” Stumbo said. “You honor the promise. You ought to feel good about that.”

But Rep. Jim Wayne, D-Louisville, said those current employees worried as well about future employees and the promise made by lawmakers – in his mind – was to past, current and future employees.

He, like others, complained the deal had been cobbled together “behind closed doors without (employee groups’) participation.”

Before the vote, Rep. Johnny Bell, D-Glasgow, objected to having to vote on a bill he hadn’t seen.

“It’s a 228-page bill I’m told,” Bell said. “I’ve not even seen it and I’ve got to go in there and vote on it.”

 But Minority Leader Jeff Hoover, R-Jamestown, said passage of the bill represented “a monumental day in the General Assembly and a monumental day in the commonwealth of Kentucky.”

He said it represented the best of bipartisanship and commended Beshear for his leadership and his efforts to bring the various parties together.

In the end, the bill passed 70-28 in the House after passing earlier in the Senate along with the companion funding bill.

There, Sen. Damon Thayer, R-Georgetown, the structural bill’s original sponsor, said it was necessary “to avert a fiscal crisis that looms in only four years in the future.” He said without action, the pension system would be broke by then and said the plan contained in the bill would save $10 billion over 20 years.

KEA President Sharron Oxendine and Steve Barger, who represents a coalition of state employees, criticized the cash balance plan for new employees and said they were especially unhappy they were locked out of negations “which affect thousands of Kentuckians,” according to Oxendine.

RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.