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Perspective: Same Song, Next Verse

By Dave Adkisson

Dave Adkisson is executive director of the Kentucky Chamber of Commerce.

When the General Assembly convenes in Frankfort this January, it will be full of new faces, but riddled with familiar issues. This year is a “short session,” as it falls in an odd year and runs half the time of the even-year budget sessions. Legislators will meet only four days in January to elect members to leadership positions and organize the committee structure for the next two years. But the new members and seasoned veterans alike will face a number of familiar but critical issues despite the limited timeframe. None of these issues could be more daunting than reforming Kentucky’s severely underfunded public pension systems – a key priority for the business community.

[pullquote_left]It’s up to the legislature now to implement bold change in order to secure the future of our state’s economy.[/pullquote_left]

Several studies have noted the dire financial condition of the commonwealth’s pension system. In its recent publication of the State of the States report, Barron’s magazine identified Kentucky as 47th worst in overall financial health. Just last year Moody’s and Fitch rating agencies downgraded Kentucky’s bond rating – both citing the unfunded pension liabilities. The Barron’s report serves as another sobering reminder that our unsustainable state pension system must be addressed.

The nature of the pension system, in which costs are constantly accruing, requires that action be taken now to put the system on a sustainable track. Every year that passes without significant changes simply kicks the can down the road and increases the cost of any eventual solution. Failure to take action also continues the current spending trend of less funding for education and more for retirement benefits – leading to lower investments in the training and education that Kentuckians require to be competitive in our economy.

The legislature must address this issue in the upcoming session. A task force was created to study the public employee pension system, and it delivered recommendations for improvement in late November. It’s up to the legislature now to implement bold change in order to secure the future of our state’s economy. The Kentucky Chamber will be there in Frankfort urging swift and meaningful action to help improve Kentucky’s fiscal condition.

Taxes will also warrant serious discussion in 2013, but won’t likely be addressed in a meaningful way in the short session. The Governor’s Blue Ribbon Commission on Tax Reform is scheduled to present recommendations to the General Assembly for consideration in late December, but it appears the deadline to do so could be extended again. Tax reform is always a difficult undertaking, and any tax proposal will require a supermajority (23 of 38 votes in the Senate; 60 of 100 votes in the House) in an odd-year session, making it even more difficult to achieve. This increases the likelihood of a special session for any vote on tax reform; however, the debate will likely begin during the regular 2013 General Assembly.

Unresolved during the 2012 session was state legislative redistricting – the process of properly redrawing legislative boundaries. The Supreme Court found the 2012 plan unconstitutional and has directed the legislature to complete the task before the next General Election in 2014. Redistricting is an extremely political exercise and will have to be negotiated by the leadership of each legislative chamber. Some are content to wait until 2014, while others would like to complete the task in 2013. Although this issue doesn’t generally impact employers directly, it will be important to watch as it can easily turn the political environment bitter.

A number of other issues will be discussed – many of which will impact employers and taxpayers. Issues like education, unemployment insurance, workers’ compensation, healthcare, environmental regulations and liability issues can have a serious impact on employers and job creation. As always, the chamber’s public affairs team will be at the Capitol following the action and keeping small and large employers alike informed on the critical issues. Keep up with legislative action at kychamberblog.com and learn about the issues at policy.kychamber.com.

Dave Adkisson is president and CEO of the Kentucky Chamber of Commerce