By Jacqueline Pitts, The Bottom Line
After Gov. Matt Bevin sent a letter to all legislators Tuesday setting a timeline for a special session on tax and pension reform, legislative leaders spoke exclusively with The Bottom Line Wednesday about their thoughts on potential reforms and whether or not it can get done.
Bevin’s letter said a special session to consider reforms would be after August 15.
Hoover said the letter from Gov. Bevin answered some questions about the timeline and what to expect. He also noted the governor’s tone in the letter looking for input while laying out just how significant the problem is.
Senate President Robert Stivers said members appreciate putting a date on the idea of a special session and waiting until after August 15 to allow members to finish summer break with their families before having to come back to Frankfort.
In terms of when they will see a plan from Gov. Bevin on tax and pension reform, Stivers said he expects to see recommendations soon and that legislative groups are working behind the scenes to study the issues beforehand.
“I think he is working on it. I think a lot of individuals, including the Chamber, have had discussions with him and the respected businesses that belong to the Chamber have had meetings with he and his staff, particularly (State Budget Director) John Chilton, talking about what type of impacts a change may have,” Stivers said. “I know a lot of work is going on. And I think it will be soon when they come with a framework.”
Hoover said he has expressed concerns to the governor about the tight timeline they are operating on to have a special session later in the year without seeing any plans yet and said there will have to be buy in from the public to pursue reforms because members of the General Assembly will “not be inclined to make drastic changes” without that.
“I think it is so important for the governor to sell the recommendations statewide over an extended period of time and build public support for whatever the recommendations may be, and that will translate to give the legislators a comfort level in voting for it,” Hoover said. “Without that, it will be extremely difficult, in my opinion, for the General Assembly to take action.”
Hoover noted once the legislature gets the governor’s recommendations, they will have to craft legislation based on that plan, while also selling it to the public at the same time later this year.
“And that’s tough to do on any issue, and it is really going to be tough to do on an issue where there is the financial implications that we see in the pension system,” Hoover said.
When asked if he has concerns about gathering the votes needed to pass reforms this year, Stivers said it is always a concern on big issues like these.
“You always do, until you see the final, definitive plan in bill form. You have to have those concerns, that’s not an unfounded concern. But if we get involved with your group, the Chamber, and they understand what it is about and advocate for the business-friendly portion of it, knowing that we have a pension problem, I think with groups like yours and others that we can have a successful special session,” Stivers said.
On pension reforms, Hoover told an audience on Wednesday at the Northern Kentucky Chamber of Commerce’s event in Covington that the pension crisis is the biggest financial threat facing the Commonwealth. Hoover stressed that this requires serious action and long-term solutions to avoid bankrupting the state. The issue, Hoover said, is the public still does not have a clear picture of just how big the issue is and the fact that it impacts every person in the state, which is why he said there needs to be an education campaign.
Stivers told the crowd that if the pension issue is not seriously addressed, it threatens to bankrupt the state and noted the critical status of the Kentucky Retirement System (KRS) and the possibility the state will have to be paying the $1 billion per year, a large chunk of the state’s annual budget, to the most underfunded plan “out of pocket” within a few years if not seriously addressed.
Hoover said he expects tax reform to deal with moving toward a more consumption-based tax system and closing some loopholes. But the House Speaker noted the complexity of the issue and how many moving parts there will be in a tax reform discussion.
“There are so many components. And I think it’s been tough for those that are working on it than maybe they anticipated and is why we don’t have a solid ”that’s been released publically yet,” Hoover said (at 5:00 in the video.) “So we will wait and see what that is and go from there.”
Stivers told The Bottom Line that with tax reform, he will be looking for a plan that broadens the base and noted the progress already being made on that front through the creation of new jobs in Kentucky after the passage of business-friendly legislation passed in the 2017 session.
For more state government news go to the Kentucky Chamber of Commerce’s The Bottom Line blog.