Legislative leaders say some issues still remain on pension reform agreement

By Jacqueline Pitts, The Bottom Line

Speaking to business leaders in Lexington Friday, Kentucky Senate President Robert Stivers and Acting House Speaker David Osborne said legislators are “closer than ever” to an agreement on pension reforms but still not ready to move forward as the window closes on the possibility of a special session before the end of the year.

The leaders, who spoke at Commerce Lexington’s Public Policy Luncheon Friday, noted many would have rather dealt with pension reforms in a special session before now because of the impact the crisis in the retirement systems has on everything else in state government.

But as for where they are currently on getting those reforms done, Osborne said they have worked with many of the interest groups impacted by reforms and addressed many of the concerns expressed about the proposal presented by the governor and legislative leaders in October.

Stivers reiterated that changes to the system have to be made due to the magnitude of the issue, as the state is currently spending up to $1.2 billion in the budget on pensions and could see that number increase to $2.4 billion if no changes are made. Stivers said he would like to see the increase in funds needed for the retirement systems be as minimal as possible.

Osborne noted there will be at least some increase in the amount going to the pension systems as they move to level-dollar funding to ensure the state is making the right payments and can begin to “stop the digging.”

As for how the state will make these pension payments, the leaders discussed the fact that the current budgetary outlook is bleak and we could see “draconian” cuts in the budget to deal with the crisis, according to Stivers.

Osborne predicted state government could likely see budget cuts of 10 percent or more if areas like K-12 education are left untouched.

Tax reform was also discussed with Osborne saying legislators need to figure out the goal of tax reform before executing an overhaul.

Stivers said legislators need to reexamine and reinvent what they think government should be and figure out what areas could be drawn back.

In terms of what could get done and what might be priorities for the General Assembly outside of the three big issues of the budget, pension and tax reform, Osborne pointed to legislation dealing with essential skills, legal liability reforms, changes to the workers’ compensation system, and infrastructure needs as some of the big priorities the House will be focused on.