The Kentucky House budget committee has advanced a bill designed to provide extra revenues for the state's underfunded pension systems.
House Bill 416 would use revenues from the expansion of Instant Racing if the state Supreme Court upholds the legality of the game. It will also use expanded lottery sales and the proceeds from a new Keno game.
House Speaker Greg Stumbo says the bill does not ask lawmakers to legalize Instant Racing.
"We're simply saying if it is upheld, here is a fund that captures this money that's used to pay off this unfunded liability in our pension fund. So we're not asking you to vote to expand gaming," said Stumbo.
Lawmakers won't pursue a 6 percent tax on lottery tickets as a source of revenue to shore up Kentucky's financially troubled pension system for government retirees.
House Speaker Greg Stumbo said that idea was rejected out of concern that a tax might stifle sales of lottery tickets that generate money for education programs in Kentucky.
Instead, Stumbo said lawmakers will unveil legislation on Tuesday that will call for the lottery to create new games, including Keno, that he said could generate about $25 million for the pension system.
He said the legislation would also call for tax revenue from slot-like machines, called Instant Racing machines, at horse tracks to be designated for pensions. He said that could eventually net $100 million a year for pensions.
Lawmakers are looking to the lottery for a source of revenue to shore up Kentucky's financially troubled pension system for government retirees.
Rep. Brent Yonts, chairman of the House State Government Committee that oversees pensions, said Friday the latest proposal would institute a 6 percent sales tax on lottery ticket sales and implement new games, which could include Keno.
The Greenville Democrat said a lottery tax could generate $49 million a year and that adding more games could generate $70 million to $90 million. He said those actions could be enough to cover the state's full contribution to the pension system, which has a $33 billion unfunded liability.
Yonts' committee is scheduled to vote on pension legislation next Tuesday. The House Appropriations and Revenue Committee would vote separately on the lottery proposal.
Kentucky lawmakers have passed the halfway point in the current legislative session without a deal in sight to shore up the financially troubled pension system for government retirees.
They have only 14 working days remaining before adjourning for the year. However, Gov. Steve Beshear has said he may call lawmakers back into special session if they adjourn without taking action to bolster the pension system, which has a $33 billion unfunded liability.
The Senate passed a measure earlier this month that requires the state to fully fund the pension system but that did not specify where the money would come from.
The House is considering a variety of options to pay the state's contribution, including raising the cigarette to $1 a pack to generate about $100 million a year.
A leading Kentucky lawmaker says raising the cigarette tax to $1 a pack would generate about $100 million a year that could be used to shore up the pension system for government retirees.
House Speaker Greg Stumbo told reporters that that's one of several options House lawmakers are considering to bolster the pension system, which has a $33 billion unfunded liability.
The Republican-controlled Senate passed a bill last week that requires the state to make its full contribution to the pension system but doesn't identify a funding source to do that. Stumbo said the Democratic-led House wants a designated funding source.
The Senate bill also would create a 401(k)-like hybrid retirement plan that some House lawmakers want to remove from the legislation.
Another change in Kentucky’s financial outlook has the state’s business leaders calling on the General Assembly for immediate pension reforms.
Standard and Poor’s has changed Kentucky’s outlook to negative, citing the state's large unfunded pension obligations as the main reason.
In response, the Kentucky Chamber of Commerce, as well as 50 other business groups, held a news conference to demand that lawmakers pass the recommendations from last year’s pension task force as they were presented.
Chamber President and former Owensboro mayor David Adkission said the change is the best reason for why reforms need to happen soon.
Current Kentucky state employees and retirees packed the Capitol Rotunda to encourage lawmakers to rethink some proposals made by a task force on public pensions last year.
Calling themselves the Kentucky Public Pension Coalition, the group of more than a dozen interested organizations encouraged their members to tell lawmakers not to switch to a hybrid pension plan for new hires and to reinstate cost of living adjustments every year.
Bill Londrigan is the president of the Kentucky AFL-CIO and a member of the coalition. And he says a study by the group shows a hybrid 401K plan reduces benefits year after year.
“You know if you look at it, you’ll see the estimates decrease benefits over the long term, something we’re totally against,” he says.
Kentucky legislative leaders say solutions on how to pay for Kentucky’s underfunded pensions won’t likely be addressed in the 2013 legislative session.
Both House Speaker Greg Stumbo and Senate President Robert Stivers say there will likely be a bill to introduce changes to the pension systems. But they also agree that such a bill is unlikely to deal how to fund the changes.
What they disagree on is when to deal with the funding solutions. Stumbo says pension funding should be dealt with in a special session, hand in hand with tax reform.
“There’ll be a bill, I don’t know whether it will be addressed," Stumbo says. "I think that we need, probably, to address the entire issue and that include the funding mechanism."
But Stivers says lawmakers should pass the changes now and deal with fully funding the pension system starting in 2014, when a new budget must be passed.