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.