Tax on lottery sales no longer being considered

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Associated Press

Posted on February 26, 2013 at 12:01 PM

Updated Tuesday, Feb 26 at 12:01 PM

FRANKFORT, Ky. (AP) — 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.

In Kentucky, actual slots are banned, but two horse tracks have installed the Instant Racing machines that allow people to wager on the outcomes of past horse races. That spawned a legal challenge that is now pending before the Kentucky Supreme Court.

Senate leaders contend that the Legislature needs to wait for the Supreme Court's ruling before designating Instant Racing revenue as a pension fix.

"If it is upheld, the money will be captured in a trust fund and used," Stumbo said. "I think the court decision is going to uphold Instant Racing."

Kentucky's pension system has a $33 billion unfunded liability. Despite a tight budget, lawmakers have been trying to identify a revenue source that would allow them to make the state's required contribution. They've been floating a variety of potential funding sources in recent weeks, though most have been shot down.

A proposal to increase the state's cigarette tax from 60 cents to $1 a pack fell to the wayside last week.

The Republican-controlled Senate has already passed a pension bill that requires the state to make its full contribution to the pension system but doesn't identify a funding source to do that.

Sen. Joe Bowen, R-Owensboro, said the state needs an additional $125 million a year to make its full contribution and that the Senate has made the commitment to appropriate that in the next budget cycle.

Gov. Steve Beshear has been pushing for tax reforms that could generate money for the pension system.

A group of experts serving on a commission appointed by Beshear last year proposed a list of tax reforms that would generate nearly $700 million a year in additional revenue. By adopting those recommendations, the Democratic governor said lawmakers could resolve the pension system's financial woes.

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The legislation is Senate Bill 2

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