House committee overhauls pension reform bill

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Associated Press

Posted on February 27, 2013 at 12:01 PM

FRANKFORT, Ky. (AP) — New government hires would be eligible to participate in the same retirement plans as current employees under overhauled legislation that passed a House committee on Tuesday.

House Democrats rewrote a bill drafted by Senate Republicans, removing key provisions that were intended to ease the financial woes of the state's pension system for government retirees.

The House State Government Committee struck language that would have created a 401(k)-like plan for incoming workers before voting 17-1 to send the measure to the full House for consideration. Ten Republican lawmakers passed during the committee vote.

The House lawmakers also added language to the bill that would allow retirees to receive cost-of-living increases, but only when the state has enough money to pay for them.

State Rep. Brent Yonts, D-Greenville, said the key component of the legislation is requiring the state to always make its required contributions to the retirement systems, which now have a $33 billion unfunded liability. Yonts said the state hasn't contributed in full in 13 of the past 21 years.

"We have broken our promise to them," said Yonts, chairman of the House State Government Committee.

The measure would also prevent police, firefighters and others serving in hazardous-duty positions from collecting retirement benefits before they're 50 years old.

The House Appropriations and Revenue Committee approved a separate bill later Tuesday that would designate funding for pensions from revenue from new lottery games and horse tracks to pensions.

A proposal to institute a 6 percent tax on lottery tickets as a source of revenue for pensions wasn't included in that bill. House Speaker Greg Stumbo said that idea was rejected out of concern that it could stifle sales of lottery tickets, a key source of revenue for education programs in Kentucky.

The legislation calls for the lottery to add Keno and some new online games to generate revenue for the pension system. It also calls for tax revenue from slot-like machines, called Instant Racing machines, at horse tracks to be designated for pensions.

Stumbo said that could net $100 million a year, roughly the amount in additional funds Kentucky needs to make its annual pension contribution.

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.

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.

State Rep. Brad Montell, R-Shelbyville, warned Tuesday that the House changes could create a roadblock to passing needed pension reforms.

"It's going to blow up the whole thing, and we can't afford that," he said.

Martin Cothran, a spokesman for the anti-gambling group The Family Foundation, likened Stumbo's funding proposal to a crap shoot, based on how the Supreme Court rules.

"This is not a responsible way to engage in public policy," he said.

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The legislation is Senate Bill 2 and House Bill 416.

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