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It took nearly a year of study, months of debate and several long nights to finalize, but the General Assembly achieved its biggest goal this legislative session when it enacted far-reaching reforms of Kentucky’s public retirement systems early last week.
For those who may not follow this situation closely, most states face long-term liabilities in their public pension systems that, combined, measure in the hundreds of billions of dollars. If nothing is done, this has the potential to cripple spending on every service these governments provide just a few years from now.
From a historical perspective, this is a relatively new problem. Kentucky’s public pension systems have been affordable for much of their history, and as recently as a decade ago, they had more than enough money to meet the benefits that had been promised. For a variety of reasons – most of them tied to the country’s tough economy – that promise was looking harder to keep.
Our work last week, however, will change that, ensuring that what is owed will be paid. Some hailed this legislation as a national model, because it establishes a framework to do away with the liability while taking steps to make sure that it is far less likely to happen again.
On the financial side, the additional money will come from federal tax changes affecting our state tax code; several updates recommended by the Kentucky Dept. of Revenue that mainly center on large businesses and delinquent taxpayers; and slightly reducing the personal income tax credit.
To offset some of that revenue, the General Assembly has authorized a tax cut that will save new-car buyers potentially hundreds of dollars if they have a trade-in. Prior to this change, those buying a new car had to pay sales tax on its full value, no matter how much they actually paid when the trade-in was included. Now, they will only pay the sales tax on what they spend, a move that should give a boost to our auto industry. We saw that happen several years ago, when the state offered this as a temporary incentive program.
The other half of our work on retirement last week creates a new type of plan for workers hired after Jan. 1, 2014, who contribute to the retirement systems for state and local governments. Their retirement will have some similarities to a 401(k), but it will guarantee that contributions from them and their employer will grow steadily every year. This plan will also be more portable for those employees who don’t make public service a career. It is crucial to note that this new law has no effect on teachers, who have their own retirement system.
Overall, this new law is expected to save the state more than $10 billion over the next 20 years, and it should provide the stability bonding companies look for when they set the state’s borrowing costs. I’m proud that this legislation incorporates ideas from both the House and Senate, while Governor Beshear deserves considerable credit for his role in helping both sides reach a compromise.
That level of bipartisanship was evident in other bills also sent to the governor’s desk early this week.
Perhaps the most newsworthy of those centers on industrial hemp, which the federal government banned decades ago because its appearance closely resembles its genetic cousin, marijuana. Under the bill set to become law, we now have a regulatory framework to grow industrial hemp should the federal government either legalize its production or grant Kentucky a waiver. These strict guidelines call on agricultural officials and law enforcement to work together, and there is hope that, if all goes well, Kentucky farmers could benefit from a major new commodity that has multiple uses ranging from biofuels to clothing.
Another bill making it through the General Assembly last week should prove to be more helpful for those deployed overseas. This legislation as originally proposed by the Secretary of State would have allowed electronic voting by our soldiers, but the final version scales that back. Absentee ballots can now be emailed to our servicemen and women, but the completed ballot must continue to be mailed. If a more secure system is found to be effective, the hope is that one day soon our military personnel will be able to vote electronically and not worry that their vote is not counted.
While it may have been a “short” legislative session because it is an odd-numbered year, the General Assembly was able to get a substantial amount of work done during these 30 working days. After a brief time off, the House and Senate will return to their normal interim meeting schedule later this spring, giving us the opportunity to see how effective these new laws are and what may need to be addressed when the General Assembly returns for its next legislative session in January.
I want to thank everyone who contacted me during the last few months to let me know their views. No matter the time of year, though, I can always be reached by writing to Room 329A, Capitol Annex, 702 Capitol Avenue, Frankfort, KY 40601.
You can also leave a message for me or for any legislator at 1-800-372-7181. For those with a hearing impairment, the number is 1-800-896-0305.