West Kentucky Lawmakers Preview 2018: Pension Reform, Tax Reform, Budget

Dec 19, 2017

Credit Matt Markgraf, WKMS

West Kentucky lawmakers offered their thoughts on ‘the big three’ potential agenda items when lawmakers convene in Frankfort for the regular session beginning in January: pension reform, tax reform and the budget. Republican State Senator Stan Humphries and Republican State Representative Kenny Imes spoke at a recent Chamber luncheon in Murray. In addition to the major items they touched on other issues, including the long-awaited expansion of Highway 641 South and funding for higher education.

PENSION REFORM

Senator Humphries said he has not yet seen a copy of a new bill that would allow for pension reform. The pension issue is at the top of the list, he said, as lawmakers prepare for the regular session after the holidays and said details are still being worked out.

"If anybody tells you that all the bugs are worked out on this secondary bill and that we're just waiting to call a session, that's not factual. I have not seen a copy of a new bill that would allow for a pension reform,” he said.

"I don't think you have to look very hard to see that the solvency rates in each of these silos of retirement systems has gone down over the last several years," Humphries said. To criticism on this being the fault of the lawmakers, he said there was a mandate to pay the 100% CERS every year. If that's the case, he said, then it should be actuarially sound and yet that's not the case, suggesting other factors.

Sen. Stan Humphries
Credit Matt Markgraf, WKMS

"I'm a former school teacher, so I understand the concern that has been offered up by educators across our district." He said he has taken the expressed concerns to heart and that lawmakers are working on the next plan.

He said it's optimistic to think that even in the early days of the general session that lawmakers would be in a position to pass a new or revised bill that has not gone through the democratic process of giving the public a chance to read it and give feedback.

Pension reform is at the top of the list in the regular session, he said, "we can't let this just dwindle away. We can't kick the can down the road any longer." He said he wants to see action that satisfies state employees and teachers. He said nobody likes change, but the current rates are not sustainable.

Regarding pension reform, tax reform and the budget, Representative Kenny Imes said “Any one of those three could consume a 60-day session.” The challenge for lawmakers regarding pensions, he said, is to “cobble something together we can all live with and the taxpayers can afford and we can get Kentucky back on some degree of sustainability, financially.” Imes said he expects lawmakers to again meet the ARC, but predicted it would be more than $1.3 billion, which is more than 10% of the state budget.

Both Imes and Humphries agreed to finding a way to separate the CERS.

Imes predicted an alternative version of the pension bill will come to light in a couple of weeks. “What I think will come out is not going to please everybody 100 percent, I can tell you right off the bat,” he said.

TAX REFORM

Tax reform will arrive soon enough, Humphries said. "I think it's pretty aggressive to think we can do pension reform in '18 and then somehow find it in our fortitude to move through tax reform while in Frankfort all the while having this vetted out across the state." Tax reform, he said he believes, is too big an issue - bigger than pension reform - and would have to be in a special session.

Most of Humphries' district borders Tennessee and the people of his district see competition firsthand when it comes to tax policy, he said (Tennessee notably has no income tax). In tax reform, he said he doesn't want to put mandates on communities and undo local policies. He said he has been supportive of local sales tax, but doesn't believe 'tax areas' will emerge in the upcoming session until a comprehensive overhaul is completed.

Credit Matt Markgraf, WKMS

Imes said in addressing tax exemptions, lawmakers will have to determine whether they should continue for items like agricultural products, prescription drugs and groceries. Imes asked rhetorically, “Go back and think if you paid a nickel tax on a loaf of bread and a nickel tax on a gallon of milk and a nickel tax on a dozen eggs, how much money would that bring into the commonwealth?” He said these are the kinds of questions lawmakers will struggle with when it comes to revising the tax code. He added that he would ‘love’ to see no income taxes, but said this can’t be done “all at once based on assumptions” and said this particular issue would be phased-in.

BUDGET

Humphries said he is aware of budget concerns in areas like higher education should there not be a pension reform. "There's a very slim possibility that we are able to maintain zero cuts," he said.

In addition the ARC requirements (mentioned above), Imes said expanded Medicaid will cost the state “around a half-billion dollars” out of the general fund. By 2020, the state is expected to cover 10% of the expanded cost, which is around $409 million. However, the governor has proposed rolling back Medicaid that could change that number.

When asked if they would vote for a budget that cuts funding for higher education, Humphries said it would be difficult to have a budget that would allow for higher education not to be cut at some level. He said it is realistic to think that additional cuts are on the way. The crux of the matter, he said, is finding ways to prevent cuts from continuing to damage higher education and placing additional costs onto students. “The last biennium was tough," he said, "And I will say this one’s going to be as tough or tougher.”  

SHIFT FORMULA & HWY 641 SOUTH

Earlier this year, the Kentucky Transportation Cabinet announced forming a road project prioritization model called the “Strategic Highway Investment Formula for Tomorrow” - or SHIFT. The effort uses an algorithmic approach to determine which road projects to focus on based on a district’s prioritization, population and other factors. In far west Kentucky, the Purchase Area Development District has said that expanding the two-lane Hwy 641 South from Murray to the Tennessee border (towards Paris, Tennessee) is the top priority for state road projects in the region. Local leaders, including Imes and Humphries, have advocated for this expansion in Frankfort.

Humphries said it’s good to have a fresh look at road projects across the state, but feels the formulas thus far presented skews, due to the economic development factor, toward central and northern Kentucky.

Imes said he appreciated the development of a foundational block for prioritizing road projects. He said the model is likely to improve. He took issue with the model dividing the state into four areas when there are 15 development districts (he described the west Kentucky region encompassing roughly one-third of the state in terms of landmass). In meeting with transportation officials, Imes said his budget request includes 641 South of $7.5 million to $8 million for right-of-way and utility movement with hopes for “dirt moved” by 2020 and a road a few years following. He noted Tennessee counterparts are making progress on their end.

Rep. Kenny Imes
Credit Matt Markgraf, WKMS

OTHER ISSUES

Imes said he hopes lawmakers work on further reducing regulations. He noted his success in passing a bill last session to sunset regulations after a period of time. He has also pre-filed legislation requiring constitutional amendments to give the general assembly more regulatory review power over executive orders and other administrative regulations. Another is Marsy’s Law, which would give the victims of crimes more access to information. And, lastly, a provision to move statewide elections to even-numbered years, which he has filed in the past. Imes argued this would save local governments money, stir a greater voter turnout and would give newly elected officers more time to create their budgets.

This story has been updated to reflect that I-69 is not a federal project, as previously mentioned. According to Kentucky Transportation Cabinet Public Information Officer Keith Todd, "While Interstate 69 is a Federal Highway, all construction of upgrades to our parkways to bring them up to current interstate standards are state highway projects.  There is no direct federal funding for I-69."