West Kentucky Lawmakers Discuss Pension and Tax Reform in Packed Paducah Forum
Three west Kentucky lawmakers fielded questions in Paducah Tuesday night from a series of people representing teachers, state workers and retirees regarding Governor Matt Bevin's proposed pension reform plan.
Republican State Senator Danny Carroll and Democratic Representatives Gerald Watkins and Will Coursey explained their positions on the measure for more than two hours in a packed Clemens Fine Arts Center on the WKCTC campus.
At least 550 people showed up, around 100 of which were listening from the lobby, to hear what the lawmakers had to say. The audience was palpably opposed to the proposed measure, making it a smooth night for Watkins and Coursey who both said at the outset that they would vote 'no' on the measure. While Carroll did not say he supported the current plan, he took a defensive role in supporting the 'framework' of the measure and moving pension reform forward before tax reform.
The event was organized by the McCracken County and Paducah Education Associations. Speakers representing various education and law enforcement groups outlined their thoughts on the proposal and asked questions to the panel. These groups included the Kentucky Professional Firefighters, McCracken County Sheriff's Office, Jackson Purchase Fraternal Order of Police, President of the Graves County Educational Support Personnel, the Kentucky Education Association and other teachers and retirees.
Members expressed concerns about provisions including the three percent additional employee contribution, the COLA freeze and uncertainties regarding the inviolable contract (part of a statute protecting pension benefits from reductions).
On Pension Reform
Representative Gerald Watkins said he would vote "no" on Governor Bevin's proposal. He said there are other "attractive options" to fund pensions at the appropriate level that don't require teachers and state workers to "bail themselves out because the money hadn't been paid by the general assembly." He said the proposal would hurt recruitment down the road.
"We need to forget the idea of the special session this year and wait until the next session starting in January. And revise the tax code, get rid of some exemptions, pull in the revenue we need and the pension crisis is solved." (Watkins spoke further on tax reform, see section below)
He said lawmakers only have a couple weeks to "entertain the idea" with the holidays coming up. "I think it's probably safe to say we're not going to have a special session and we owe that to you, you have won Battle One." He said in recent conversations in Frankfort, "the Governor's bill is dead" and the House is writing their own bill with no input from Bevin. He urged the audience to contact lawmakers to have input in that bill. He noted teachers and state workers make up a "big voting bloc."
Representative Will Coursey lamented not having input in the development of the pension proposal, saying it was conducted behind 'closed doors' without input from stakeholders. "And when you don't have a seat at the table oftentimes you find yourself on the menu," he said.
"This, what I would call an assault on public education began in the last session of the general assembly when we enacted ill-advised charter school legislation," he said, that would "suck the life blood out of our public schools." Coursey criticized what he called the "Betsy DeVos school of thinking" (DeVos is the Education Secretary under President Trump. According to NPR, she and her husband helped found a charter school in Michigan and lobbied for free-market approach to school choice in the state, where not 80% of charter schools are run by for-profits.)
Coursey said he wants to look into contracts of state employees who aren't paying into the retirement system. He said he has asked the administration for a number of contracted employees and how much money could be lost in the system because of that.
He said he fears a mass-exodus of professions like fire fighters and police officers should the pension proposal be enacted.
"We have to honor that inviolable contract," Coursey said. "If we don't have educators, which in my estimation is the most important profession in our country today... what are we going to have?"
Coursey said that Senate leadership had indicated that there will be a special session before January. "I just can't conceive how we'll be able to do that and why we would at $65,000 dollars a day."
Senator Danny Carroll said the pension issue is one of the most serious issues in the state legislature, with a $40 to $60 billion unfunded liability, that touches every aspect of state government. He noted aspects of the proposal are being reviewed, with changes likely. "From day one, I have supported a balanced approach to this issue." He said the current system could not sustain downturns in the economy when revenue dwindles and positions get outsourced. "We have to make sure we do not pass this problem along to the next generation," he said.
Outlining the factors of how the pension got to this point, he said the impact of the state not putting in the extra funds requested is 15% of the problem. "A full one-third of the issue was caused by poor investment returns and all of those things that come with the downturn in the economy," he said.
Carroll said he doesn't condone "offensive" comments by Governor Bevin, referring to his comments that people lack "sophistication" in understanding the pension issue and that teachers are "hoarding sick days." Carroll said "to expect an employee to not take full advantage of the benefits that are given them - the benefits through laws that were made through people like us - is ridiculous."
He said he understands teachers feel like they are not respected, but cautions that the pension crisis "will bring this state to our knees if we do not deal with it." He said he supports the structure of the plan and has made no commitment to a vote since there has been no actuarial scoring. "For me that's been very frustrating to have a plan that's been issued without any statistics to back up anything that's been proposed."
As to CERS separations, he said if stipulations are attached that would require changes be made should funding drop below a certain number he would be supportive of a separation, but would want to know the fiscal impact of the overall system so as to not create an undue burden on the system as a whole.
Regarding COLAs, Carroll said there may be some ground to move the COLA freeze to every other year or to not affect current retirees and instead be a moratorium on future retirees.
"As it stands right now, Kentucky has funding level in the aggregate of 37.4%. That is the worst in the entire country. That's not debatable, that's where we are." He said KERS nonhazardous is six years from being insolvent. "So to say that there is no urgency, that this is all made up is an absolutely ridiculous statement to make." He said the biggest disagreement is whether those within the system need to make further sacrifices as part of a solution.
"If we do not change the structure, this will happen again," he said. He later said he would consider alternative plans that offer a "balanced approach." He said of the alternative plan proposed by teachers he worries if it would generate enough immediate savings and whether it's enough or adds a burden to taxpayers.
In closing remarks, Carroll said the pension remains the top priority right now. "The Senate will act as adults in the room, if we need to, to move things forward," he said, adding "we won't be distracted by this."
He asked teachers to consider how much they would make in a 401(k)-style plan as opposed to a pension plan, suggesting they could earn more. "Before you criticize, before you say no to this... Take the time to look at the numbers and see."
On Tax Reform
Coursey and Watkins both questioned why tax reform wasn't taken up before pension reform. Coursey said he doesn't disagree with Governor Bevin on "bringing the sacred cows out of the barn" as he suggested in a State of the Commonwealth Address regarding tax reform. Coursey noted the upwards of $13 billion in tax exemptions that could be looked at. Watkins said the $700 million needed to fund the pension system (citing budget director John Chilton) could be found through closing some of the exemptions (also sometimes referred to as 'loopholes'). Watkins said he wouldn't support a tax on groceries (which is included in the exemptions number, along with other popular items).
Watkins said the tax code needs to be revised to be more 'business friendly' and grow revenue and suggested revisiting the work by the Blue Ribbon Task Commission. He noted spending cuts under the Beshear administration and further cuts under Bevin's administration. "You can only cut so much," he said, before the cuts affect the economy.
Carroll said raising revenue through tax reform is needed, but every dollar brought in can't be put into the pension system, but would be need to address other things that affect the budget like education, infrastructure and rising Medicaid costs. In asking whether there was anything wrong with spreading out the responsibility, a member of the audience shouted "It's not our fault." He said a percentage of the issue is on the state government and a majority in the economy and investments - "that's where the blame lies." He said money statutorily required was put in - though extra requests were not met and other demands during the recession. "There was money taken out over a few years. And that money went to fund teacher healthcare," he added but noted that money was returned with interest. Carroll further explained the history of the unfunded liability as written in the PFM report.
In addressing exemptions, Carroll said he'd like to consider cigarette tax and Internet sales tax. "Many of us use exemptions every year and you have to be careful and balance things out," he said, wanting it to be fair to every member of society.
KEA President Stephanie Winkler
Near the end of the forum, Kentucky Education Association President Stephanie Winkler held up a copy of the 505-page pension proposal and said "this thing right here is dead. It was D-O-A. Dead on arrival. There is no way that this is going to go anywhere."
Winkler said rumors and innuendo about the pension system is not an effective way to communicate about the issue. She said teachers and state workers need to be vigilant and passionate. She said lawmakers have "an extraordinarily hard job" and that being mean spirited doesn't help the conversations. She called on groups to stick to facts, writing personal letters and emails and making personal phone calls. "We need to educate people and explain to them that we are taxpayers. We not only pay into our pensions, but we too pay taxes," she said, adding that they need to have the lawmakers backs when raising taxes.
"Public service is taken for granted in our communities, but they are the lifeblood of our communities. Our communities cannot thrive without public service," she said, and noted that retirees pay millions into local communities.
"This fight is not going to be over until we come up with solutions," and referred to the alternative plans presented Monday.
Other Area Lawmakers
Republican Representatives Steven Rudy and Richard Heath were invited to attend, but were unable to do so. Heath is holding a town hall on Thursday at Mayfield High School (Editor's note: we had originally reported the City Hall).
At the end of the event, Chad Davidson of the McCracken County Education Association read a text message from Rep. Rudy that said "I can not support the Governor's proposal as it's been presented," but would be willing to work with stakeholders to craft legislation that meets obligations to employees and retirees."