Kentucky's House Minority Leader hopes if a special session on pensions is called there would be compromise and bipartisan agreement on the resulting bill.
Democrat Rocky Adkins, a candidate in this year's gubernatorial race, said he's not been a part of the discussions involving the pension relief bill or the special session. He sat down for an interview with WKMS News before a meet-and-greet in Murray on Friday.
“And I would hope that if the governor does call a special session, as I would tell any other governor: you need to have a compromise," Adkins said. "You need to have an agreement. It needs to be bipartisan support. And we need to be able to - if it is called - move into a session and move out.”
He said the only thing that needs to be done in the special session is freeze contribution rates for local and quasi-government agencies and universities. "When the decision was made to lower the assumed rate of return - of pension return - from 7.5% to 5.25%, that doubled the contribution rate from local governments, from universities, from quasi-governments from 49% to 83%.”
Adkins said he would not recommend a pension overhaul bill because KRS reforms passed in 2013 are working. “The Kentucky Retirement System alone, since we did those reforms, we put a pension oversight board in place, a $3 million dollar audit of the system and we put language in that said we need to put more money into the system and we did that. The ‘14 budget done that, the ‘16 budget done that.”
Changing a defined benefit system to a cash balance system would be "the worst step we can take" in attracting new teachers, said Adkins. “We need to maintain a defined benefit type of pension system so we can attract the best and the brightest." He argued doing away with defined benefit would make that effort difficult, when the state already has a shortage of math and science teachers.
Republican state Senator Danny Carroll said at a recent policy forum in Paducah a goal is to put new teachers in a new system and to "get everyone out of the defined benefit system." Carroll said he didn't think there would be much of a struggle to get that aspect of reform passed.
Kentucky has more than $37 billion in pension debt. Bevin vetoed a late-session bill earlier this month that would have added to that debt while providing relief to universities and some agencies. A special session is expected this summer to pass a revised bill.
Comprehensive tax reform has been a long-discussed issue in the state legislature and could manifest in the next general session. Republican lawmakers in west Kentucky recently discussed shifting toward service tax, doing away with income taxes and increasing the gas tax to generate needed revenue to cover pensions, road projects and other issues.
Adkins said those tax items should be on the table, but doesn't want changes to burden working families, criticizing legislation passed in the GOP-dominated legislature. “This last tax bill that was passed raised the sales tax on 17 services across Kentucky that basically raised the taxes on 95% of Kentucky and lowered the tax rate, the taxes, for the top 5%. I thought that was a bad proposal.”
Sen. Carroll said a ‘no income tax’ structure is fair because it’s based on use. “If you’re lower income and you don’t use a lot of these services, then your tax will be lower. If you’re higher income and you use a lot of these services, you’re going to be paying in a lot,” he said. Carroll also said lawmakers have to be careful in revising tax exemptions so as not to have a negative impact on business and industry.
The proposed model of no income tax, higher sales tax and gas tax mirrors Kentucky's southern neighbor, Tennessee. Adkins said he's not sold on the idea. “I don’t know if that’s the right approach because Tennessee does it, is that what Kentucky needs to do? ...I think we need to look at what’s best for Kentucky.”
Adkins said recent tax bills were passed without Democratic support and the party hasn't had a seat at the table since Republicans took the majority. "There’s no question," he said. "You’ve watched what’s happened in Frankfort on several proposals, whether it’s charter schools, whether it was the tax bill that was passed without one Democratic vote, whether it was the pension reform bill.”
He said both parties need to be at the table to best serve in the interest of Kentuckians. "That’s the way you do major reform," he said, criticizing a last-minute pension reform bill that came out of a scrapped wastewater treatment bill that was later struck down in court. "That’s not how you do reform," he said. "Especially on issues like this that has an impact on hundreds of thousands of lives across Kentucky.” That lack of buy-in, he argued, is what's prompting teachers and others to protest in Frankfort.