How Pension Reform Impacts Everyday Kentuckians by Rep. Dennis Keene

Frankfort, KY—Governor Matt Bevin will soon call a special session of the Kentucky General Assembly to address the pension shortfall.  The decisions that will be made during this session impacts the lives of everyday Kentuckians and particularly those working in or retired from state government and our schools.  Kentucky is facing a short- and long-term financial crisis.  State revenues are estimated to be $200 million short this fiscal year. Gov. Bevin has called for already-strapped agencies to cut another 17 percent by the end of next June.  Long-term, pension liabilities total at least $36 billion.

About 90 cents of every state tax dollar goes to three things: Education, health programs like Medicaid, and corrections.  We have cut and/or reformed all three areas over the past decade, so there’s not a lot of fat left to remove before state services are severely impacted.  Only seven states, for example, have cut a larger percentage of higher education budgets since 2008. We will not attract new companies and grow the job market with an underfunded education program.

These pension payments are also a major economic driver.  The Kentucky Retirement Systems send out almost $2 billion to retirees each year, plus provides health insurance to 86,000 retirees and family members.  KTRS, meanwhile, pays about $2.3 billion a year in pension/health benefits.  Every $1 paid out in pension benefits creates $1.43 in economic activity.

Representative Rick Rand and I have pre-filed legislation to open the doors to expanded gaming in Kentucky once again. While we are receiving much bipartisan support for this legislation, Governor Bevin remains staunchly opposed.  In 1988, Kentuckians overwhelming voted for an amendment to the Constitution to allow a state lottery that has helped fund educational scholarships. It now brings almost $1 billion in gross sales a year, with $250 million of that going to state government and education. Gaming is already here.

Kentucky’s signature industry, horse racing, has wagers amounting to $1.1 billion a year in gross sales, with a portion going to the state by way of tax receipts. Historical racing machines are fairly new on the scene at racetracks and the most recent report (June 2017) shows these historical racing machines have brought in $2.66 billion since they came to Kentucky in 2011.  The General Fund, though, has only seen $12.6 million of that.  That is less than one-half of one cent of every dollar going into these machines. During the upcoming session, we must look at this tax structure as a means of raising revenue to put towards the pension debt.

In 2013 the General Assembly passed pension reform from which we are already seeing a stronger system going forward. The real problem is the $36 billion debt. Expanded gaming would give us a dedicated revenue stream to put towards this debt while the overall pension system is allowed to become stronger during the next several years.

Cuts to the state budget along with benefit reductions to retirees would surely have a negative impact on our economy. Allowing the voters to have their say about expanded gaming, providing much-needed revenue to the state budget and pension debt is the prudent thing to do at this time.

Paid for by Dennis Keene for State Representative Campaign
LRC photos courtesy of LRC Public Information