Senate Bill 1 - Funding Our Future

Earlier this evening, Senator Joe Bowen (R, Owensboro) filed Senate Bill 1, the much anticipated pension reform bill that seeks to put Kentucky on a path to fiscal solvency and benefit sustainability.  The following press release was issued (the links to the bill and a section-by-section summary is at the bottom):

SENATOR JOE BOWEN FILES PENSION REFORM MEASURE AS SENATE BILL 1

FRANKFORT, Ky. (February 20, 2018) – State Senator Joe Bowen (R-Owensboro) on Tuesday filed Senate Bill (SB) 1, representing the highly anticipated pension reform proposal from the Senate Majority Caucus. SB 1 contains significant changes from the initial pension reform proposal released in October of 2017.

Senate Bill 1 would not force any current or future state employees or teachers into a defined contribution (401(k)-style) retirement plan. It also would not require all employees and teachers to pay an extra three percent of their salary for a retiree health benefit. And, the bill does not create an incentive for employees and teachers to retire at their earliest possible eligibility by ending the ability to accrue more service credit in their current defined benefit plan.
“We are committed to funding our plan, meeting our obligations to state employees, and to making systemic reforms to ensure these systems will be financially sound for current and future employees,” Senate President Robert Stivers (R-Manchester) said. “When this bill passes, we will over time eliminate the unfunded liability that has been estimated to be as much as $60 billion.”

“When a pension reform proposal was first released in the fall of 2017, there were several issues raised by teacher groups, state employees, retirees, and taxpayers,” House Speaker Pro Tem David Osborne (R-Prospect) said. “This plan is our attempt to address many of those issues brought to us. We listened to the concerns, and this bill represents a compromise that will bring our pension systems to the appropriate funding levels over a 30-year period.”

“This bill represents countless hours of work by countless individuals that will directly address the unfunded liability in Kentucky’s ailing pension systems,” Bowen said. “We listened to key stakeholders, experts, and taxpayers, and we are confident our new plan balances the need to stabilize the system while honoring the commitments we have made.”
To access Senate Bill 1 in full, please visit www.lrc.ky.gov.

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Gaming, indeed.

My position against gaming is well known, particularly in Frankfort.  Gaming lobbyists never waste time bringing it up to me.  Despite my personal, philosophical objection to the idea of gaming I'm still willing to have a learned discussion about it.  I'm open to hearing opposing view points.  My job as a legislator requires me to keep an open mind and weigh ideas.  If anyone who supports gaming ever came to me to talk about it I'd be happy to have that discussion, but unfortunately, so far, their arguments have failed even the slightest examination.  There are lots of questions gaming advocates haven't answered.  If they want it to pass, like advocates for any legislation, they must be prepared to answer the questions and own the results - good or bad.

A recent article in the New York Times discussed some of these questions in the context of a study done by a partnership of universities.  It's a short read that I highly recommend, regardless of your position.

The debate in Kentucky circles the often cited "let the people decide" sales pitch.  I posed to gaming supporters during the 2014 session the following hypothetical:  If we moved such a law forward, and put the gaming expansion matter on the ballot for voters to defeat or pass, would the gaming industry consent to spend just as much money advertising the woes of gaming as it does advertising it's merits?  Supporters conveniently fail to say out loud what everyone in state politics believes - the best ad campaign usually wins.  How many of you reading this believes the gaming industry would be outspent by those of us who oppose gaming?  Casinos made about $35 Billion in 2011. The Family Foundation and the Kentucky Baptist Convention don't exactly compete.

While I'm at it, here are a couple more questions that must be answered by the gaming industry:

1. What portion of your patrons are in the middle and lower income groups of the communities/regions where the casino exists?

2. What do you do to educate your patrons that you are taking steps to attract prolonged gaming? For example, do you inform them that slots are designed to entice more gaming (i.e., "near misses" and penny bets)?

3. What financial information about patrons do you collect?

4. How much do middle and low income gamblers lose as a percentage of their income?

5. What impact do casinos have on existing businesses in the areas where they operate?​

6. Excluding management, what are the mean and median incomes for your job positions?​

7. What losses in revenue do churches and non-profits experience when a casino enters a region?​

8. Similarly, do churches and non-profits experience an increase in service requests and outreach in regions where you operate?​

9. What amount, if any, do you set aside to provide for financial education programming and does that programming use a curriculum that cautions against gaming habits? How do you make your patrons aware of the education programming?​

 These are just a few to start with.  So far, I haven't had a conversation with a gaming supporter that didn't bring up a handful more that went unanswered.  I'm not holding my breath.

Week In Review - February 15

FRANKFORT – The Senate continued working hard this week passing bills addressing healthcare, the state’s debt, school safety, economic development, and the justice system. Healthcare is an issue of great concern for everyone and health insurance coverage is both difficult to obtain and expensive to keep.  Senate Bill 3 allows for a Christian medical needs sharing program to return to Kentucky after being rejected last year by the Kentucky Department of Insurance. This insurance-like program has helped hundreds of people in our state afford healthcare and even qualifies as certified coverage under the federal Affordable Healthcare Act. There are three such programs in Kentucky, and they provide an affordable alternative for many Kentuckians.

Another step was taken toward improving access to healthcare with Senate Bill 43 by making it easier for physician’s assistants to work in Kentucky.  We have many areas here that are medically underserved and these medical professionals fill a real need in our communities.  Kentucky is also the only remaining state that imposes a waiting period before PA's can begin patient care.  This bill reduces the current 18 month period to three months before eventually eliminating the waiting period altogether.

As many of you have read, Kentucky’s bond rating has been downgraded due partly to our level of bonded indebtedness of 8.4%. Senate Bill 10 limits state debt to only 6% of General Fund revenues.  This is a level generally accepted as the standard by bond rating agencies, as well as a threshold the legislature has historically attempted to operate within. We cannot continue paying off the Visa with the MasterCard.  This matter is no longer a fiscal imperative but a moral one as well. The measure excludes debt for universities, the Kentucky Housing Authority, and other agencies using funds outside the General Fund, including the stand-alone Road Fund.

School safety is of paramount concern, and thoughts on school safety have been brought into sharper focus with the shooting in Newtown, CT.  Senate Bill 8 was developed with the intent of bringing something positive from that tragedy. The bill directs school superintendents to submit school safety plans to the Kentucky Department of Education. It also requires the adoption of a school safety plan, safety drills during the first month of school, and for school diagrams to be shared with local first-responders.  These are straight-forward and low-cost measures that, while not able to completely prevent tragedy, will hopefully better prepare us.

Senate Bill 50, the industrial hemp legislation, was addressed during the Senate Agriculture Committee on Monday and passed the full Senate on Thursday. This legislation allows Kentucky to position our farmers so that once the federal government approves the cultivation of industrial hemp, they can be in the forefront of an industry that produces products for everything from cars to cosmetics to food to clothes. While I continue to educate myself on the issue and work with hemp advocates and law enforcement, this vote fulfills a commitment I made to my district.

Modern technologies have changed the way we communicate even from just a few years ago.  "Smartphone" adoption is climbing, and cellular phone service - while still not available everywhere - is skyrocketing. Traditional landline usage rates are plummeting, and there is an overwhelming desire amongst Kentuckians to expand wireless capacity and connection speeds.  Senate Bill 88 will allow for the modernization of phone-service in Kentucky making sure that the answer to “Can you hear me now?” will be a yes regardless of where you live.  The bill does not cut off landline service to existing customers, but frees up wireline providers to funnel much needed investments into their wireless infrastructure.  You can be certain I'm asking for those investments to focus on the sorely underserved areas of Todd, Logan and Christian counties.

The Senate Judiciary Committee has been active as well, passing the following bills from this week. Senate Bill 6 was filed in response to the overwhelming number of deaths resulting from heroin overdoses in Northern Kentucky. Unfortunately, this scourge seems to be spreading to the rest of the state.  The bill will increase the penalties for those dealing in heroin especially when those actions directly result in death.  Senate Bill 23 clarifies that judges can authorize review of DNA evidence after conviction. If DNA is good enough to prove guilt, then it also should be able to prove innocence. It is a matter of justice and will help affirm the integrity of the Judiciary.

I sponsored this particular legislation, Senate Concurrent Resolution 35, to reauthorize the Task Force on the Unified Juvenile Code. The bipartisan task force consisting of members from all three branches and levels of government are meeting to continue the work that was begun last summer examining the juvenile code and considering what improvements should be made to balance the needs of juveniles and public safety.

All these bills now move to the House for their consideration. If you have any questions or comments about the issues above or any other public policy issue, please call me toll-free at 1-800-372-7181 or email me by visiting the Contact page. I invite you to bookmark this site for regular updates and posts, but you can also review the Legislature's work online at www.lrc.ky.gov.

Pension Problems

UPDATE: The primary, and only remaining, sponsor of SB 144 withdrew his sponsorship earlier today, February 19th, in the Senate chamber, effectively killing the bill!

As many of you are aware, Kentucky faces a tremendous financial crisis in its public pension system. To date, the funds are over $33 Billion in the hole, and we continue to dig ourselves deeper - until now. Last week, the Kentucky Senate passed a bipartisan bill, Senate Bill 2, that makes broad changes to the way public employees' retirement accounts are managed and grown. The plan proposed in SB2 is neither a "defined benefit" plan (like what is currently in place), nor is it a "defined contribution" plan, such as a 401(k). Rather, SB2 creates a hybrid, "cash-balance" plan. There are two important things to note about SB2:

1. The bill does not do anything to the Teachers Retirement System.
2. The bill only affects new hires after July 1, 2013.

Many of you have contacted me over the last two days, however, about a newly filed bill, Senate Bill 144. This well-intentioned bill, sponsored by Sen. Chris McDaniel, takes a substantial step in righting the sinking pension ship. However, I believe the bill goes further than necessary. As many of you have noted, and correctly so I believe, SB144 carves away the income earned above your base pay scale.

...payments for overtime, compensatory time, living allowances, expense reimbursements, lump-sum payments for accrued vacation leave, lump-sum bonuses, severance payments, lump-sum payments for accrued sick leave, uniform and equipment allowances, employer-provided payments for service purchases, or any other payments determined by the board to be in excess of the employee's base regular rate of pay...

It is important to note that SB144 is technically valid, in that these payments above base pay are not part of whats called the "inviolable contract." In other words, while the Commonwealth is obligated by law to honor the base pay part of retirement, it is not technically required to honor all the payments above and beyond it.

However, while I am prepared to make difficult decisions - even politically unsafe and unpopular decisions - to address our pension problems (after all, if we don't fix it now no one will have anything waiting for them when they retire), but I believe SB144 goes too far. I would rather that everything that has been accumulated up to this point by employees be kept in place and honored. While the Commonwealth may not have the same obligation to honor these amounts as with base pay, I simply believe its the right thing to do. State employees worked extra hours, avoided calling in sick, etc., believing that this time would be accruing to their benefit down the road. It'll hurt financially, but I can't justify robbing folks of what they expected (and worked) to get.

While it's not widely popular, I might (emphasis on the "might") be ok with eliminating these payments above base pay going forward on a sliding scale based on tenure of service. For example, if you've got 30 years of service under your belt nothing is changed; if you've got 20 years in we tinker with the calculations a bit; if you've got 10 years in we tinker with the calculation a bunch; and if you've got 5 years in or less we tinker the most. That's the only fair and equitable way to handle the change and still keep the funds afloat - though I'm happy to hear your suggestions! Call me at 502-564-8100 (ask for me), leave a message for any legislator by calling 800-372-7181, or email me by visiting the Contact page (it comes straight to me).

In the meantime, rest assured that SB144 in its current state does not have my support. I hope to work with Sen. McDaniel (who is a fantastic senator that is working hard to bring Kentucky's fiscal house back into order) to create a solution that makes hard changes but does so in a fair and equitable way.