When the General Assembly convenes in Frankfort January 8, 2013, there will be a number of new legislators, but many of the challenges remain the same. The odd-year session is often called the “short session” as it runs half the time of the even-year budget sessions. Lawmakers will meet only four days in January to elect members to leadership positions and organize the committee structure for the next two years. They will return in February for the remaining 26 days and must conclude the session by the end of March. Despite the limited timeframe, there are a number of important challenges facing lawmakers – none more daunting that reforming Kentucky’s severely underfunded public pension system.
PENSIONS: Several studies have noted the dire financial condition of the pension system. In its recent publication of the State of the States report, Barron’s magazine identified Kentucky as 47th worst in overall financial health. Just last year Moody’s and Fitch rating agencies downgraded Kentucky’s bond rating; both citing Kentucky’s unfunded pension liabilities. The Barron’s report serves as another sobering reminder that our unsustainable state pension system must be addressed.
The nature of the pension system, in which costs are constantly accruing, requires that action be taken now to put the system on a sustainable track. Every month that passes without significant changes simply kicks the can down the road and increases the cost of any eventual solution. Failure to take action also continues the current spending trend of less funding for education and more for benefits. This leads to lower investments in training and education programs that Kentuckians require to be competitive in our economy. Click here for more on Kentucky's pension problem.
TAX REFORM: The state tax code also warrants serious discussion in 2013. The Governor’s Blue Ribbon Commission on Tax Reform is scheduled to present recommendations to the General Assembly for consideration. They have already held a dozen meetings around the state and are trying to develop consensus recommendations to improve Kentucky’s tax code. Tax reform is always a difficult undertaking, but any tax proposal will require a supermajority (23 of 38 votes in the Senate; 60 of 100 votes in the House) in an odd session. This increases the likelihood of a special session for any vote on tax reform; however, the debate will certainly begin during the 2013 regular session. Click here to view the Chamber's recommendations to the commission.
REDISTRICTING: Unresolved during the 2012 session was state legislative redistricting – the process of redrawing legislative boundaries. The Supreme Court found the 2012 plan unconstitutional and has directed the legislature to complete the task before the next General Election in 2014. Redistricting is a very intense political exercise and will have to be negotiated by the leadership of each legislative chamber.
Some are content to wait until 2014, while others would like to complete the task in 2013. Although this issue doesn’t impact employers directly, it will be important to watch as it can easily turn the political environment bitter.
A number of other issues will be discussed – many of which will impact employers and taxpayers. Issues like education, unemployment insurance, workers’ compensation, health care, environmental regulations, and liability issues can have a serious impact on job creation. The Chamber’s legislative team will be at the Capitol following the action on behalf of Kentucky’s business community. Keep up with legislative action at kychamberblog.com and learn about the issues by viewing our legislative agenda at policy.kychamber.com.