(Feb. 1, 2012) - The Kentucky Chamber of Commerce was joined by the National Federation of Independent Businesses (NFIB) and the Associated General Contractors of Kentucky (AGC) at a press conference in Frankfort today to urge legislators to pass comprehensive pension reform during the 2013 Regular Session of the Kentucky General Assembly.
The coalition of business leaders warned that each day that passes without significant changes to the system increases the chance that Kentucky employers and individuals will be targeted for significant tax increases. According to Kentucky Chamber President and CEO Dave Adkisson, failing to act during this legislative session also continues the “short-sighted, downward spiral” of providing less money for education and economic development and more for unsustainable benefits not available to the average taxpayer.
“Kentucky’s businesses have a significant stake in our public employee pension systems – both at a state and local level,” said Adkisson. “Kentucky’s private employers, most of which are small, local businesses, directly contribute approximately 40% of all state revenue in income, corporate and sales taxes, in addition to individual income, payroll and sales taxes.”
AGC Board President David Dean pointed to Kentucky’s downgraded bond ratings – a direct result of unfunded pension liabilities – saying that it will negatively impact construction projects and ultimately lead to fewer jobs.
“Major national rating agencies have downgraded Kentucky’s bond rating twice in the past two years. That means it will cost taxpayers more to finance such important public projects as new schools, water and sewer lines and other infrastructure improvements,” said Dean, who is also president of Dean Builds, a 10-year old commercial construction company based in Lexington. “Those higher costs will mean fewer projects – and fewer jobs for Kentuckians.”
Adkisson stated the time to act on pension reform is in the remaining 26 days of the 2013 session.
“Kentucky’s business community and taxpayers expect action now. If we don’t fix this pension problem in the 2013 General Assembly, we might have to rename our state. Instead of the Commonwealth of Kentucky we’ll have to call it the Common Debt of Kentucky,” said Adkisson. “We will be so far in debt it will be almost impossible to dig our way out.”
Unfunded liability in the current pension plan is now at $30 billion. A non-partisan interim legislative panel has proposed a fix, which Adkisson says should serve as the framework for legislation that should be passed in the regular session – not during a special session.
“At a minimum, these bipartisan recommendations must be passed to get our pension system on a sustainable path and put the bond markets on notice we are serious about getting our state’s finances in order,” said Adkisson. “It is imperative that Kentucky lawmakers enact these recommendations in their entirety.”
Adkisson pointed out that removing provisions like the requirement to fully fund any future cost of living adjustments, or the hybrid pension system for new hires would water down the recommendations to the point they’re “essentially meaningless and present no significant savings to Kentucky’s taxpayers.”
Tom Underwood, the state director for the NFIB fears that if a viable solution to the pension issue is not enacted now, small businesses may end up footing the bill.
“Small business owners are hanging on by a thread right now and they employ over half of Kentucky’s workforce. This is not an area we want to hit with additional burdens,” said Underwood.
Since 2007, the Kentucky Chamber of Commerce has been seeking a fix to the state’s public pension problems, citing the threat that escalating public retirement costs pose to the ability of governments to provide basic services. The Chamber highlighted the problem again in 2009 and 2011 with its Leaky Bucket Reports that identified the growing costs of Kentucky’s public employee benefits.
“If the 2013 Session concludes without the passage of meaningful, pension reform the business community will have no choice but to call the 2013 Session a failure,” said Adkisson.