Whatever the solution to the state’s pension crisis — an estimated $40 billion shortfall — it will be painful for Kentucky residents.
That’s the consensus of three of the state legislators who represent Hopkins County as Gov. Matt Bevin’s expected call for a special session draws near.
“There’s serious problems with all the options,” said state Sen. C.B. Embry, “and the governor admits whatever we do will be controversial.”
The Morgantown Republican sees three options: Change the benefits for future state employees; require larger contributions from existing and future employees; and increasing revenue.
One option all three agree is off the table is cutting benefits for current retirees and employees.
“We know the people that work for the state and the retirees were promised a benefit and they deserve that,” said state Rep. Jim Gooch, R-Providence. “We have to honor that obligation.”
State Rep. Myron Dossett said: “I want to assure our retirees and state employees
we are going to do everything to make sure our pension system is secure and reliable. There will be no reduction in promised benefits.”
With an unfunded liability so large, and an biennial state budget of about $20 billion, it’s hard to see how the problem will be solved without raising revenue.
“I hate to do tax increases,” said Dossett, of Pembroke. “But if we need to consider that, we will.”
The Republican added, “We will be putting this on the backs of every citizen of Kentucky. We need to give them an explanation.”
Embry said the governor asked for and got $1.28 billion in the current budget for the pension system, “the most that’s ever been put in,” and that required “severe cuts” to most state agencies.
Now, Bevin is saying the state needs to put $2 billion in the pension system in the next budget, Embry said. That would require an additional 12 percent cut in most agency funding, which “is just not doable. The other source is to raise taxes,” he added. “But getting government to raise taxes is a difficult thing.”
Gooch says there needs to be a “stream of revenue” dedicated to the pension problem, which brings in tax reform, a topic also high on Bevin’s agenda.
“We definitely need tax reform,” he said. “But there’s wide disagreement on how you get there. There’s always going to be winners and losers.”
For example, Gooch believes the state’s sales tax, 6 percent, is too high. He said if fewer products and services were exempt, the rate could be lowered.
Embry said he expects proposals to raise the sales tax and reduce exemptions. But he says, “that would greatly hurt low income people.”
All three legislators say they are committed to solving the problem, but it won’t be easy.
“This has been years in the making,” Dossett said. “We’re going to have to face this.”
“One of the problems I see as a representative is that we’re all elected for two years,” Gooch said. “We have kind of a reactionary government. Everything is based on what’s happening today and we often do short-term solutions that get us by until the next election, but you can’t fix long-term problems with short-term solutions.”
With the governor working with legislative leadership to develop a solution, Embry wants to make sure there is time to study the proposal, explain it to the public and build consensus.
“There’s not a single member not in favor of fixing it,” he said. “There’s a lot of opinions, but the one we’re dealing with will be the governor’s proposal, and it depends on what it is. We will need time to study it and explain it.”
The senator said this is one of the most serious problems the state has faced in the 14 years he has been in office.
“I meet with 20-25 groups a month when we’re not in session,” Embry said. “My talk is pretty depressing, but I have to tell the truth.”
Due to previous commitments, Rep. Melinda Gibbons Prunty, R-Belton, was unavailable for comment.