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Lawmakers Still Hesitant On Bevin's Call For Tax Reform

Pile of Money
Getty Images/Ingram Publishing
Pile of Money

Gov. Matt Bevin said he wants to find more revenue to put toward Kentucky’s ailing pension systems and overstretched state budget, but not everyone is on board if the governor's solution would mean tax increases.

Bevin said he wants to call lawmakers back to Frankfort later this year to hammer out a plan that would help the state generate more revenue through economic growth and eliminating tax breaks.

Republican lawmakers have historically been wary of tax increases, but Sen. Joe Bowen, a Republican from Owensboro, said lawmakers might be forced to consider it given the state’s financial jam.

“I think the problem is so big that they’re going to have to search their own souls and when they do that, they’re going to realize that hey, we’ve got to do something,” Bowen said during an interview on Monday.

A consultant hired by the governor’s office estimates that the state will need about $700 million more every year — that’s about 7 percent of the state’s annual budget — to put the state’s pension systems on sound financial footing.

Bevin sent a letter to state lawmakers earlier this month saying that finding more money for pensions within the state’s current revenue scheme would “put significant pressure on Kentucky’s ability to fund K-12 education, public safety, higher education, and many other government services that all of us support.”

Combined, Kentucky’s pension systems are among the worst funded in the nation.

Kentucky’s pension fund that covers most retirees from state government has only 14 percent of the money it needs to write checks to its current and future pensioners.

But Chris McDaniel, the Republican chair of the Senate Budget Committee, says it’s not yet politically viable for the Republican-controlled legislature to increase taxes.

“I think that that’s a tough vote. I don’t think it can get to a majority,” McDaniel said.

“I have not yet seen a compelling case to adjust the tax rates of everyday Kentuckians -- 4.2 million of whom will never derive a benefit from the pension system, 300,000 of whom will.”

During a meeting of the state’s Public Pension Oversight Board on Monday, groups representing state government employees, retired teachers, transportation workers and emergency responders made their cases for the state to protect retiree benefits and contribute more to the pension systems.

McDaniel asked the groups whether they supported proposals for generating new revenue like taxing medical marijuana or expanding casino gambling — which no group explicitly said they would support.

He said without specific proposals for new revenue streams, the state will likely have to rely on economic growth or cutting state spending — which he supports.

“There’s not a tree sitting out back of the capitol that we go shake for $700 million,” McDaniel said.

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