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Amid Kentucky Revenue Shortcomings, Expanded Gambling Re-emerges

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Two Kentucky Democrats say legalizing casino-style gambling will generate much-needed tax revenue for the state, which has had budget shortfalls in eight out of the last 14 years amid a massive pension crisis.

The proposal comes as lawmakers are gearing up for a possible special legislative session later this fall. Gov. Matt Bevin has promised to reconvene the Republican-led legislature to attempt to find solutions for the pension crisis.

Rep. Rick Rand, a Democrat from Bedford, said Republican leaders should look for new revenue to keep from cutting pension benefits and other state programs.

“It’s not going to correct every problem, but it is going to move us in the right direction — not only for our pensions but for important policy items like education and higher education,” Rand said.

Rand and Rep. Dennis Keene, a Democrat from Wilder, have proposed a constitutional amendment that would legalize casino gambling and dedicate tax proceeds from the initiative to the state’s ailing pension systems.

A separate piece of legislation sponsored by Keene would allow four free-standing casinos to open up and permit Kentucky racetracks to set up slot machines, which are forbidden under state law.

Democrats have pushed expanded gambling for years as an answer to Kentucky’s financial woes. The policy was a major plank of Gov. Steve Beshear’s successful re-election campaign, but it fizzled amid opposition from family values conservatives.

Rand estimated that the proposal would generate $236 million per year in tax revenue for the state, with an initial $325 million coming in from licensing agreements with the casinos.

“Unless the Republican leadership in this state can come up with something better, then they would be advised to at least take a look at it,” Rand said.

According to a Kentucky Center for Investigative Reporting story from 2015, Ohio, Illinois and Indiana collectively brought in $3.9 billion in taxes from casinos on the Ohio River over 10 years.

Kentucky has a pension debt estimated to be between $35 billion and $70 billion — the worst-funded system in the state, according to some appraisals.

John Chilton, the state budget director, predicts that the state needs to put about $700 million more every year into the pension funds — a significant chunk of the state’s annual $10.5 billion budget.

Earlier this year, Bevin called for lawmakers to close tax loopholes and rejigger the tax system to bring in more revenue for the state, but the plan fizzled amid political reluctance to enact anything that might be seen as a tax hike.

Now lawmakers appear set to tweak pension benefits for state workers during a special session, a move that has stoked fears that current workers and retirees might see changes in their pension plans.

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