The Kentucky General Assembly finalized the 2013 Regular Session on Tuesday night, adjourning Sine Die just before Midnight. The session ended in a flurry of activity with the House and Senate finding agreement on reforms to Kentucky's ailing public employee pension system, which opened the flood gates for a series of other bills including nearly every high-profile issue of the session being addressed in one form or another.
Pension Reform, as we indicated routinely throughout the session, was the big issue. To the General Assembly’s credit, through compromise on both sides, an agreement was reached on the final legislative day that provides for the following:• Moves new state employees into a 401k-style hybrid cash balance plan, similar to what is found in the private sector.• Requires cost of living increases to be pre-funded, so that COLAs do not continue to create additional unfunded liabilities.• Puts in place more oversight and transparency of the Kentucky Retirement Systems.• Requires the state to pay its full contribution, or “ARC” (actuarially required contribution), to the pension system beginning in February 2015. The ARC totals around $100 million per year.
In order to generate the $100 million in new revenue needed to fund the ARC, the General Assembly will generate $95.7 million in fiscal year 2015 and $99 million in 2016 from what was referred to as technical and compliance recommendations from the Governor’s Tax Reform Task Force report. The biggest pieces of that funding will come from:• $10 reduction in the personal income tax credit, yielding $32.5 million annually.• Federal tax law changes resulting in $30 million annually.• Closing what was construed as a loophole by treating intercompany payment of management fees the same as other intercompany expenses, yielding $15 million annually.• Capping vendor compensation for sales tax collection, yielding $11 million annually.
The pension reform deal caps off a productive legislative session for the General Assembly that saw them deal on HB 5--Medicaid managed care prompt pay; HB 217--clean-up of the KASPER/Pill Mill laws; HB 7--university project bonding; HB 1--Auditor’s bill on special district transparency; SB 97--raising the dropout age; and SB 13--omnibus changes to alcohol regulations. Here is a review of KAM’s issues for the session.
HB 370, sponsored by Majority Floor Leader Rocky Adkins (D-Sandy Hook) was a top KAM priority. The bill provided access to a bond program for small and medium-sized manufacturers to help them make energy efficient upgrades to their facilities. The bill passed out of the Senate with a floor amendment that would remove the state moratorium on nuclear energy. The amendment presented a problem in the House, and while we worked with House and Senate leaders to see if a resolution could be achieved, we were unsuccessful. We will continue to push for this important legislation in the next session of the General Assembly.
HB 207, sponsored by Rep. Wilson Stone (D-Franklin), confirms the Executive Order reorganizing the Office of Career and Technical Education into the Department of Education. KAM supported this bill in order to fully implement career pathways, so that K-12 and Career Education can be united in one office. The Governor has signed the bill and this was a significant step forward and big victory for KAM this session.
HB 211, sponsored by Rep. Tommy Thompson (D-Owensboro), would have deregulated electric rates to a select class of users, specifically aluminum smelters, requiring the electric utility in the area to sell power to the smelters at a market rate significantly below the regulated rate and passing the costs on to the other industrial and residential users in the area. KAM expressed concerns over the precedent this would set and potential rate increases to other manufacturers in the area, thus we have encouraged those involved in the dispute in Western Kentucky to negotiate and find an amicable private party settlement. The bill did not pass, but we believe will continue to be an issue in future sessions.
HB 287, sponsored by Rep. Mary Lou Marzian (D-Louisville) prohibits the manufacture, sale, or distribution of any reusable food or beverage container containing bisphenol-A or any infant formula or baby food stored in containers containing bisphenol-A. KAM opposed HB 287, as it is an unwarranted local attack on the free market system and the entire federal process of regulating items used for food and medicine. The bill did not pass.
HB 378 - sponsored by Rep. Fitz Steele (Hazard–D) is a measure intended to shed light on the Kentucky Division of Water’s processes for listing streams as impaired and developing associated total maximum daily loads. The concepts embodied in the bill were developed by a consortium of interests representing regulated entities, including KAM and CIC. KAM was proud to support this legislation that passed and will be a good addition to the regulatory environment. A special thanks to the sponsor and Sen. Paul Hornback (R-Shelbyville) who filed a companion bill in the Senate.
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