Higdon: General Assembly will return to Frankfort for veto days April 13-14

14th District State Senator

Monday, April 9, 2018 — The 2018 Legislative Session has now entered a 10-day “veto recess,” where Governor Matt Bevin could veto bills passed by the Kentucky General Assembly. Aside from the pension bill, the most significant measure to pass this session was the budget bill that will dictate how our state collects and appropriates funding for the next two years. The legislature passed a budget that spends much more than the governor requested, and we are anticipating the governor may veto some of these provisions, which the legislature then may seek to override in our remaining days of session.


Some of the budget highlights included historically high funding levels for state education, including increased SEEK per-pupil funding, and funding SEEK transportation at a higher level. We fully funded the Department of Veterans Affairs and the Kentucky State Police and shored up our state’s pension systems, including the Teachers’ Retirement System, by fully funding them. This bill also ensures that retired teachers will see no health-care premium increases or coverage decreases. Kentucky’s ailing pension systems have commanded significant funding increases in recent years and in order to honor our commitment to our retirement systems, we needed to come up with some added revenue to protect other vital government entities from funding reductions. Our approach decreased Kentucky’s tax income rate while broadening the tax base, a shift to a more consumption-based tax system.

People have expressed concern to me that House Bill (HB) 366, the state’s revenue bill that also includes tax reform, raises the income tax on Kentucky’s most vulnerable. This is simply not the case. For people making over 133 percent of the federal poverty level, their income tax rate will be lowered from 5.8 percent to five percent.

On April 5, we passed Senate Bill (SB) 151 which contained parts of SB 1, the pension bill. As your senator, I want to say that I did not like how we handled this process, and I apologize. This issue has dragged on for far too long, and I admit it could have been handled better. However, there are no perfect solutions, and inaction on reforming Kentucky’s public pension systems was no longer an option. Billions of additional dollars will be budgeted to reduce the unfunded liability. The pension reforms enacted by the General Assembly ensure that the core retirement benefits of every current public employee are protected, and new public employees will have a sustainable retirement income in the future. In SB 151, we require future General Assemblies to fully fund all plans.

The final version of the pension bill is much different than the one first proposed, and I worked to change many of the proposals after hearing from concerned constituents. I voiced the concerns of many teachers, retirees, and KERS/CERS members who contacted me, and with their help we improved the plan that I voted on in these specific ways:

1. No reduction in COLA

2. Only change to active teachers is capping sick days at the end of this year

3. New employees go into a hybrid cash balance plan. This stops the digging so we can concentrate all funding toward our unfunded liability.

4. Requires future governors and General Assemblies to fully fund all pension plans.

5. Moves TRS to level-dollar funding, and away from percentage-of-payroll funding, which required an additional $400 million a year.

6. Makes changes to CERS and KERS pension plans. Allows for service credit to be used for retirement eligibility until July 1, 2023.

Ultimately, our focus remained on fully funding education, providing for our public protectors, and ensuring our pension systems are fully funded. In our budget bill, we dedicated approximately $3.3 billion in funding, nearly 14 percent of the total budget, to help fund these ailing pension systems.

In addition to passing the Commonwealth’s budget and revenue bills, we passed a number of other measures. House Bill 1 is a comprehensive overhaul of Kentucky’s foster care and adoption system. More than 8,600 Kentucky children are now in foster care and awaiting permanent homes, and the need for such reform has been obvious for a long time. House Bill 1 includes major provisions that would expand the definition of blood relative for child placement.

We also passed HB 400, which is a tourism and economic development bill that allows the direct shipment of alcoholic beverages. House Bill 400 allows visitors at bourbon distilleries to ship limited amounts of spirits home as well as to join “bourbon of the month” clubs. House Bill 400 would also permit vineyards to ship specific amounts of wine out of state. The shippers of the spirits, according to HB 400, are required to verify the delivery is made to someone at least 21 years old living in a “wet” area. This bill will help many small, local businesses remain competitive on a national level.

Senate Bill 5 also passed, and it levels the playing field for small-town, locally-owned pharmacies. Senate Bill 5, as amended by the House, would make the Kentucky Department for Medicaid Services in charge of setting the reimbursement rates for a pharmacist. The rate is currently set by pharmacy-benefit managers (PBMs) hired by the state’s Medicaid managed-care organizations (MCOs). Kentucky Medicaid spends $1.7 billion annually on prescriptions, and SB 5 will help authorities track that money to determine whether locally-owned pharmacies are being reimbursed fairly.

We also passed House Bill 362, which allows for the phase-in of increased pension costs for local governments. Recently, the Kentucky Retirement Systems Board adjusted their assumptions to require cities, counties, and other quasi-governmental entities to increase their pension contributions. If those increased pension contribution costs were not phased in over time, several of these local governments would be at risk of bankruptcy. Passage of major pension reform legislation in recent weeks allowed us to justify the decision to allow counties and cities to phase-in these costly pension contributions, which was the language passed in House Bill 362. While this measure represented a win for local governments and quasi-governmental entities, it reiterated the need for raising revenue through tax reform, as we did in House Bill 366.

There are only two days left in the 2018 Regular Session. We will reconvene for those final two days on Friday, April 13, and Saturday, April 14. Kentucky’s constitution requires the General Assembly to be adjourned by April 15, and since April 15 is a Sunday and we cannot constitutionally meet that day, we must finish the state’s business by midnight on April 14.

It is an honor to represent you and our district in Frankfort, and I thank you for engaging in the legislative process. If you have any questions or comments about these issues or any other public policy issue, please call me toll-free at 1-800-372-7181, on my home phone at 270-692-6945, or email me at Jimmy.Higdon@LRC.ky.gov. You can also review the Legislature’s work online at www.lrc.ky.gov.


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