Fri February 1, 2013
In Wake of Financial Downgrade, Kentucky Business Leaders Call for Quick Pension Reform
Another change in Kentucky’s financial outlook has the state’s business leaders calling on the General Assembly for immediate pension reforms.
Standard and Poor’s has changed Kentucky’s outlook to negative, citing the state's large unfunded pension obligations as the main reason.
In response, the Kentucky Chamber of Commerce, as well as 50 other business groups, held a news conference to demand that lawmakers pass the recommendations from last year’s pension task force as they were presented.
Chamber President David Adkission said the change is the best reason for why reforms need to happen soon.
“So in other words they downgraded from stable down to negative," he said. "I think that makes our point better than anything we could say today."
State Senate leaders have promised to pass the recommendations immediately next week. Senate Majority Leader Damon Thayer said the change shows why immediate action is needed.
“This paper from Standard and Poor’s is a stark reminder of how important is it to do pension reform," Thayer said. "It is why we are the No. 2 worse funded state in the union behind Illinois."
The businesses leaders also said they prefer for full funding for the pensions to start in the 2014 session and not be linked to tax reform in a special session.
House Speaker Greg Stumbo has advocated for linking tax reform to plugging the pension gap in future years.
But the business group said raising taxes on individuals and businesses—many of who are not to blame for the pension problems—isn't their priority, nor would it help already struggling taxpayers.
Senate leaders prefer to take up funding in the 2014 session, while they "plug the hole" with the task force recommendations immediately.
In a later statement, Mary Lassiter, Secretary of the Cabinet for Governor Steve Beshear, says the state's financials are still in good health.
"Kentucky’s bond ratings have not changed, and the three credit rating agencies have affirmed our ratings. However, Standard and Poor’s has expressed concern about the state’s financial health, primarily in pensions, which is reflected in their revision of the state’s fiscal outlook," she said.
"It’s important to understand that credit ratings are based on a broad range of issues, including the state’s overall revenue structure, economic trends, pension funding, debt levels, structural budget balance, rainy day fund levels and many others. The Commonwealth clearly needs to continue to address these substantive issues, and we are confident that we will work together with all parties to keep Kentucky on sound financial footing.”