Legislative report: Bills riling teachers, changing tax code, funding projects are pending with three days left

By Joe Graviss

State representative for Woodford County and parts of Fayette and Franklin counties
      It just takes two words to sum up this year’s legislative session through the end of last week: “Stay tuned.” I say that because, with only four working days remaining, the General Assembly has a long list of bills still awaiting a final decision. [Editor's note: one day, March 28, is for considering vetoes.]
      I am no fan of this approach, because it makes it much more difficult for legislators, much less the public, to keep track of and offer meaningful input on laws that would have an impact on Kentucky for years to come. We must re-commit ourselves to finding a better way.
      Until then, my hope is that this scorecard of some of the more prominent bills still in play will help.
      Several generating the most headlines are focused on education, which explains why teachers have been at the Capitol in force in recent days. Most of their opposition is focused on four bills in particular.
      The first, House Bill 525, would significantly alter how the board of trustees is selected for the Kentucky Teachers Retirement System (KTRS). Teachers, who do not get Social Security (nor their spouses, upon death), and whose money this belongs to, have long had the authority to nominate seven of the 11 trustees, but that would effectively drop to two under this bill. Most of the remaining nominations would be made by education-oriented organizations, some of which have asked to not be included.
      KTRS is an outstanding retirement system that stands alongside some of the best in the country (around 8.5 percent return over last 10 years), so I see no need to change what is working well—as long as we continue to fund it. This legislation had yet to clear the House by last week, much less the Senate, so its chances of becoming law are increasingly unlikely, hopefully.
      The same can be said of House Bill 205, which also has not been considered yet by the entire House. It would authorize up to $25 million in tax credits annually for those who donate to private elementary and secondary schools to boost scholarships for those who otherwise cannot afford tuition. That credit would likely grow in future years.
      There are significant constitutional concerns about this legislation, and I question whether we can afford it at a time when the current two-year budget does not contain even a single dollar for new textbooks or professional development for teachers. I understand, support and appreciate the goal here, but with severely constrained funds, it’s just not the right time.
      Senate Bill 250 is an educational bill that only applies to Jefferson County Public Schools. It has several provisions, but the one drawing the most scrutiny would give the district’s superintendent much more authority should he or she not agree with the principal hired by a school-based decision-making school council. Opponents argue this bill undermines a practice that has served us well for nearly 30 years, and it could lay the foundation to extend this new power to every superintendent.
      Those three bills are still pending, but the fourth affecting educators – Senate Bill 8 – was sent to the governor on Thursday. I voted against this. This changes who serves on the tribunal system that handles the appeal process when a teacher is fired. I believe this legislation goes too far and, like Senate Bill 250 and House Bill 525, fixes something that isn’t broken.
      At the postsecondary level, House Bill 358 would give our public regional universities a chance to “cash out” of the Kentucky Employee Retirement System and pay off their current liabilities over the next 25 years. Current employees can remain in the state retirement system, but newly hired ones would not have that option. It is worth noting that this has no impact on university employees paying into the state’s hazardous-duty and teacher retirement systems. I voted against this measure because we need to protect the overall retirement system and not lower the assets.
      Although odd-year legislative sessions are not traditionally focused on the budget, two bills being written by legislative leaders deal directly with state spending.
      House Bill 354 would, among other things, fix last year’s tax overhaul so that non-profit organizations would get back many if not all of the exemptions they lost last year. I did not support the 2018 tax changes, but do believe we must help our non-profits, which do so much for our communities. We must be vigilant, however, by keeping a close eye on other tax “sweeteners” that could be added to this bill that only benefit a connected few and not the state as a whole.
      In the end, this and the related House Bill 268 – which opens the budget for other projects – could turn out to be quite consequential. I voted for this mostly to help our non-profits.
      As the House, but not the Senate, passed it, House Bill 268 would authorize a needed round of renovations at our state parks and give our quasi-government agencies and regional public universities another year’s reprieve from having to pay a steep increase in their public-retirement costs which could cripple or shutter many of them who are offering essential services to the most vulnerable Kentuckians based on lots of feedback from stakeholders in our district that I received.
      Two other bills before the General Assembly this year that have cleared a House committee face a more difficult road in becoming law, but their debate has nonetheless helped raise needed awareness.
      On Wednesday, for example, the House Judiciary Committee approved House Bill 136, which seeks to legalize medical marijuana, putting us in line with more than 30 other states that have taken similar or more far-reaching steps.
      On Thursday, both House Speaker David Osborne and House Democratic Leader Rocky Adkins advocated for House Bill 522, which would call for automatic recounts in extremely close elections involving candidates running for Congress, constitutional offices like governor and the General Assembly. This would help us avoid situations like we saw early this year in the close race won by state Rep. Jim Glenn of Owensboro. The election contest his opponent requested dominated much of the House’s time during the session’s first days.
      If you would like to know more about these or other bills, please visit the General Assembly’s website at www.legislature.ky.gov. If you would like to add your voice to those supporting or opposing these measures, meanwhile, please don’t hesitate to reach out to me or those I serve with.
      My email is joe.graviss@lrc.ky.gov, and the toll-free message line is 1-800-372-7181. If you have a hearing impairment, the number is 1-800-896-0305. Thanks for all you do, and holler anytime.

At town hall, Vandegrift and other executives see a spirit of cooperation among Woodford's three governments

By Tyler Parker and Chadwick George
University of Kentucky School of Journalism and Media

“It’s a new day in Woodford County!” Mayor Grayson Vandegrift proclaimed as he concluded his opening statement at the countywide town hall, “We Are Woodford,” in Versailles Thursday night.

Mayor Grayson Vandegrift gives opening remarks at the town hall.
(Image from KCTCS video on Facebook)

The executives of the three governments in the county began the town hall by talking about their goals and ideas. Vandegrift noted that he, Versailles Mayor Brian Traugott and newly elected County Judge-Executive James Kay are all under 40 (respectively, 36, 39 and 36), and “I’m not sure that’s ever happened before.”

Vandegrift, Traugott and Kay all said the meeting and the turnout of more than 100 people showed there is a spirit of cooperation. “What a wonderful sight,” Kay said to open their presentations. Vandegrift said there is “a renaissance in the county.”

Traugott said, “You can feel it in the air between Versailles, Midway and Woodford County and the Fiscal Court. It's inspiring, and it’s a fun environment in which to govern, so I'm looking forward to the next four years.”

The only hint of competition came from Vandegrift mentioning the attendance of all six Midway City Council members, while the Versailles council and county Fiscal Court had one and two absentees, respectively. “I don’t want to brag, but Midway wins again!” he pronounced, and laughter erupted from the audience.

Vandegrift had tried to arrange a joint meeting of the three government boards when the late John Coyle was judge-executive, but said the Fiscal Court resisted the idea. He said Thursday night that the town hall “really is, I think, a great start in the next step forward about how we work together as communities and as an entire county.”

Midway and the county are partners on the Midway Station industrial park. Vandegrift said they and the county Economic Development Authority have been “very fortunate . . . to really turn around Midway Station and take it from what was once called a boondoggle into a boon to our economy.” And to the city; the mayor noted that occupational-tax collections have more than doubled since 2014, and “It’s changed everything for us.”

Farmland preservation a key topic

As the question-and-answer portion of the meeting began, it was clear that the main topic on audience members’ minds was maintaining the county’s agricultural industry.

Hampton “Hoppy” Henton, long a leader in that effort, was the first to speak. He said the county should, like Fayette County have a purchase-of-development-rights (PDR) program, in which people are paid for placing a permanent prohibition on development of their property.

Next was Deb Pekny Heckney, who said she hoped that the officials’ vision for the county "is to let it always be the unique place that it is. . . . We left Florida because development came in . . . and destroyed an incredibly beautiful part of the world."

Margaret Reece Newsome of Versailles said she has worked for some of the best people in the horse industry, and said, “People come here for horses – not for shopping.”

The most passionate comment of the evening came from Jess Bowling, who said he has lived in the county since 1966, and “I am gettin’ tired of seeing it covered with concrete. . . . Stop it or there won’t be no farming!”

Stuart Weatherford of the Kentucky Community and Technical College System, which hosted the meeting at its headquarters, said the county’s horse and bourbon industries are “burgeoning,” but so is “the retirement industry,” and asked if there is a program to attract retirees who want to live on 10 acres or more with their horses.

“They're pure gold,” Weatherford said of such retirees. “They don't have kids, they pay all their taxes, they don't tax the system.” He said they can’t afford to retire in the Northeast and Northwest and “are looking for places to go.”

Vandegrift said there is no such program, “but it's a great point you make.” He said taxes in the county “tend to be high,” and Midway’s property taxes were cut recently “partly to help keep and attract people on fixed incomes.”

Dan Rosenberg said he has been a resident of the county since 1978, and asked about the process of appointments for its committees and boards. Kay said he wants to update and modernize the process by putting it on www.woodfordcounty.ky.gov.

Kay welcomed anyone with questions to visit him at his office on the second floor of the courthouse. “My door is always open!” he announced. He also encouraged everyone who wants an appointment to have an email and to be responsive.

Kay noted that he had created a drug task force to fight the opioid crisis, and will start live videostreaming of Fiscal Court meetings.

Longtime community activist Lillie Cox of Versailles told the executives and the crowd, “I probably know every person in this room. . . . We want to see people working together more. We want to see councils, tourism, the courts, all working together.”

State Rep. Joe Graviss, D-Versailles, who acted as master of ceremonies, said the next town hall meeting will be a “county-fair set-up” where “any entity in the county” can have a display.

State Rep. Graviss says pensions are 'on the right track' and changes will require input from those to be affected

By Joe Graviss
State representative for Woodford County and parts of Franklin and Fayette counties

We’ll use this week’s update to take a deeper dive into a specific issue again, and then once the session starts next week, get back to updates.

For well over a decade now, no issue has dominated the General Assembly’s time quite like our public retirement systems – and that trend isn’t expected to change as this year’s legislative session re-starts Tuesday, Feb. 5, following a short break.

Because this matter is as complicated as it is important, now is a good time for a quick refresher course while we wait to see what, if anything, the House and Senate will do during the next two months on this important part of our workforce’s benefit package to attract and retain great workers for the Commonwealth that we need.

When you hear discussion about public pensions, it’s mainly focused on the Kentucky Teachers Retirement System (KTRS) and Kentucky Retirement Systems (KRS). KTRS, which was created in 1938, covers educators from local school districts, regional universities and school-oriented organizations. KRS, meanwhile, began in the 1950s and is comprised of five separate systems that cover state and local government employees, non-certified school staff (such as janitors and bus drivers) and those who work at quasi-government agencies like public health departments.

Altogether, these two systems have nearly 560,000 members, and most are still working in public service or are retired.

In the early 2000s, when the stock market was booming, both retirement systems had enough money, or more than enough in some cases, to pay every future pension benefit they owed at the time.

Just like our own finances, however, unforeseen events can change projections, and that’s exactly what we saw happen in the aftermath of a recession in the mid-2000s and the Great Recession that began in 2008. Investment returns and government budgets alike went into steep decline. The attached slide from a recent pension task force meeting I attended gives more analysis of the erosion.

The General Assembly began addressing this problem in 2003 and implemented more significant retirement reforms in 2008, 2010 and especially 2013. Beginning in 2014, legislators also began setting aside much more money to begin restoring these systems’ financial health.

Taken together, this twin approach of bipartisan reforms and more funding is giving us the roadmap to bring down the long-term liabilities.

That number is sizable at $43 billion, but it alone does not tell the full story. For one, it’s what is owed over the next several decades; and, two, the systems currently have almost $39 billion in investments that have seen solid growth in recent years.

The system's Comprehensive Annual Financial Report actuarial chart on the current system's projected benefits shows the system righting itself in approximately 2042 with required actuarial payments to the system. Think of a snake that has eaten a mouse and time lapse photography shows the mouse bulge flowing through the snake’s body until it’s gone. In our case, that is approximately 2042 per the CAFR, and has a lot to do with mortality rates.

Investment earnings are responsible for about half of every pension/health insurance benefit received by public retirees, nearly all of whom still live in the commonwealth. They get about $4 billion annually, which is an economic value in itself. For comparison, Kentucky farmers received a little less than $6 billion last year for all of the crops and livestock they sold.

Some have asked me why we don’t offer a traditional 401(k) to new public employees. The short answer is because it would cost governments billions of tax dollars extra since they would have to make up the employer/employee contributions no longer available to pay down the liabilities. Instead, those contributions would be locked up in individual retirement accounts.

Kentucky is also not alone offering defined-benefit retirement plans; most state and local governments across the country have them as well.

The 2013 reforms did implement a hybrid system similar to 401(k)s in some key ways, and this new plan applies to KRS members, legislators, and judges who joined the system after that year. Employees and employers still pay their contributions as before, but the employees are no longer guaranteed a defined pension benefit. Instead, their retirement is based on those employer/employee contributions and KRS’ overall investment growth, which can then be annuitized at retirement.

Those 2013 reforms did not affect teachers, but that was by design, since they are not eligible for Social Security due to a decision made back in the 1950s. There is uncertainty whether new teachers would even be allowed to enroll in the federal program, and if they could, it would be especially difficult for cash-strapped school districts since they would have to pay six percent more for each new teacher as the local employers.

Given that KTRS already has more than half of the funding it needs for the next several decades, I don’t believe moving in that direction makes financial sense, and while the future is tough to predict, the system appears well-positioned for it. Another consideration is that reducing retirement benefits for new teachers would also make it harder to attract younger people to the field.

There have been secret and rushed attempts over the last year to push through new retirement reforms, but those have ultimately gotten nowhere. Legislative leaders are at least showing greater willingness to listen this year, since they formed a bipartisan public pensions working group a month ago that has already met for a half-dozen times and I’m attending every one of them. Its goal is to see if any consensus can be reached, either this year or in time for next year’s legislative session.

As I mentioned, I believe we are already on the right track, but if anything should pass in the weeks and months ahead, it must have input from those affected; it must not cost taxpayers more than current projections; it must not undermine already-promised benefits; and it must not make it more difficult to retain and hire the public-service employees we need and deserve.

I hope this brief review has helped to shed light on why this issue has often been at the top of the General Assembly’s agenda for so long. I will of course keep you updated on what may happen next.

At the same time, I need to hear from you as well. You can write to me at joe.graviss@lrc.ky.gov, and the toll-free message line is 1-800-372-7181. If you have a hearing impairment, please call 1-800-896-0305. The legislature’s website also has a lot of information online and can be found at www.lrc.ky.gov. Thanks for all you do and never hesitate to call anytime.