KY Policy Blog

New Projections Say Senate Pension Bill Is $206 Million More Expensive than House Plan

By Jason Bailey
March 2, 2013

The Senate version of pension legislation will cost $206 million more than the House version over the next 20 years according to analysis of the new actuarial projections for Senate Bill 2.

The Senate plan would cost state government $59 million more than the House plan and is $147 million more expensive for local governments than what the House proposed, resulting in a total cost increase of $206 million. The projections come from the retirement system’s actuary, Cavanaugh Macdonald.

Earlier analysis projected that switching to a hybrid cash balance plan read more

Lottery Funds Not Adequately Supporting State Financial Aid Programs

By Ashley Spalding
February 27, 2013

The House has recently identified new lottery funds as a potential source of revenue to help pay down Kentucky’s pension liability. Whatever happens with that proposal, it’s important to understand that the student financial aid programs that currently receive almost all of the lottery revenue are already substantially underfunded.

Capping the monies for college scholarships, even while allowing up to 2 percent annual growth as proposed by the House, would mean that our neediest students would continue to be turned away for financial aid. More dollars are needed both to read more

Gambling Revenues Are No Substitute for Tax Reform

By Jason Bailey
February 27, 2013

The House has proposed generating new revenues for the state pension system by expanding the lottery and utilizing revenues from instant racing. However, the plan generates only a portion of the funds needed to make the annual pension payment, while gambling revenues tend to grow slowly over the long-term. If such a proposal advances, it should not replace the need for state tax reform that generates additional and sustainable revenues.

According to the speaker’s February 26 presentation on the proposal, the House does not expect these new gambling options to read more

Income Tax Cuts No Way to Grow Small Businesses

By Anna Baumann
February 27, 2013

The claim that cutting state income taxes is an effective strategy to help small businesses create jobs is discredited in a new report released by the Center on Budget Policy and Priorities (CBPP).

The report shows that state personal income taxes have an insignificant effect on small business job creation. And by taking resources away from critical services like education, income tax cuts could harm a state’s ability to grow an entrepreneurial economy. CBPP notes that:

Taxable income for small businesses is typically modest enough that even a full repeal read more

Bill Would Be a Step Toward Greater Accountability for Tax Breaks

By Anna Baumann
February 20, 2013

Legislation introduced in the House proposes new reporting requirements for some economic development incentive programs, and is a step in the right direction toward greater scrutiny of these costly financial subsidies.

Kentucky needs better data on the cost-effectiveness of the business tax breaks it awards. A few years ago, the state created an online database that provides information on tax breaks when they are awarded, but provides no follow-up information about the resulting impact. House Bill 242 would require the Cabinet for Economic Development to post online information about the read more

Debt Limit Could Increase Costs for Kentucky

By Jason Bailey
February 13, 2013

A Senate committee approved legislation today to limit debt service (the annual payments made on debt the state owes) in future years to six percent of the state’s revenue. Yet rather than saving money, Senate Bill 10 could end up increasing Kentucky’s costs.

There are two reasons debt payments go up as a share of revenue: 1) the state takes on more debt; and 2) the state takes in less revenue than expected. In the latter case, sagging revenues are usually the result of a recession.

But because interest rates read more

Administration Describes Bleak Outlook for Next Budget without More Revenue

By Jason Bailey
February 5, 2013

In a presentation on the need for tax reform to the joint House and Senate Appropriations and Revenue Committee today, Secretary Mary Lassiter laid out a bleak outlook for the next biennial budget. The still-sluggish economy is likely to mean only modest revenue growth, and new revenue will be eaten up quickly by medical cost inflation, contributions to the pension system to pay previous liabilities and the replacement of one-time dollars used to help fund existing services in the current budget.

Lassiter said that revenue growth is likely to be read more

State Can’t Pay Pension Debt from Natural Revenue Growth without Harming Services

By Jason Bailey
January 3, 2013

One area of consensus on pensions is that the state should begin making the full annual required contribution to the retirement system, which will reduce the long-run costs of paying back the system’s liability. Recently, a couple of Senate leaders have suggested that Kentucky can make that payment starting in 2015 using the natural revenue growth generated by a recovering economy—in other words without raising additional revenue through taxes.

But that approach is unrealistic. There just won’t be enough money to make the payment while also doing justice to Kentucky’s read more

The State of Working Kentucky 2012: Jobs by Industry

By Jason Bailey
December 21, 2012

Kentucky’s economy continues to change, with a decline in manufacturing jobs and a shift toward more jobs in the service sector—a trend that has accelerated with the weak economy of the last few years. These changes have big implications for the job quality of Kentucky workers.

Kentucky experienced growth in manufacturing jobs throughout the 1990s, reaching a peak of 310,000 jobs in the year 2000. For about the last ten years, however, manufacturing jobs have plummeted with Kentucky losing nearly one-third of its factory employment over that period. Job loss read more

The State of Working Kentucky 2012: Race

By Ashley Spalding
December 20, 2012

The weak economy of the last few years has had far-reaching effects, but some groups have been harder hit than others. In particular, African Americans in Kentucky have suffered enormous job losses and continue to face a daunting labor market.

Over the last decade, unemployment for white Kentuckians remained consistently just below the state unemployment rate, while unemployment for African Americans was substantially higher—particularly toward the end of the decade. For whites, unemployment grew from 4.9 percent in 2001 to 10.1 percent in 2009, before dropping to 8.9 percent in read more