Kentucky
General Assembly

FRANKFORT -- The Legislative Research Commission will hold a Jan. 8 orientation session for lobbyists who will be working in Frankfort during the Kentucky General Assembly's 2014 session

The orientation will last from 9 a.m. to 2:30 p.m. in the Capitol Annex, Room 149

The session is aimed primarily at assisting legislative agents who are new to the Kentucky General Assembly or those interested in a refresher course on the legislature's operating procedures. Those attending will have an opportunity to listen to presentations from legislative leaders, staff members of the Legislative Research Commission and a veteran lobbyist on the inner workings of the legislative process and the role that legislative agents play in that process

The Legislative Ethics Commission will also offer a presentation

There is no charge for attending the orientation session and no pre-registration is required

The General Assembly's 2014 session starts on Jan. 7 and is slated to end April 15.

FRANKFORT—A prohibition against “pension spiking” approved by state lawmakers with the passage of Senate Bill 2 during the General Assembly’s 2013 Regular Session drew questions from a state legislative committee yesterday.

The prohibition was mentioned in a presentation to the Interim Joint Committee on State Government by Kentucky Retirement Systems Executive Director William Thielen, who said the policy change will take effect on Jan. 1, 2014, as will implementation of a hybrid cash balance plan for new state hires. All policies will be implemented by KRS.

The pension spiking prohibition states, explained Thielen, that the actuarial cost to the retirement system created by an annual salary increase of greater than 10 percent during a retiree’s last five years of KRS-covered employment is the responsibility of their last KRS-participating employer. Implementing those provisions, said Thielen, “has been particularly problematic for our staff.”

“We’re having to design various features of our technology system to deal with that, but we will complete that as well to the extent necessary as of Jan. 1,” he said. “There are some issues related to the pension-spiking provision you may be asked to consider during the upcoming session in 2014.”

Senate Majority Floor Leader Damon Thayer, R-Georgetown, who sponsored 2013 SB 2, said he doesn’t foresee any change to that policy.

“I don’t foresee any roll-back of any of the provisions of SB 2 occurring in 2014, (or) until the bill goes into effect for a while and we see how it works,” said Thayer.

Thielen said KRS will likely recommend legislation to clear up some “ambiguities” in the legislation, but that KRS itself “has no plans to try to do anything to that provision.”

Of the approximately 80 public pension plans nationwide, Theilen said Kentucky ranks in the middle in terms of rate of return. He said the average rate of return is around 8 percent; Kentucky’s rate of return is 7.75 percent.

KRS’s Kentucky Employee Retirement System for non-hazardous employees (the largest of the KRS systems) was only 27.3 percent funded as of June 2012. Total unfunded liability for KRS plans which exclude teachers was $13.9 billion last year, according to a Sept. article on the website BenefitsPro.

The committee also received an in-depth report on the Kentucky Teachers’ Retirement System from KTRS Executive Secretary Gary Harbin, who said that system’s liability is growing at a rate of 7.5 percent and must be addressed—to the tune of $386 million in fiscal year 2014 and over $400 million in fiscal year 2015, Harbin said—to help meet KTRS’ actuarial needs.

Harbin said KTRS’ current $12 billion unfunded liability will grow to $23 billion “if a funding plan is not put in place.”

FRANKFORT – A book containing issue briefs on topics likely to confront lawmakers during the Kentucky General Assembly's 2014 session is now available in print and online

"Issues Confronting the 2014 Kentucky General Assembly" contains 46 issue briefs prepared by members of the Legislative Research Commission staff. The book is not meant as an exhaustive list of issues that lawmakers will consider, but reflects a balanced look at some of the main topics that have been discussed in legislative committee meetings

The publication can be viewed online at: http://www.lrc.ky.gov/lrcpubs/IB242.pdf

Printed copies can also be picked up at the LRC Publications Office in the State Capitol, Rm. 83

The Kentucky General Assembly’s 2014 session begins on Jan. 7 and is scheduled to adjourn on April 15.

FRANKFORT—Kentucky could lose half, all, or none of its tobacco settlement payment next year due to a Sept. 11 ruling that found the state “nondiligent” in upholding statutes requiring escrow payments by nonparticipating cigarette manufacturers

The decision, in which an arbitration panel named Kentucky among six states found “nondiligent,” leaves the state uncertain about just how much it will receive next spring for calendar year 2014, Governor’s Office of Agricultural Policy Executive Director Roger Thomas today told the Interim Joint Committee on Agriculture yesterday. Kentucky had anticipated receiving approximately $90 million in tobacco settlement dollars next year, with agriculture getting half of whatever dollars are received.

“It’s pure speculation at this point…” said Thomas. “It all depends on these various state MSA courts and what their rulings are on motions to vacate.”

“It could be $45 million, it could be $5 million, it just depends on the actions of the state MSA courts…” Thomas said. There is even a possibility that the state’s payment due in March 2014 will not be reduced, pending court actions, he said.

Since tobacco settlement payments fund Kentucky’s popular Agricultural Development Fund, Thomas told the committee the outcome would “have a very dramatic effect” on state agricultural programs. Still, he emphasized that it is too early to say exactly what the Sept. decision will mean for 2014 and throughout the next budget cycle.

“(But) it’s easy to see we have our challenges before us,” he said

According to the arbitration panel, Kentucky, Missouri, Maryland, New Mexico, Pennsylvania and Indiana did not adequately enforce collections from nonparticipating manufacturers, or NPMs, who were not original signers to a 1998 multi-billion-dollar master tobacco settlement agreement between the four largest tobacco companies (at that time) and 46 states. NPMs are expected by law to make escrow payments.

The original signers—which lost market share in 2003—blamed the loss on inadequate enforcement of NPMs, according to a Nov. 7 article on the issue on the web site Law360. Those original signers, or “participating manufacturers,” felt sales by nonparticipating companies had increased more than they should have because Kentucky and the other states did not adequately enforce collections from NPMs.

To shield themselves financially, the participating manufacturers invoked what is called an “NPM adjustment” under law and withheld money from the settlement agreement. The adjustment, says the Law360 article, allows participating manufacturers to reduce payments to states “if they (the companies) lose market share to their nonparticipating colleagues because of the multistate settlement’s obligations.” States that are found to have closely followed their model laws were shielded from reductions, while those found “nondiligent” will have their tobacco settlement payments reduced.

Although Kentucky feels “like we were diligent in our enforcement,” says Thomas, the arbitration panel judged otherwise, he said.

Appreciation for the impact the Kentucky Agricultural Development Fund has had on the state’s farms was voiced by Committee Co-Chair Sen. Paul Hornback, R-Shelbyville.

“Without that foresight by those of you who sat here and (developed) HB 611… I don’t think our agriculture in this state would be nearly as far along as it is,” he said. HB 611, passed by the 2000 Kentucky General Assembly, determined how agriculture would benefit from Kentucky’s $3 billion share of the 1998 tobacco settlement.

Fellow Committee Co-Chair Rep. Tom McKee, D-Cynthiana, offered some praise of his own.

“It was an honor for me to work with you and many other legislators to help develop these programs,” McKee said to Thomas, himself a former member of the Kentucky House of Representatives. “I think if you travel the state, if you go out on the rural roads of Kentucky, you’re going to see fence that wouldn’t be there; you’re going to see cattle handling facilities that wouldn’t be there (with the ADF).”

The committee also received testimony from Kentucky Agriculture Commissioner James Comer, subcommittee reports on rural issues and horse farming from Subcommittee on Rural Issues Co-Chair Sen. Stan Humphries, R-Cadiz, and Subcommittee on Horse Farming Co-Chair Rep. Susan Westrom, D-Lexington. Representatives from Kentucky Farm Bureau were also expected to testify, as were officials from AT&T who were scheduled to speak on telecommunications and modernization.