Legislators make noticable impact on city
Bowling Green gets help with retirement financing, fights off some 40 bills that would have hampered its authority

By JIM GAINES, The Daily News, jgaines@bgdailynews.com
Saturday, July 5, 2008 9:07 PM CDT

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Reform of the state's public-employee pension system probably had the most impact on local government and finance, but several other bills the General Assembly passed (or failed to pass) this year were likewise of note to advocates for city government.

Jerry Deaton, director of governmental affairs for the Kentucky League of Cities, and J.D. Chaney, the group's counsel for member legal services, were in town last week to brief local officials on legislative action. It's KLC's job to "defend home rule," backing greater local autonomy and flexibility, Deaton said.

This summer's special legislative session saw passage of a bill changing the state pension system for many public employees hired on or after Sept. 1, 2008.

"We think that was a good start toward addressing these long-term problems," Deaton said. He credited House Speaker Jody Richards, D-Bowling Green, with being instrumental in the bill's passage.

This year, the city's contribution to the County Employees Retirement System will drop by $400,000, after going up for many consecutive years, Mayor Elaine Walker said. Local governments faced penalties for not making those contributions, but the state itself has not made its pledged contribution in some time, she said.

"Every year we get a bill, giving us basically a percentage that we have to pay of our payroll," Walker said. "There's a huge shortfall in the state's payments, while cities and counties have continued to pay."

It took two years of pressure to get action to fix the system, but it finally came, she said. The new policy won't have its greatest impact for 20 to 25 years, when the next generation of employees begins retiring, but even that wouldn't happen if changes hadn't been made now, Walker said.

Deaton predicted that the 2009 legislative session will see more changes to the retirement system. Local governments subsidize the classified-employee retirement system by $24 million a year and rising, he said.

Altogether, Chaney said, KLC successfully opposed about 40 bills which would have limited local government's authority, but he expects most of them to be resubmitted.

One such item of considerable local importance was an attempt to centralize the collection of local occupational taxes, Deaton said. State law only gives cities three major ways to raise money: occupational taxes, a tax on insurance premiums and property taxes, he said. Bowling Green's 1.85 percent occupational tax provides nearly two-thirds of the city's budget.

Walker said cities want to hold on to local collection because, otherwise, that money might never make it into local coffers.

"There's not a real good history of the state collecting a tax and returning it to local governments," she said. Walker cited the state takeover of telecommunications tax collection as an example: The state promised that centralized collection wouldn't affect the amount cities got, but Bowling Green alone is shorted about $140,000 a year, she said.

Deaton called changes to another of those local revenue sources, the insurance premium tax, the most important law that got little media attention. Chaney said House Bill 524 makes insurance companies do most of the legwork on collecting that tax, requires greater accuracy, sets up a process to resolve disputes and makes receipt of the money more timely.

The KLC's 2008 Legislative Update says the law requires the state Office of Insurance to establish ways to verify the location of policyholders by 2009. Companies with more than 2,000 policies have to comply with that rule by 2010. The bill ups penalties for violation, and requires companies to tell policyholders local insurance tax rates and relevant jurisdictions.

Those changes are more important to other cities than to Bowling Green, but it's still a much-needed clarification, Walker said.

The league of cities eventually wants to push for a state constitutional amendment to allow local-option sales taxes, permitting local referenda to approve such taxes to pay for specific projects, Deaton said.

"There's no guarantee it'll happen in the next 10 years, but we think that people need to start hearing that that's another option, another tool in your toolbox," he said.