Danville residents told their state representative and senator they want the legislature to tackle pension reform and tax reform at the same time during a town-hall-style “legislative coffee” event Monday morning.

Around 40 people attended the event, held at 9 a.m. in Danville City Hall, during which state Rep. Daniel Elliott (R-Danville) and state Sen. Rick Girdler (R-Somerset) fielded questions and shared their perspectives on the 2018 General Session.

The topic brought up the most by residents was tax reform.

“I am very concerned with tax reform because (doing it) would affect everything to the better,” the first constituent to speak said. “The wealthy and the corporations are not paying their fair share. … I’m really not talking about how this affects me; I’m talking as a Christian about how it affects … the poor.”

Elliott answered that in order to get anything passed into law in Frankfort, representatives and senators must find “consensus.”

“I do agree with you that tax reform is an important part of the discussion that we are having … but Sen. Girdler and I are not in leadership and there was a decision made early on by the governor  and by the leadership in the House and the Senate that pension reform would come before tax reform,” Elliott said. “And that was an executive decision and made by leadership, which we weren’t part of that, because we’re not leadership.”

Girdler, who is serving in his first term as senator said “being new” to Frankfort, he asked why pension reform was being looked at first.

“The answer is … if you think that pension has been a tough vote, wait until you get into taxes — that’s a hundred times tougher than pensions,” Girdler said. “So I think that may be the reason. … (Elliott) is telling you right as far as us (not) being in leadership, we don’t have any say on what comes and what don’t. We have a say on what we vote on.”

Girdler said since Gov. Matt Bevin’s initial pension reform proposal from this past summer failed — Girdler and Elliott were among those who opposed it — “we haven’t been visiting it at all.”

“We’ve discussed it maybe once or twice in caucus,” he said.

Girdler said it’s going to be tough to get through pension reform and setting the state’s next two-year budget before the end of the general session, leaving potentially no time for the legislature to address tax reform.

“I hate to tell you this — it probably won’t be tackled until we get to the next interim,” he said. “I don’t think there’s enough time to do tax reform in this session.”

Another constituent asked if it wouldn’t be possible to look at tax reform first and improve the state’s revenues to “make it easier to make good decisions about pensions, for instance, and about education, where the cuts are just draconian.”

“There may be a point where tax reform may be forced if we’re not able to agree on a working budget,” Elliott said.

There are some proposed tax changes, such as an increase on the cigarette tax, but “we aren’t going to take up individual tax increases. We’re going to do it all in the form of a comprehensive package as leadership wants to do,” Elliott said.

“That’s a very bad way to approach it when you have such draconian cuts,” the constituent responded.

Elliott noted cuts to education funding are only a proposal from the governor at this point — “that’s just a proposal. We’ll have our say on that.”

Dr. Milton Reigelman said he believes increasing the cigarette tax and the gas tax could both be beneficial in terms of solving Kentucky’s deficits. The cigarette tax can tend to be “regressive” because it affects poorer people more than wealthier people, but studies show the benefits may outweigh the costs, he said.

“I know it’s the third rail of politics to raise taxes, but in fact, we’re going to have to raise taxes a lot and I’d like to have it done in the least regressive way possible,” Reigelman said. “… We don’t want to further the distance between the poor and the rich.”

Girdler and Elliott said they both support the cigarette tax, but did not commit their support fully to the idea of increasing it.

Girdler said he would like to see the cigarette tax modified to give businesses that collect it a small percentage to cover their costs of collecting it. He also noted tax bills must start in the House, not the Senate.

Elliott said the House is looking into raising the gas tax because Kentucky’s tax is relatively low compared to neighboring states. On the cigarette tax, he said he is “keeping an open mind.”

“I’m not opposed to doing it. I think we do need to figure out how we’re going to use the money if we do pass that,” Elliott said. “But … I really am hesitant at this point to say that we will pass any individualized tax increases just because of what leadership has said. If they call it for a vote, we’ll have to vote on it, but I don’t expect that to be called for a vote.”

A constituent who said she is a retired teacher said she is bothered by the idea that tax reform might not be considered during this session, especially since one idea that’s been proposed is raising health care insurance costs dramatically on teachers.

“You’ve got a group of people this state that have worked really hard to try to do the best they could for the students that they teach and right now they feel like they’re under attack,” she said.

“I do understand a lot of teachers do feel like they have been under attack and that public education isn’t being supported as much as it should be with this present budget and maybe with the pension proposal that came out back during the summer,” Elliott responded. “I’ll just speak for myself — I am not supportive of that part of the budget that would eliminate retired teachers’ health care. … It’s too drastic and it would put many people who are retired in a sort of a poor house, unfortunately.”

Girdler said he is also against raising health insurance premiums on retired teachers — “I don’t agree with that, not one bit.”

“I agree with you 100 percent. I keep asking my budget people, ‘have we found a way? Have we found any money?'” Girdler said. “I go to my budget meetings and they’re telling me we’re at zero balance. What they’re saying is if you want to put $700,000 over here, you’ve got to find the $700,000 over here. … Where we come up with it, I don’t know. But I’m hoping that will be taken care of.”

Multiple other constituents said they were in favor of the legislature looking at tax reform and pension reform at the same time, rather than waiting on tax reform until pension reform is complete.

Elliott said he has talked with Gov. Bevin about why the General Assembly isn’t looking to address both at the same time.

“He is so focused on economic development … that he does not want to use any type of tax increase as a basis to fix this pension problem,” Elliott said. “Now, he may have to come off of that at some point, but he fundamentally believes that we can bring ourselves out of these issues through economic development, economic growth. And we may very well be able to do it, I don’t know.”

One constituent called that strategy “supply-side or trickle-down economics” and said Bevin is “trying to recreate the experiment in Kansas,” where Republicans had cut taxes but recently had to reinstate taxes to keep services in place.

“I don’t want Kentucky government, school districts, cities, counties and area development districts to go busted because you guys are (afraid) to look at all these issues together,” he said.

“I’m not afraid to look at anything,” Elliott said, noting he and Girdler had prevented Bevin’s original pension proposal from becoming law by opposing it. “… We’re not afraid of anything. We’re going to look at this pension proposal that comes out and if our constituents are against, we’re going to vote against it.”

Steve Becker, a member of the Danville Independent School District Board of Education, said because of how things are being handled at the state level, local school districts and governments are being burdened with additional pension costs and budget cuts. The only way to make up for that is by raising taxes locally, he said.

“Basically, what is being proposed is a tax increase. It’s a tax increase on our local folks,” Becker said. “Now, there is no way mathematically possible that the school districts and the city governments can ever make up that decrease in their funding. So those of you who think that what’s going on in Frankfort is good for everybody, when you get your property tax bill and you complain already about them, well — now here’s going to be another reason.”

Becker said 16 school districts in Kentucky are “probably” going to be insolvent within two years — “who’s going to pay for those kids? It will be the state.”

“I have to beg of you guys — you all keep saying this comes from the top,” Becker said. “Well, if you can’t talk to the top —”

“We talk to the top,” Elliott interjected. “That’s not fair.”

“It’s also not fair that we really, really don’t hear from you guys … exactly where you stand,” Becker responded. “If the governor were to say today, ‘I want a vote on the budget as it stands, where does the House stand on that? Not just Daniel, where does the House stand on that?”

“We will propose our own budget,” Elliott answered.

“Daniel, that’s not the question I asked,” Becker said.

“But what you’re suggesting is not how the process works,” Elliott said, before explaining how the House will come up with its own budget proposal and the legislature and governor will work together to develop a budget that can be passed.

“I just want you all to know that the sense that I get from Democrats and Republicans here — we don’t have a whole lot of confidence in what’s going on,” Becker said.

“That’s not the sense I get from the people I talk to,” Elliott said. “… Just because a budget is proposed has no bearing on how we feel as to what is proposed. People may try to do a ‘guilt by association,’ I don’t know. But that’s not right.”

Commissioner wants communication

Danville City Commissioner Denise Terry was given the final question to Elliott and Girdler by the event moderator, Danville Mayor Mike Perros.

“It is my opinion that we have not had great representation in Frankfort since the great Joe Clarke,” said Terry, referencing a former Democratic representative from Boyle County who served in the state House for 28 years from 1970-1998. “So I’m asking you as a city official to communicate with us more because we are the gateway to your constituents, who are also ours. I know that you all have not attended any city commission meetings —”

“I have,” Elliott said. “I’ve been to one.”

“OK, well you’ve been to maybe one,” Terry said. “We have invited you all several times and not to throw our mayor under the bus, but he wants to hire a lobbyist. And our current commission actually voted against that because I think that’s your all’s job.”

“I talk to your mayor at least once a week,” Elliott said, and Perros confirmed that is the case. “I stay in good touch with him. I assume he’s talking to you all.”

“I would like, as a commission, to have more communication with you guys,” Terry said.

“You guys should come over and meet with me,” Elliott said. “Like the fiscal court comes over every year, you guys should come over.”

Later in the conversation, Elliott told Terry he disagrees with her on a lack of communication. “I think we’ve done great on that, so I would just disagree with you.”

Restaurant tax

Elliott and Girdler heard from one constituent who opposed the idea of broadening the availability of the restaurant tax. Currently, only “Class 4” and “Class 5” cities can implement a sales tax on restaurant bills. There is an effort underway to pass legislation that would allow any city regardless of class to have a restaurant tax.

Neither Elliott nor Girdler stated support or opposition to the idea.

“As I’ve said, I don’t think there’s a very high likelihood that any individual tax by itself would pass the legislature at this point without being part of a broader tax reform package,” Elliott said.

At the end of the event, Terry said she believes expanding the restaurant tax would be “low-hanging fruit” and could help cities that are about to be burdened with extra expenses because of the state.

“With (Danville’s) more than $700,000 obligation in this budget, we also need options to come up with that money, besides raising taxes,” she said.

Perros said all cities are supposed to operate on a “level playing field” but that’s not the case with the restaurant tax. Nearby Harrodsburg has a restaurant tax and brings in around $700,000 annually from it; Danville has no such option, he said.

“Let’s really make it a level playing field.”