How'd they do it?

After 21 years of working together Senator Tom Buford requested we compile income and expense recommendations for inclusion into a Senate resolution for 2014-2016

biennium budget. He felt by presenting Resolution to Senate would aid Senators in realizing severity of Kentucky’s current biennium budget situation.

Kentucky needs to look at the "whole state" in crafting tax and state expense reforms.
Also, detailing Kentucky units of local governments to reduce costs by merging counties to minimize taxpayer expenses!

2014-2016 BIENNIUM BUDGET: USING 1978 TAX STRATEGY, BELOW:

"People are tired of paying and paying, and until there is a change of heart and mind there seems to be but one way to go, reduce governmental spending in all areas outside the basic services to provide additional money for those things Kentucky must have, one of which is a good education system."*

Thanks to a 2006 law and perhaps the distressed economy, public discussion about the unification of city and county governments should be priority in 2016 General Assembly.

identifying anemic state tax revenues:
Current 110 Counties Tax Capacity....

Kentucky's stewards---in solving this financial crisis must---must be made aware of Kentucky's tax capacity.

For example, developing and applying an average tax rate to a given county's tax base---to ascertain it's tax capacity---would identify the tax revenue those rates produce:

For example, developing and applying an average tax rate to a given county's tax base---to ascertain it's tax capacity---would identify the tax revenue that those rates would yield in a county with the average tax base. For example, when this formula applied to Elliott County this formula only produces 53% of the tax revenue those rates would yield in a county with the average tax rate. [See Kentucky Annual Economic Report---2001, p.29]

Tax capacity falls below 75%:

Kentucky Annual Economic Report 2001, page 29

18% of KY counties whose tax rates do not bring in enough money to fund current expenses

Bracken, Breathitt, Carter, Clay, Cumberland, Edmonson, Elliott, Estill, Green, Harlan, Jackson, Knox, Lawrence, Letcher, Lewis, McCreary, Magoffin, Menifee, Morgan, Owsley, Powell, Rockcastle; i.e.,

75% to 100% tax capacity:

Adair, Allen, Bell, Bracken, Breckinridge, Butler, Caldwell, Carlisle, Casey, Christian, Crittenden, Fleming, Floyd, Garrard, Grant, Grayson, Hart, Henry, Hickman, Johnson,Knott, Larue, Laurel, Leslie, Lincoln, Lyon, McLean, Marion, Martin, Metcalfe, Monroe, Muhlenberg, Nicholas, Ohio, Owen, Pendleton, Perry, Pike, Robertson, Rowan,Russell, Spencer, Todd, Trimble; i.e.,

37% of Ky Counties right at break-even line concerning tax rates ability to offset expenses

50% (Fifty-five percent) of KY Counties tax rates’ are not enough to cover their expenses or at break-even point.

Recommend state’s tax policy include amending KRS to authorize "local sales tax option" for county governments giving them access to additional tax revenues...only if local taxpayers approve referendum;

2006 Recommendation reduce number of counties from 120 to 70, eliminating fiscal inefficiencies!

If not, over one-out-of-three KY counties will continue to be dependent on federal government transfer payments while holding back economic development of approximately one-out-of-6 Kentucky counties.

Kentucky should do everything in its power to increase the level of education in the backward parts of the state. If it means using the state's power to declare local school

systems (educationally) bankrupt and take them over, then do it. If it means targeting magnet cities around Eastern Kentucky as economic development zones and creating

significant incentives for development, then do it.
The real answer in the lagging part of Kentucky is a dramatic campaign to raise the level of education. That is the absolute precondition to get any kind of development going

there. That's not easy.

The Forward in the Fifth movement seems to be the kind of thing that needs to become major priority of the state to give Eastern Kentucky a boost out of it's current education

deficit quagmire!

In 2007, Kentucky's debt was third highest ratio of government debt to gross domestic product of any state in the nation---requires "looking outside the box". This means cutting billions of state tax expenses simultaneously raising state tax resources through "revenue neutral" strategies along with modernizing Kentucky current obsolete tax base.

KY lawmakers could send a message of cooperation to taxpayers by placing their "skin" in this 2016 tax & expense reform effort by actually passing legislation eliminating their full-time pensions.

Chamber of Commerce could show they're going to do their part by asking lawmakers to eliminate all obsolete corporate tax shelters. Estimated $400 million of'em.

In 2014-2016 biennium budget

CUT ESTIMATED $43 million of annual property tax administration personnel expense by reorganizing PVA offices (statutory officer) into 17 PVA REGIONS..

Cut estimated $20 million, annually replacing 174 Superintendents with 17 regional Superintendents;

In addition, eliminate $100 million of non-merit paid personnel from all 3 branches of state government; ie., executive, legislative and judiciary; See below branches of state government pay;

In addition, eliminate $100 million of non-merit paid personnel from all 3 branches of state government; ie., executive, legislative and judiciary; See below braches of state

government pay;
Job Description                       Estimated Annual Sate Pay Est Total Cost

President & other officials      $94,000-$400,000 　                   $1,300,000

General Government

Medical Directors　             48     positions $21,877-$222,718  $4,800,000

Chief                                     20　 positions $22,877-$192,618 $1,600,000

Commissioners　                 88　 positions up to $175,000       $15,400,000

Adm Assistants　             1577     positions up to $131,250       $206,981,250

Supervisors　                   1541     positions up to 86,443           $133,208,663
Senior Supv　                  205       positions up to $73,444         $15,056,020

Managers　                      786　   positions up to $99,864         $78,493,104
Legislative                        2      　 positions up to　 $99,750     $199,500

Deputy　                         129　    positions up to　 $130,958   $16,893,582

Compliance　                  93　      positions up to $81,264 　    $7,557,552

Managers　                    786　      positions up to　 $108,323   $131,720,768

EXECUTIVE BRANCH

Executive　 508　 positions up to　 $136,128 $69,153,024

Special Assistant　 53　 positions up to　 $131,250 $6,956,250

interim 2　 positions 115,000-$127,500 $255,000

Administrative　 2713　 positions 123,384-$193,440 $524,802,720

General Government 14 positions $123,384 adm Law judges $1,727,376

Vice President 6　 positions 94,000-$122,008 $4,318,206

Communications 38　 positions 113,637 　 $4,318,206

Staff Asst.　 676　 positions $132,820 　 $89,786,320

Policy　 546　 positions $110,000 $60,060,000

Dental 　 4　 positions $108,323

Attorney　 530　 positions $123,384 　 $65,393,520

Auditor　 344　 positions $36,375,936

Health 131 　 positions $75,547 $9,896,657

Prgm Coord　 250　　 positions $70,953 　 $17,738,250

Environmental　 803　 positions $86,246 　 $69,255,538
SR . Associates　 113　 positions $109,002 　 $12,317,226

REDUCE

PROPERTY TAX ADM COSTS ESTABLISHING17 PVE REGIONS

PVA 120 positions　 PVA/D.PVA COSTS $118,475 avg. pay

Replace with 17 regional PVA's

Replace Deputy PVA's 680 positions-Avg Pay $88,000= ANNUAL SAVINGS $14,217,000 $59,999,800 (eliminate 300 leaving 380 @$70,000+ annual pay) TOTAL

SAVINGS: $43M REDUCE EDUCATIONAL SUPERINTENDENT

COSTS 174 Supt's @$155,172 avg. pay
Replace with 17 regional Superintendents @ $120,000 annual pay (excluding 15 independent Superintendents

KBE/KDE                                 39　 positions 7,822-$180,958        $7,057,362
KBER/KDE Associate Comm                           $118,381
ELIMINATE full-time pensions of part-time legislators;

CUT $2.0 billion dollars of "state expenses; START cutting $350 million of $12 billion of state tax expenditures; CUT $400 million of corporate tax shelters; and, CUT $100

million of non-merit personnel pay in excess of $100,000 per year:

CUT Judiciary's 2014-2016 biennium 3,700 employee $293 million total budget by eliminating estimated 60 million from Office of the Courts of non-merit positions;
to promote economic development by attracting high paying trucking industry jobs, eliminate truck weight-distance tax using a "revenue neutral" strategy; Combine all motor

fuels, weight-distance tax & state trucking registration fees revenues; then, eliminate weight-distance tax;

USE 25% OF MASTER SETTLEMENT TO bolster current COAL SEVERANCE TAX FUND'S FINANCIAL STABILITY;

$3.45 billion dollar Tobacco Settlement Fund—MASTER SETTLEMENT & AGREEMENT PLAN--(1998-2023) profile:

FOR KENTUCKY FARMERS

$1,725,000,000

EARLY CHILDHOOD

$69,000,000

DEVELOPMENT

$1,656,000,000

RECOMMENDATION IN 2014-2016 BIENNIUM BUDGET:

TRANSFER TO COAL SEVERANCE TAX FUND $862,500,000,000 FROM MASTER SETTLEMENT FUND JUSTIFYING THIS MOVE BY REPLACING

SEVERANCE DOLLARS TAKEN 1970-1980 FROM COAL COUNTIES" SHARE OF COAL FUND SEVERANCE DOLLARS WITH OTHER KY COUNTIES

Funds NEEDED to enhance Kentucky citizen health;

One-in-five adult Kentuckians do not have a regular doctor
81 of 120 counties do not have enough primary care doctors
More than 1 million Kentuckians did not visit a dentist in the past year
Length of hospital stay and death rates differ for same diagnosis across hospitals
People without health insurance are three times as likely as people with insurance to say the heath care they receive is poor to fair
Only one-in-four-primary-care providers uses computers for patient records
People with the same conditions pay different amount for treatment depending on where they live
Nationally, about half of bankruptcies can be traced to a health-related cause
Kentucky has third highest obesity rate in the nation: three-of-five adults are overweight or obese
Kentucky has the highest rate of smokers in the nation, and more people die from smoking here than in any other state
Poisoning deaths have doubled because of illegal prescription drug use.

IMPLEMENT FURTHER "SAVINGS" BY:

In 2014-2016 biennium budget increase H.B. 44 maximum tax rate to 6%

Amend KRS allow substituting one-time payments for across-the-board raises which aren’t added to base salaries for next year’s budget. In addition, the state will not have

to contribute up to 7.5% of the bonuses into retirement account. 2014-2016 Kentucky "County" financial conditions:

There needs to be more encouragement and exploration of cooperative arrangements, agreements, sharing of taxes, shared services, and equipment between local governments,

or local government officials and other governmental entities. There should be the consideration of the provision for incentives, if necessary (ex.: tax credits or funding). This

should include multi-county agreements.

There is a lack of adequate funding for the incarceration of prisoners, including juveniles, by local governments. There needs to be a reworking of the judicial system so that

the state will absorb more or all financial responsibility for the incarceration of prisoners. This should include all costs for the incarceration of all prisoners from the initial

incarceration.

There needs to be further investigation into the problem of the usage of zip codes for distribution of insurance premium taxes.

There needs to be more responsibility by local government for the implementation of the financial systems that are utilized.

The fee system for funding local government offices should be abolished and such offices should be funded by state or local government. The method for payment of such

offices could be similar to that utilized for county attorneys or PVA’s.

There needs to be a legislative re-evaluation of the offsetting of local taxes

There needs to be a feasibility study done regarding utilizing the county clerk’s office for the collection of outstanding parking fines.

KY STATE POLICE DIVISION OF COMMERCIAL ENFORCEMENT OFFICERS IN VIOLATION OF 1994 KY SUPREME COURT RULING STATING CEO ONLY STATE

AGENCY HAVING MOTOR VEHICLE KRS POWER TO ENFORCE ALL MOTOR VEHICLE LAWS IN KY. YET, IN 2015 THEY HAVE NOT PRODUCED EVIDENCE OF FULL

COMPLIANCE ATTEMPT, COSTING STATE/LOCAL TAXING JURISDICTIONS SEVERLY NEEDED TAX REVENUES

County finances could be improved by individual counties--with help of state police Commercial Enforcement Officers and KY DEPT OF REVENUE cracking

collaborating to locate, identify, appeal, collect and disperse unpaid collections to appropriate local/state taxing jurisdictions from KY OWNED MOTOR VEHICLE

OWNERS CIRCUMVENTING KY TITLING & REGISTRATION; i.e., estimated 200,000 TAX EVADERS EXIST costing state & LOCAL TAXING JURISDICTIONS

AN ESTIMATED $100 million of uncollected state and local taxes

MOTIVATE COUNTY/CITY MERGERS TO LOWER GOVERHMENT COSTS

Unification efforts should be mirrored as those done in Hardin and McCracken counties.

A similar effort is on hold in Spencer County as it awaits a ruling from the state Court of Appeals in a suit brought by Taylorsville against merger.

·The flurry of discussion about city-county merger doesn't surprise Denny Nunnelley, executive director of the Kentucky Association of Counties.

these days Local governments are more dependent on payroll taxes paid by workers and occupational license fees paid by businesses. With fewer city and county budgets

that, in turn, puts pressure on elected officials to work as efficiently as possible, and that leads to public pleas to at least study Consolidation of services such by combining

city police and sheriff's departments or consolidating city and county fire department, or the outright merger of city and county governments.

Given this background, more residents and elected officials are talking openly about consolidation, for example, a Hardin County governance subcommittee looking into

possibility of merging Hardin county and its six incorporated cities. "It is becoming more and more difficult in today's environment for smaller units of government to

continue to provide services at a manageable tax rate," Howard said. "So I think the efficiencies that can often be gained from unification plays a part in that. The studies

have shown that unified governments ... don't lower your taxes, but they keep them from escalating as high if you were not unified."Lexington and Louisville are the only

merged city-county governments in Kentucky.

Voters rejected merger proposals in Franklin and Scott counties in 1988, Daviess and Warren counties in 1990, Taylor County in 2002, and Franklin County again in 2004.

Under the state's 2006 unified-government law, the city and county equally bear the cost of a study committee. The judge-executive and the mayor jointly determine the size

of this "unification review commission, "which would have 20 to 40 members.

The law states that a unification plan "shall be completed" within two years of the commission's appointment. If a majority of the members are unable to agree on a plan for

unification within two years, the commission dissolves.

'Give the public an opportunity.' Set up this commission, and let people look at it," Georgetown resident David Thompson said. "You're not voting for merger. You're voting

for up to a two-year process of letting people in the community sit and talk about this. This new legislation offers the education into merged government what it can do,

what it cannot that most merger attempts have not."

In Hardin County, unification was driven by the military reorganization at Fort Knox, which meant losing its tank-training role but gaining a net increase of about 4,500 jobs

as the Army's home for training, recruitment and human resources.

That led to a study of unification of county governments with six incorporated cities:

Elizabethtown, Radcliff, Vine Grove, Sonora, Upton and West Fort Know.
These cities will be asked to be a part of the commission that will draw up a detailed plan for unification. (Upton presents a wrinkle because that city straddles the line between

Hardin and LaRue counties, and although a city can cross county lines, a merged government cannot.)

1992 Legislature's refusal and subsequent concurrent Court decision---Jones v. Board of Trustees, 910 S.W. 2d 710 (Ky.1994)---reduced KERS funding to only 61% of its

total financial needs in 2007.

This decision is 'prima facie' arbitrary & ruinous evidence violating previous agreed to inviolable contract containing merit retirement benefits promised KERS members; it is

an hurtful and deliberate infringement by the 1992 Kentucky Legislature to adopt Retirement Boards’ actuary's 1992 recommendations.
The court decision stated "...the Commonwealth and the benefits provided there in shall...not be subject to reduction or impairment by alteration, amendment, or repeal; i.e.,

KRS 61.692. Thus, under Kentucky law, pension benefits for public employees and retirees are a contractual right, and those benefits may not be reduced......by the legislature

retrospectively."

The 1995 Court decision regarding 1992 Legislature & administration actions breached KERS inviolate contract [excluding $10 billion underfunded KERS health care] by

condoning underfunding of KERS retirement system. Such irresponsible decisions has, over time, significantly enhanced reduction of KERS retiree's fund needed to comply

with required percentage of total established for coverage of all KRS retirees; whereas, county (CRS) has 61% of the funding total needed

In addition, as a result of the 1995 court decision KERS retiree' funding has been discriminated against due to other state retirements currently enjoy much healthier financial

climates; i.e.,

Teachers' Retirement System has funds to cover 76%; and County Employees Retirement System has funds to cover 81%; National average is 86%.

In early 2000 it was estimated 58 percent of employees nationwide get any paid sick leave---while Kentucky’s state employees accumulate sick time. In addition---the 2001

General Assembly passed legislation allowing state employees to be paid for all unused annual and compensatory time.

Therefore, any legislation addressing state employees’ retirement plan must mirror the following protections for taxpayers:

FUND Pay-for-performance for all merit state employees & cap current non-merit total pay per individual annual pay @ $100,000 until emergency situation of equalization

of state expenses and state tax resources occurs.

ELIMINATE excess layers of management and place more emphasis on direct service employees
ELIMINATE management layers and reallocate staff to direct service positions
ESTABLISH a new personal management cabinet
FREEZE and abolish current and future vacancies that are not considered critical or high turn-over positions and re-engineer those jobs kept
RETRAIN staff and award pay increases to job holders whose positions receive added duties from re-engineering process
MOVE from a "defined benefit" to a "defined contribution program" for new state employees
MERGE administration and support services of Kentucky employees retirement Systems:

County employees retirement system
State police retirement system
Teachers retirement system
KRS Employees retirement system

State Government establish management training program for attendance by all state managers/supervisors

Budget dollars for state's training of all first line supervisors in state management to use motivation and incentives to equalize workplace duties, responsibilities and pay

For new hires follow lead of industry by establishing mandatory savings plan for each state employee January 1, 2016

Protect NEW state employees’ defined contribution retirement plan by legislatively establishing a mandatory savings plan for each state employee whereby state employee

contributions matched by state up to a defined maximum and state will automatically pay base health care plan giving state employee option of adding applicable health care

options at their own expense

Respectfully submitted,

Bill Huff
319 Dixie Manor Court
Harrodsburg, Ky. 40330-1923
huff9983@roadrunner.com
859.265.7180