March 5, 2013 — FRANKFORT - Gov. Steve Beshear held out hope Tuesday that lawmakers can still find a compromise solution to the state’s badly underfunded employee pension funds in the waning days of the 30-day General Assembly.

But he all but said he’s prepared to call a special session later this year if there is no compromise.

“The short session isn’t really designed for big, complex issues,” Beshear said. “Nevertheless, both houses have tackled this because they are committed to finding a solution and they are committed to finding a solution.”

Short sessions in odd-numbered years were designed to deal with non-budget issues which come up between the 60-day budget sessions in even numbered years. As an incentive to voters to approve annual sessions in 2,000, the constitutional amendment required any funding or revenue bills to receive a three-fifths vote of each chamber — 60 votes in the 100-member House and 23 in the 38-member Senate.

“We eventually will resolve this (pension) issue,” Beshear said. “Whether it’s resolved in this current session or not I think is still up in the air. But one way or another this year, we’re going to resolve this pension issue.”

If it’s not resolved in the current General Assembly, the only other way to do it this year is through a special session. Only the governor can call such a special and he has enormous control over special sessions because he sets the agenda and lawmakers can only consider that agenda during a special session.

Beshear applauded the work of both chambers thus far. (The Senate passed a reform package based on recommendations of a bi-partisan task force, but the Senate measure provides no funding for the annually required contribution or ARC to the system by the legislature.

(The House re-wrote the Senate bill, taking out a hybrid, cash-balance plan for new employees and replacing it with a defined benefit plan similar to current employees’ and retiree’s benefits. But the House passed a separate bill to fund the ARC through an elaborate system of using lottery growth funds and money from instant racing. The Senate has refused to consider that bill.)

Beshear said Tuesday he sides with the House on devising a payment system for the plan at the same time the reform is passed.

“I’ve always said I feel we should fund whatever solution that we come up with and obviously that is very difficult in a short session where you have some very rigid constitutional requirements about super-majority votes,” Beshear said, again implying a need for a special session.

“So we’re going to keep talking and see where things go,” the governor said.

One as yet untested way to pay for the added costs of the pension reform is through tax reform. Beshear commissioned a study group to recommend changes to the tax code and it made a series of changes which would produce between $650 and $690 million in new revenues each year.

Beshear said he’d still like to see tax reform passed this year — again since it’s not before the legislature with only seven days left in the session, that would have to come in a special session.

“I want us to continue having discussions about tax modernization, tax reform to see what may be possible in terms of modernizing our tax code and bringing it into the 21st century and tying it to a 21st century economy,” he said. “I’m having informal conversations about that with a number of legislators and I’m going to continue to do so.”

Asked directly if that is a likely topic for a special session, Beshear said, “We’ll see.”

The Senate is controlled by Republicans who are generally opposed to tax increases. Senate President Robert Stivers, R-Manchester, and Majority Leader Damon Thayer, R-Georgetown, have both said pension reform can be funded without a tax increase.

On another topic, Beshear said Ashley Judd, the actress considering a challenge to Republican U.S. Sen. Mitch McConnell, called him last week to talk about the possibility of running.

“She called me and we had a good conversation,” Beshear said, adding he thinks Judd is “seriously considering” the race.

“I think she can be an effective and a formidable candidate if she chooses to run,” Beshear said. “There may be other candidates who fall into that category, too.”

He declined to name any other possible candidates.

Ronnie Ellis writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.