Legislative Report #05-19

Report 05-19
June 10, 2005

HOUSE APPROVES TAX PACKAGE

This week, the House of Representatives passed House Bill 1630 which provides for continuation of state operations through July 31, 2005 in the event that the state budget for next year is not adopted by June 30. The bill also extends several taxes that are scheduled to expire at the end of June and raises additional revenue by increasing certain tax rates and expanding tax bases. The bill was sent to the Senate after clearing third reading in the House on Thursday.

The House tax package differs from the Senate's tax and fee provisions that are included in the Senate budget bill which was approved in May. The House proposes to extend the 8.25% upper income bracket of the state income tax for another 2 years while the Senate drops the income tax rate for highest income bracket back to 7.75% in 2006.

The Senate budget included a $.35 per pack increase in the state cigarette tax rate. The House tax package does not include a cigarette tax increase, but House leaders have indicated that this will be addressed in the House budget.

THE WORD ON RETIREE COLAS

The passage of HB 1630 sets the stage for consideration of the budget next week by the House Appropriations Committee. There are indications that the House budget will include a 2.5% COLA for retired local governmental employees. The COLA for state retirees is reported to be 2.0%, the same COLA as proposed by the Senate. However, we expect that the House will include a 2.5% raise for active state employees.

We urge our members who are retired state employees to contact their representatives in the House and ask that the state retiree COLA be raised to 2.5%, the same as proposed for active employees. Inflation affects our net pension benefits the same way that it affects the take-home pay of active employees.

From our perspective, the argument that retirees should receive a lower Cost-of-Living Adjustment than active employees because we no longer pay Social Security and state income taxes just is not valid. A lower COLA means that our net buying power is lower when compared to active employees. Moving the state retiree COLA to 2.5% would require the House to appropriate an additional $12.8 million.