FRANKFORT —
The day after Gov. Steve Beshear told a joint session of the Kentucky General Assembly he won’t support pension reform without reforming the tax code to provide more money for education, the Republican-controlled Senate passed a bill to try to rein in pension costs.
The bill, sponsored by majority leader Damon Thayer, R-Georgetown, would end cost-of-living increases for pensioners, move new hires into a hybrid, cash-balance plan; and states the legislature’s “intent” to fully fund annually required contributions to the funds.
Kentucky maintains multiple pension plans — for state and county employees, for teachers, and for Kentucky State Police. Additionally, some quasi-government agency employees are allowed to participate. In total, the plans face a $30 billion unfunded liability.
Thayer’s bill and its provisions are based on the recommendations of a bi-partisan Senate and House task force that studied the issue and recommended the changes. It addresses the Kentucky Employees Retirement System (KERS) that has an $18 billion unfunded liability but does not affect the teachers’ plan.
Several factors over a couple of decades led to the problem. In flush times during the 1990s, lawmakers enriched retiree benefits and then, in tight times, lawmakers deferred making the annual payments in order to fund other services.
During that time the plans also suffered investment losses during two recessions as well.
That makes the recommendation to begin fully funding the system beginning with next year’s budget critical. Next year’s cost is estimated to be about $327 million, though not all of that will have to come from the General Fund. Some funds will be paid from the road fund and federal funds for employees paid by those sources.
But the Democratic-controlled House and Speaker Greg Stumbo, D-Prestonsburg, are hesitant to approve the changes without a predetermined plan to fund the ARC.
And Beshear wants lawmakers to pass some form of tax reform to generate more revenues before taking on pension reform. So even though the measure passed the Senate 33-5 with four Democrats and one Republican voting no, it faces an uncertain future in the House.
Read the full story in the print or e-edition of Friday's Glasgow Daily Times.
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