Pension overhaul bill introduced in Kentucky Senate

Posted at 7:52 PM, Feb 20, 2018
and last updated 2018-02-20 19:52:49-05

FRANKFORT, Ky. (AP) — A long-awaited overhaul of one of the country's worst-funded public pension systems was introduced Tuesday in the Kentucky Senate, setting the stage for debate on one of the defining issues of this year's legislative session.

The bill introduced by Republican Sen. Joe Bowen was notable in part for what it didn't include, deviating from some key provisions in an earlier plan endorsed by Gov. Matt Bevin.

The measure would not force any current or future state employees or teachers to move into a defined contribution 401(k)-style retirement plan. That was the cornerstone of a proposal endorsed by Bevin last year.

But that prior proposal drew fierce opposition from hundreds of thousands of state workers and public school teachers. The backlash came in advance of an election year, the first since voters gave Republicans full control of the state legislature in 2016.

Bowen said Tuesday the new bill will deal with the unfunded liability in Kentucky's ailing pension systems.

"We listened to key stakeholders, experts and taxpayers, and we are confident our new plan balances the need to stabilize the system while honoring the commitments we have made," he said.

The new bill also would not require all employees and teachers to pay an extra 3 percent of their salary for a retiree health benefit.

And the new version does not create an incentive for employees and teachers to retire at their earliest possible eligibility by ending the ability to accrue more service credit in their current defined benefit plan.

The legislature's top Republican leaders also weighed in on the measure.

"We are committed to funding our plan, meeting our obligations to state employees, and to making systemic reforms to ensure these systems will be financially sound for current and future employees," Senate President Robert Stivers said.

House Speaker Pro Tem David Osborne noted the backlash generated by the prior proposal.

"This plan is our attempt to address many of those issues brought to us," he said. "We listened to the concerns, and this bill represents a compromise that will bring our pension systems to the appropriate funding levels over a 30-year period."

Kentucky has one of the worst-funded public pension systems in the country. The system is at least $42 billion short of the money required to pay out benefits over the next 30 years. That's according to official estimates approved by the state's various retirement systems. Bevin, a Republican who has aggressively campaigned for pension changes, says the true number is likely double that.

The system's struggles have strained the state budget. Bevin's two-year spending proposal includes $3.3 billion for the retirement system, or 15 percent of all state spending. The enormity of the spending prompted Bevin to propose cuts of more than 6 percent across most of state government.