Former Senate President David Williams warned about looming pitfalls in the state pension systems years before lawmakers mustered the fortitude to address the problems. His successor, Sen. Robert Stivers (R-Manchester), spoke of William’s political clairvoyance on the Senate floor Tuesday as he rationalized the need to further examine the ailing teacher retirement system.
The state employee’s pension system was reformed in 2013 after a bipartisan task force formulated recommendations that resulted in Senate Bill 2. The way Senate Republicans see it, that approach paid off then and can again for the Kentucky Teachers’ Retirement System. KTRS currently has about 54 percent of the money it needs to pay for future benefits.
Last month House Speaker Greg Stumbo (D-Prestonsburg) muscled his plan through the House to issue $3.3 billion in pension obligation bonds to prop-up the teacher pension system. But Senate Republicans are averse to borrowing that much money because they argue the system needs more permanent fixes to make it viable.
Republican Leaders Offer Alternative Approach
Instead of pursuing the bonding proposed in Stumbo’s House Bill 4, Stivers wants to take the next nine months to study the pension system. He proposed convening a 12-member bicameral, bipartisan group of lawmakers who will make recommendations to be enacted during next year’s legislative session.
Senate Minority Floor Leader Ray Jones (D-Pikeville) opposed the GOP-amended HB 4. He said there is wisdom in borrowing money now while interest rates are historically low and that an infusion of cash into the teachers’ retirement system is needed sooner rather than later.
Sen. Reggie Thomas (D-Lexington) ran the numbers on the decreasing asset base in KTRS. He said the system is hemorrhaging dollars and pension obligation bonds are a sensible way to stop the bleeding. Thomas added that bond-rating agencies have noted Kentucky’s failure to make the pension system whole and he said that’s working to Kentucky’s detriment.
Senator Argues What Worked Before Can Work Again
Senate Majority Floor Leader Damon Thayer (R-Georgetown) co-chaired the public pension task force in 2012 and subsequently sponsored Senate Bill 2 that passed a year later. He chronicled the success of that approach and said the same method can translate into sustainable reforms for teacher pensions. Thayer sought to reassure retirees who fear they may not receive their promised benefits.
The chair of the Senate State and Local Government Committee, Sen. Joe Bowen (R-Owensboro), downplayed the effect bonding would have on helping KTRS. He said the rate of return is minuscule and that it’s unwise to gamble with borrowed money. Bowen made a case for why a review of the system makes the most sense.
Sen. Brandon Smith (R-Hazard) was among three Republicans who voted against the KTRS study. Smith said he’d given his word to educators in his district that a solution would come this year. Smith recently opposed a bill from fellow Senate Republicans to limit state debt because he said he knew the $3.3 billion bonding proposal was coming.
The Senate-amended House Bill 4 that replaces the pension obligation bonds with a study of KTRS cleared the Senate Wednesday on a 26 – 10 vote. The Democratically-controlled House is likely to refuse those changes, thereby forcing a conference committee to negotiate a deal.
Another Public Pension System Measure
A bill that would allow quasi-government agencies to voluntarily leave the Kentucky Retirement Systems or be forced out if they no longer qualify to participate was awarded final passage yesterday.
The House approved Senate changes to House Bill 62 by a vote of 96 – 1. The bill sponsored by Rep. Brent Yonts (D-Greenville) now heads to Gov. Steve Beshear’s desk for his signature.
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