Senate vote expected on pension bill
Published 9:58 am Thursday, February 7, 2013
Senate Bill 2, a sweeping reform of Kentuckys pension system for future workers, legislators and judges, will be up for a Senate vote Thursday.
Senate Majority Leader Damon Thayer on Wednesday presented SB 2 to the Senate State and Local Government Committee, which passed the bill by unanimous vote.
The legislation calls for: full payments of actuarially required contributions to Kentucky Retirement Systems, which faces more than $18 billion in unfunded liabilities; ending unfunded cost-of-living pay raises for retirees; and moving future hires into a hybrid cash balance plan rather than the defined benefit plan currently offered.
The Legislature last passed pension reform in 2008. Part of the plan gradually increases the states share of the actuarially required contribution, which is currently set to be 57 percent of the full ARC in fiscal year 2014.
That amount isnt going to cut it, Thayer said. The General Assembly will have to find the funds expected to be about $120 million in General Fund dollars starting in fiscal year 2015 while writing the next biennial budget, he said.
Ending unfunded cost-of-living raises would also improve the cash flow of KRS, Thayer said. Any excess funds should be applied to the unfunded future pension obligations, he said.
Thayer, a Georgetown Republican who co-chaired a pension task force last year, said the proposal is the result of a bipartisan compromise. Thayer has backed prior efforts to move public employees into 401(k)-style defined contribution plans, which have passed the Senate but died in the House.
We wanted to create a document that was truly a consensus that we felt could pass, Thayer said during the committee meeting.
The bill is expected to clear the Senate, but its fate in the House is uncertain. Thayer said SB 2 might undergo changes when it reaches the House.
But I felt like the right way to start this process was to pass the recommendations of the task force, he said.
House Speaker Greg Stumbo said passing SB 2 without identifying an adequate funding source would be unwise. The House is exploring funding options, he said, but he declined to elaborate when asked for specifics.
A growing number of representatives are suggesting sticking with the current defined benefit plan, said Stumbo, D-Prestonsburg.
Do we need to have the dramatic changes for future employees that the commission recommended? Some would argue if you allow (economic) growth to continue and some level of additional funding that the current system is sustainable, Stumbo told reporters Wednesday.
Rep. Brent Yonts, a Greenville Democrat and chair of the House State Government Committee, said the House might file its own pension reform bill or amend SB 2 when it reaches the chamber. Some have said the hybrid cash balance plan would be expensive to set up and administer during the programs first 15 years, he said.
I think starting out, the House will want to stay with the traditional plan, Yonts said.
Paying for the actuarially required contribution must also be addressed, he said, raising the possibility of linking tax and pension reforms.
There are ways to create a funding stream, and I think leadership agrees with me that weve got to say something about how its to be funded.